Floridians have wondered what happened to the promised rate relief on homeowners insurance. Now they may find the same fate awaits them on auto premiums.
Insurers promised an average 13 percent to 16 percent drop in auto premiums once the state's controversial no-fault insurance law expires. That's because when the law sunsets Oct. 1, so will the requirement for drivers to buy $10,000 in personal injury protection, or PIP, which covers medical bills after an accident for a driver and passengers.
But the savings could be small at best for many drivers. And for some, especially those without health insurance, only higher premiums are in their future.
A Miami Herald review of various auto policies that come up for renewal early next month shows savings of 10 percent or less -- and that is if consumers don't buy medical payments coverage to replace benefits now provided by PIP. Adding that wipes out any savings and in most cases costs more than before.
In a post no-fault world, for instance, a Homestead resident, whose 2004 Ford F150 truck is insured by State Farm Mutual Automobile Insurance, would pay nearly $47 less -- a 9 percent drop -- on his six-month premium if he can go without the medical coverage. But if he has to buy the coverage, his overall premium would be about $8 higher than the old premium of $496.22 that included the PIP coverage.
The six-month premium for Joe Nasuti's policy on a 2004 Chrysler Sebring convertible, his primary automobile, would go up $30 to $346.90. For the three cars he owns, this Palm Beach Gardens resident would realize a savings of $16 on his Geico policy.
If he wanted to replace the $10,000 of PIP coverage with the same amount of medical payments coverage, however, the policy cost for three cars would jump $140.
Insurers "are just pulling the wool over your eyes, " Nasuti said.
Geico did not respond to two e-mail requests for comment.
One reason drivers may see fractional savings is that insurers have raised rates on other auto coverages such as:
* Bodily injury liability, which pays medical bills for accident victims if you cause the accident.
* Uninsured motorist coverage, which pays medical bills if you're in an accident with a driver who carries insufficient insurance.
In its filing with state regulators, State Farm said its bodily injury liability rate will go up an average 9 percent statewide, while uninsured motorist coverage goes up an average 5.1 percent.
The reasons: Claims previously handled under PIP benefits would now shift to these other coverages, insurers say.
If policyholders need to buy medical payments coverage, premiums could stay about the same, said Justin Glover, a State Farm spokesman. "We think [a policyholder] would still be better off, " he said.
State Farm and other insurers say medical payments coverage goes much further because insurers negotiate with providers on fees and utilization. With PIP, auto insurers are obligated to pay what doctors and hospitals charge.
Several major insurers, including State Farm Insurance of Florida and Allstate Florida, have been aggressive proponents of letting the no-fault law sunset because it breeds massive fraud and runs up charges for often unnecessary and expensive medical procedures to exhaust the $10,000 that's provided in every accident.
Sanjay Vyas, Progressive's product manager for direct business in Florida, said the no-fault system, designed to lower costs by reducing the number of lawsuits, hasn't worked out that way. Lawsuits have increased, he said.
The companies say they would prefer to slug it out in court and recover damages from drivers who are responsible for accidents.
Some of these companies also say their experience in Colorado, which eliminated its no-fault in 2003, shows auto insurance rates dropped in the ensuing years.
But without no-fault, consumer advocates and officials like Alex Sink, Florida's CFO, worry that even minor accidents will result in lawsuits and bog down the courts.
If another driver is at fault for your injuries, "you will potentially have to hire a lawyer to get your medical bills paid, " Sink said. "We're getting ready to have a lot more lawsuits, a lot more attorney involvement. We just have to get prepared for an entirely new environment."
Indeed, other rates could also go higher.
CAUGHT IN THE MIDDLE
Paul Sanford, a lobbyist for Blue Cross/Blue Shield, said the insurer's actuaries estimate of transferring the cost of auto accident-related medical care to a health insurer could mean monthly increases in healthcare premiums of $5 to $7 per family member.
For a family of four, that's $20 to $28 per month, or $240 to $336 a year. That would wipe out a good portion of savings that could come from eliminating PIP premiums.
Agents, like Alex Chavez, district manager for AAA Auto Club South in Miami-Dade, are caught in the middle. Confused policyholders are asking what added coverage they should buy.
"If you don't have uninsured motorist coverage, buy it. That will be our biggest recommendation, " Chavez said.
It's the most beneficial in South Florida because of the high number of uninsured drivers.
Yet, Chavez expects rates on all coverages to rise even further next year as insurers see more claims in these areas under a tort system.
