PCI Plans to Support No-Fault Reform, Oppose Body-Shop Bills

Officials with the Property Casualty Insurers Association of America (PCI) announced this week they intend to push for the overhaul of no-fault auto insurance systems in several states this year and to fight in others against proposed increases in labor rates for auto body repair.
The association, which includes more than 1,000 member companies nationwide, released a list of issues this week on which it plans to lobby state lawmakers, including no-fault changes, proposals that would allow the state to set hourly rates for auto body repair and mechanical work on insured vehicles, and restrictions on the use of consumer credit histories in determining premiums.
“PCI is committed to advancing a pro-consumer agenda that supports healthy, competitive insurance markets across the nation,” Paul Blume, senior vice president of state government relations for PCI, said in a news release.
No-Fault Reforms Backed by PCI
PCI is one of many insurer organizations pushing for legislators to make changes to no-fault systems in a handful of states. According to a report released last month by the Insurance Research Council (IRC), increases in the number of injury claims filed by policyholders in New York, New Jersey and Michigan alone are driving up insurer costs nationwide.
Those states are three of a dozen nationwide with no-fault vehicle coverage systems that were designed to make it easy for accident victims to file claims and to cut down on the number of lawsuits filed as a result of vehicle crashes.
But PCI and other insurers and industry groups say dishonest claimants, lawyers, medical providers and others are taking advantage of loopholes in no-fault systems in Florida, Michigan, New Jersey and New York to file bogus claims.
Industry experts say staged accidents, overbilling, unnecessary medical procedures and other expenses have driven up costs for insurers and forced them to increase the price they charge consumers for auto insurance in New Jersey and other no-fault states.

According to IRC, personal injury protection (PIP) claim costs per insured vehicle nationwide rose by more than 18 percent from 2008 to 2010, driven partly by average per-vehicle PIP claim cost increases of 62 percent in Florida over that time period and a hike of 120 percent in Michigan over the last decade.

An Insurance Information Institute (III) study released last month noted that Florida and New York are the fourth- and fifth-most-expensive states, respectively, for private vehicle coverage, and the III estimated that motorists there would pay a combined $800 million extra on premiums in 2011 as a result of bogus claims and other scams.

New Jersey legislators have spent months discussing revamping that state’s system for insuring vehicles after repeated insurer complaints about criminals gaming the system by filing dubious claims.

And some lawmakers and insurers are also calling for an overhaul of Michigan’s no-fault system, the only one in the U.S. that requires insurers to pay for up to a lifetime of medical and rehabilitative costs for victims of serious vehicle crashes.

Michigan drivers must pay into a state fund that helps finance PIP claims that total more than $500,000. That fee, which was $145 in 2011, is added onto each motor vehicle policy.

Coverage providers say the system leaves them with prohibitively high health care costs and has caused policy rates in Michigan to become among the highest nationwide. PIP claim costs in Michigan have risen by 20 percent in the last five years because of the state’s lifetime benefits requirement, a recent study by the American Insurance Association found.

PCI Opposes Body Shop Regulations

PCI officials also plan to oppose some state legislation that would establish hourly rates for auto body work and impact the ability of insurers to steer business toward companies they prefer, among other measures.

A bill currently being considered by a legislative committee in Massachusetts calls for establishment of a “fair and reasonable process” for determining the hourly rates auto body shops can charge for fixing insured vehicles.

Wages for auto body workers in the state have stagnated in recent years, according to industry representatives. Coverage providers oppose any move for state involvement in the setting of hourly wages on the grounds that rates should be determined by the market and that establishing minimums would artificially drive up their costs.

Cost-Controlling Legislative Initiatives Could Help Insurers’ Bottom Lines Recover

PCI officials noted that 2011 was an extremely active year for tropical storms and other natural disasters that cost insurers plenty.

According to a recent report from PCI and ISO, domestic property and casualty insurers saw their profits dip last year to a combined $8 billion, a 70 percent drop from the previous year. The organizations put much of the blame for those subpar results on underwriting losses that resulted from catastrophic weather events.

But most insurers think 2012 will be a better year for the industry, with 75 percent of respondents to a recent III survey predicting increased profits this year.

More than two-thirds of coverage providers said they expect increased profitability in private vehicle coverage and 67 percent predicted the same for homeowner policies.