No-fault car insurance, which requires drivers to file car accident injury claims with their own insurance company regardless of who’s at fault, seemed like a good idea in the 1970s. So good that almost half our states, along with the District of Columbia and Puerto Rico, adopted some form of no-fault insurance law that allows policyholders to make auto accident claims with their own insurers.
Personal injury protection is the insurance type that pays for these kinds of claims.
But when scam artists figured out its flaws and started exploiting them, it no longer seemed like a good idea. Some states abolished their no-fault laws, some modified them and some can’t seem to decide what to do.
Florida is one of the wafflers. The Sunshine State first adopted no-fault car insurance in the 1970s, dropped it on a technicality in 2007 and immediately reenacted it. When fraud persisted—aided by lawyers, doctors and auto glass contractors—Florida became one of the least affordable states for car insurance. And again this year its legislature voted almost unanimously to repeal it.
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An Incubator for Fraud
But many groups, including insurers who typically dislike no-fault insurance, don’t want to see it die—at least not the way current Senate Bill 54 would kill it. The Tampa Bay Times is among them. “Florida’s ‘no-fault’ auto insurance system is a mess, an incubator for fraud and abuse that serves neither ratepayers nor injured motorists,” the editorial board says.
The Tampa Bay Times went on to say that “the change that lawmakers cobbled together . . . was a rushed response driven by frustration, not informed policymaking. Gov. Ron DeSantis should veto” it. DeSantis’s office did not return calls seeking comment.
Critics of SB 54 have two major problems. The first: Florida’s current system makes Florida the fourth-costliest state for auto insurance, according to data from the National Association of Insurance Commissioners. Florida car owners spend an average of $1,426 a year on auto insurance. The nationwide average is $1,057.
But the solution could be costly—as much as $860 more annually for drivers who can least afford it. This could add a quarter of a million additional uninsured motorists in a state where an estimated 20% of its drivers are already driving around without any auto coverage, according to the latest data from the Insurance Research Council. The nationwide average is slightly under 13%.
The second problem: The so-called “solution” doesn’t address the real issue. It’s “the excessive amount of auto accident litigation that is driving up costs for consumers,” says the Consumer Protection Coalition.
Car insurance fraud is ripe in personal injury lawsuits. These lawsuits can be legitimate, although there is an alarming rate of “swoop and squat” staged accidents. When this happens the so-called car accident “victims” are funneled through chiropractors who are in on the scam and who submit fraudulent injury claims to insurance companies. Their cases are represented by lawyers whose goal is to get the maximum amount from insurance companies.
Florida’s claims frequency for personal injury protection coverage was almost 50% higher than the national average, according to the Insurance Research Council, with more than half of the state’s claimants having hired lawyers—compared to 35% in other states.
The Florida Justice Association, which represents many of the state’s lawyers, didn’t return calls seeking comment.
No-Fault Has Its Ups and Downs
Florida isn’t the only state having difficulty disposing of no-fault car insurance. Colorado eliminated it in 2003. Auto premiums dropped significantly, stabilized in the ensuing years, trended upward and then spiked due to a variety of risk factors, such as hail losses, rising fatality rates and booming population.
But Executive Director Carole Walker of the Rocky Mountain Insurance Association says one of the biggest factors is the same one that Florida has: “Bad legislation pushed primarily by trial lawyers making it easier to sue for bad faith and phantom damage.”
Michigan got rid of no-fault car insurance in 2019 and rates, once the nation’s highest, fell. Nonetheless, Michigan is still one of the most expensive states for auto insurance.
And Michigan’s no-fault law repeal came with an unexpected problem. Its two-year phase-in, which occurs this July, has accident victims with permanent brain injuries “terrified” they’ll lose much of their access to long-term care, although it’s unclear whether the new law will retroactively apply to them. If it does apply, some will only be reimbursed for 56 hours of care per week instead of round-the-clock care.
“I don’t think anyone intended that to happen when we passed this law,” State Sen. Curtis Hertel told Fox News.
Under Florida’s current no-fault law each policyholder is required to have $10,000 in personal injury protection, or PIP as it’s more commonly known. This coverage pays medical expenses incurred by the insured regardless of who’s at fault in the accident, hence the term “no-fault.”
If you’re seriously hurt you can still sue the driver at fault and seek an insurance settlement, if the defendant has insurance.
But supporters of the Florida bill—which almost unanimously passed both chambers of the state legislature with a minimum of hearings and debate—say the $10,000 amount set aside under the current no-fault law doesn’t come close to covering the cost of many medical claims. That $10,000 threshold introduced in 1979 would be $77,000 today, according to the Tampa Bay Times.
SB 54 would do away with the $10,000 in PIP and require car owners to have liability coverage of at least $25,000 per person/$50,000 per accident for injuries to others.
But would getting rid of Florida’s no-fault system cost more? A study conducted by the American Property Casualty Insurance Association (APCIA), which represents the insurers, found that depending on the amount of coverage Florida residents have, annual costs would increase about $344 for the average driver and $860 for those who carry only the minimum required Florida car insurance. The APCIA says about 40% of Florida drivers buy only the minimum car insurance.
Adding almost $900 to the current average bill would amount to almost $2,300 a year.
If the number of uninsured drivers multiplies as a result, insurers will need to increase rates because motorists who drop coverage won’t pay anything when they have an accident. And this proposed law does nothing to address either injury or property damage fraud.
Some Florida state officials share insurers’ concerns about SB 54. Insurance Commissioner David Altmaier says the whole no-fault question needs more study, while Chief Financial Officer Jimmy Patronis worries it will increase the number of uninsured drivers.
So will Gov. DeSantis listen to the warnings or to state legislators who want no-fault reform even with the potential flaws? One thing is certain: Car insurance “reform” seldom works out the way it’s expected to.