WHAT TO EXPECT AFTER NO-FAULT EXPIRES
Here are questions and answers on figuring out what auto insurance you might need after the no-fault law expires as expected on Oct. 1.:
Q. What kind of auto-insurance coverage will be mandatory?
A. After the no-fault law expires, drivers will no longer be required to buy $10,000 in personal injury protection, or PIP, that covers medical expenses and lost wages in an accident, regardless of who is at fault.
Only property damage liability will be required for drivers to register a car in Florida. The minimum required is $10,000.
Property damage liability covers damage to another person's property, including buildings and fencing.
Q. Will new policies be issued to all insured drivers after Oct. 1?
A. No. Most insurance companies will make the change as policies come up for renewal. On policies renewed before Oct. 1, the personal injury protection will remain in place until the policy expires.
However, some insurers, such as State Farm and Allstate, will allow policyholders to eliminate the PIP coverage from policies after Oct. 1. If they have paid for their policies in full at renewal, they will be issued a refund. If they're paying premiums monthly, the unused portion of the PIP premium will be credited to their remaining payments.
But any accidents that happen after Oct. 1 are no longer under the no-fault system. Fault will have to be determined by police on the scene or in court before further benefits are paid.
Q. Will auto-insurance rates go down because of the change?
A. Overall, premiums could drop because drivers won't be required to buy personal injury protection. This would be true for drivers who have healthcare insurance through an employer or already pay for it individually.
Eliminating PIP could save drivers with health insurance $100 to $200 a year -- and possibly more in South Florida, where coverage is expensive.
But insurers have increased rates on such optional coverages as bodily injury liability and uninsured motorists coverage, because they anticipate more claims under these coverages. The increases will offset some savings realized by eliminating PIP.
Q. If a driver has no form of healthcare insurance, do auto insurers offer any coverage that would pay medical bills?
A. For drivers with no other form of health insurance, they may need to buy medical payments coverage to cover their medical bills. Depending on the insurer, medical payments coverage could cost the same or more than PIP coverage so there could be little or no savings for such drivers.
Q. If a driver is involved in an accident with an uninsured driver, how is damage to your car or medical bills paid?
A. Whether the other driver is at fault, you would need to carry uninsured motorist coverage to have your medical bills paid.
A driver could also rely on his own healthcare insurance to cover doctor and hospital bills.
A driver's own collision coverage would take of the auto-repair bills.
Q. What is the state's financial responsibility law and does it make liability coverage mandatory?
A. The financial responsibility law requires that drivers have proof they can meet the liability from an accident if they are at fault. Proof can be insurance, such as bodily injury liability coverage, a $30,000 surety bond of, or proof of personal wealth.
Proof is demanded when an accident occurs. If a driver doesn't have property damage liability insurance, his license could be suspended under this law.
Q. In evaluating their coverage, what questions should customers ask their insurance agents?
Drivers should consider whether they have assets to protect and whether they need to increase the optional coverages they already have.
All insurers are encouraging policyholders to review their auto-insurance coverages with their agents.
Q. Where can drivers get more information?
A. Florida's chief financial officer, Alex Sink, has prepared a website that provides answers for consumers: www.myfloridacfo.com, click on the "Life Without No-Fault" box at the top right side of the page.
AAA Auto Club South is holding two seminars later this month to help consumers figure out the coming changes in auto insurance. These seminars are open to all AAA members:
* Wednesday, Sept. 26; AAA Auto Club South Miami office, 6643 South Dixie Hwy., South Miami; 5:30-7:30 p.m.
* Thursday, Sept. 27; AAA Auto Club South office, 7074 SW 117th Ave., Kendall; 5:30-7:30 p.m.
Once personal injury protection, or PIP, expires Oct. 1, the only auto insurance required will be a minimum of $10,000 in property damage liability, which covers damage to another person's property, including buildings, fencing and animals. But there are optional coverages, including:
* Bodily injury liability: covers medical expenses for people injured in an accident the driver causes.
* Collision: covers repairs to vehicles caused by accidents; can elect deductibles of $250, $500 or $1,000.
* Comprehensive: pays for other damage, such as fire, theft, windstorm, vandalism or flood; can elect deductibles of $250, $500 or $1,000.
* Uninsured motorist: provides medical benefits and lost wages to a driver or passengers in an accident caused by another driver with no insurance coverage. It's usually sold in increments of $15,000 per person and $30,000 per accident.
* Medical payments: provides additional medical benefits; sold in increments from $5,000 to $20,000, depending on insurer; pays a driver's medical expenses up to limit purchased.
NOTE: Lenders may require that drivers buy optional coverages, including collision.