PIP, Lawsuit Abuse and the Uninsured: Why Your Florida Auto Insurance Is Out of Control

For years, Florida has topped lists of states with the highest auto insurance rates in the nation, averaging about $2,500 a year for full coverage.

Source: R Street, Caroline Melear | Published on December 6, 2023

50% of drivers looking to switch auto insurance

For years, Florida has topped lists of states with the highest auto insurance rates in the nation, averaging about $2,500 a year for full coverage. Ohio has the lowest rates at about $1,000 annually, meaning that Floridians are paying about two-and-a-half times the cost for similar coverage. Additionally, these costs have risen significantly in recent years, up from about $1,300 annually in 2020. A variety of factors are at play here, including no-fault coverage laws and the large proportion of uninsured and underinsured drivers in the state.

Some of the other states with expensive auto insurance, including Michigan, also have no-fault coverage laws. No-fault laws mean that, in the event of an accident, drivers are covered by their respective insurance policy, regardless of who was actually at fault. This means Florida drivers are required to carry personal injury protection (PIP) to cover their own medical expenses in the event of an accident resulting in injury.

PIP Coverage

PIP coverage is designed to make filing medical claims easier and reduce the incidence of accident injury lawsuits. Florida tops lists with more than 20 percent of drivers uninsured, compared to the national average of about 12 percent. In many ways, this makes PIP coverage seem necessary. However, the nature of the product naturally leads to higher insurance rates when otherwise “good” or “safe” drivers are required to pay more to protect themselves from “bad” or “unsafe” drivers. This natural progression to higher costs lends itself to even less affordability, making auto insurance potentially out of reach for even more drivers. But repealing PIP entirely would likely come with far more issues given the already extreme rates of uninsured drivers. Instead, lawmakers would be wise to look to PIP reforms to ensure motorists are covered in the event of an injury while also reducing the financial burdens of carrying such policies.

Insurance Abuse

An additional issue leading to higher-than-average costs is insurance lawsuit abuse. Floridians have had significant experience with these issues plaguing homeowners’ insurance over the years, with plaintiff attorneys targeting anything from roofs to sinkholes as a way to make money in insurance lawsuits. Several sessions of the Florida legislature tackled many of the root causes of this issue, including doing away with one-way attorney fees, insurance assignments-of-benefits and attorney fee multipliers in the state.

But these same issues are now causing a significant strain on the auto insurance industry, specifically regarding windshield lawsuit abuse. Drivers across Florida with damaged glass have been approached and offered free windshields by auto glass shops. Repairs are made as promised (though some Floridians have said their repairs were never completed), but the driver’s insurer receives a bill for an exorbitant amount far exceeding actual replacement costs. Often, it is easier for insurance companies to simply pay the outlandish repair costs than to litigate. But when insurers refuse the costs, auto glass shops work in conjunction with law firms to sue for the cost of both the repair and the legal fees. This scam is a solid payday for shops and attorneys, while being such a financial strain on insurers that they are left with few options but to raise premiums on Florida auto policies.

Suggestions

Fortunately, changes made in the recent legislative sessions to tackle high costs of homeowners’ insurance should lead to some relief for auto insurers and policyholders in the long term. However, provisions in the most recent bill from the May regular session of the legislature allowed for 46,000 windshield lawsuits to be filed from January to August 2023. The assignment-of-benefit changes only take effect upon renewal or reissuance of a policy, giving something of a “grace period” for lawsuits to be filed. By contrast, less than 600 were filed in 2011, indicating plaintiff attorneys are attempting to extract as much juice as possible before the Florida orange is squeezed dry.

The most significant step state lawmakers can take is to continue reducing the financial burden imposed by lawsuit abuse and focus on PIP reform to reduce costs for good drivers. To the extent lower costs can decrease the significant percentage of uninsured drivers in the state, further savings will naturally flow.