“Cart before horse” on PIP reform savings calculations
How do you calculate actual results from something that hasn’t actually happened? Well, you can’t. But that didn’t stop Florida legislators from demanding that it be done. Auto insurance companies had to submit rate filings data to regulators to demonstrate cost savings from auto insurance reforms that don’t start for three more months. Hey, this is Florida – and calendars trump calculators.
There are many people wanting proof that the no-fault reforms of HB 119 will work – insurers, politicians, consumer groups and, most of all, Florida drivers. Although the reforms that target the rising costs of personal injury protection (PIP) don’t start until January 2013, insurers had to show in rate filings due October 1 that the reforms were starting to do the job. That’s like writing a performance review for an employee before their first day at work. So, is anyone pointing this out (other than me)?
Many new stories on the October PIP rate-filing deadline neglected to mention that insurance rates can’t reflect reforms that haven’t yet occurred. Instead, they relay what critics are saying, even negative comments from legislators who helped pass the law and know full well that the reforms have not launched. Finding something or someone to blame is convenient, while getting all the facts remains elusive.
“There are no facts, only interpretations.” Philosopher/poet Friedrich Nietzsche is attributed with that quote. He advocated for seeking the objectivity of the truth, and that’s a philosophy that makes sense. The truth is that insurers don’t charge whatever they want. Insurers file insurance rates based on past costs – and if past costs don’t go down, then neither does rates. They do this because past losses reflect future costs.
No one can honestly promise that planned PIP reforms will make auto insurance rates drop. I realize people want such a promise, but a “try it and see” approach is a step in the right direction. PIP reforms must have a chance to work, at least six months or more. And, before they can work, they have to start. That day comes in January. Results to follow.