No-Fault’s Sunset Means High Rates For Consumers
Updated July 2007- On Oct. 1, 2007, auto insurance will no longer be required in
Florida. The original aim of ending
no-fault, which requires Florida drivers to buy $10,000 of personal injury protection (PIP) to cover the cost of medical care, was to reduce the
widespread fraud created by the program and to lower insurance rates. But PIP is linked to the state's other type of
mandatory auto coverage - property damage liability.
The demise of PIP will eliminate the requirement to carry at least
$10,000 of property damage liability coverage, according to the state
Department of Highway Safety & Motor Vehicles, which enforces the no-fault
law.
“Insurance will not be required for good drivers," said
department spokeswoman Julie Baker, although drivers who get into an accident
and have no insurance will be required by the state to carry insurance for a
certain amount of time.
The end of mandatory auto insurance in Florida, home to more than
12 million drivers, could raise insurance rates 25 percent to 30 percent as the
risk of colliding with an uninsured motorist climbs, said Gunars Mansons, vice
president of the Specialty Agents Association of Florida, a trade group
representing small independent insurance agents.
State Farm, the state's largest auto insurer, and other auto
insurers who lobbied hard for the sunset of PIP say the requirement to buy
property damage coverage will survive PIP's termination.
The no-fault law requires that all policies must include $10,000
of property damage coverage. State Farm contends the law's reference to
property damage, though flawed, will be preserved despite the expiration of the
PIP law, company spokesman Justin Glover said.
The no-fault law is controversial because it allows unscrupulous
doctors and clinics to bill for unnecessary and expensive medical procedures to
get the full $10,000 of coverage guaranteed for every accident. "We're
overpaying for it," State Farm's Glover said.
The end of no-fault will allow consumers to decide for themselves
whether they need such medical coverage, Glover said. For some people on
Medicare, PIP is a financial burden, he said.
"They're buying PIP when they probably don't need it,"
Glover said.
But the state's hospitals and trauma centers want to preserve the
no-fault system because the mandatory coverage means they're guaranteed to
recover up to $10,000 of the cost of care almost immediately. The elimination
of PIP will cost them at least $350 million a year as they foot the bill for
drivers who have no health insurance.