By Terri Lewis
Want to save 50% on your car Insurance? You should since Florida is among the three states with the least affordable car insurance since 2014.
Let’s look at what drives the costs of car insurance in Florida and specifically in Lee County. In a summary report from the Insurance Research Council (IRC) from September 2021, Florida has some of the most expensive car insurance in the US and ranked in the top three states with the least affordable car insurance since 2014. In 2021, Lee County fatalities and serious injuries totaled 1,058. This year doesn’t look to be an improvement.
Insurance is a risk-based business model, meaning that they look at the costs of all of the potential risks and aim to charge above those costs to turn a profit. If they can develop models that accurately reflect the costs to be less than their revenues, they make money. If they can’t make money, as we’ve seen from the Florida’s housing insurance crisis, there is no incentive to provide insurance.
Applying a statistical analysis to the state comparisons in the IRC report, about 80% of car insurance costs are driven by three areas in their order of influence on rates; 1) uninsured motorists, 2) personal injuries and 3) legal climate (lawsuits, fraud, etc.).
Uninsured motorists in Florida range between 20-25% of the drivers. We rank in the top 6 in the number of uninsured as compared to other states in the US. While sitting at a stop light, look around at other drivers. Most likely, one of more of them around you are uninsured.
Personal injuries is the second most important cost driver to car insurance rates. It covers the numbers of accidents, the costs of medical procedures, number of injury claims, and severity of the injuries. Florida is #1 in the use of expensive diagnostics (like MRI’s) and #6 in the dollar amount of costs of injury severity and injury claim frequency. Drunk or impaired drivers, distracted driving (cell phone usage), erratic lane changes, red light running, etc. all contribute to the frequency of accidents. Excessive speeds is the biggest contributor to injury severity and fatalities. The faster a car is going, the worse the injuries. Impaired driving is also a serious issue in Lee County. “Lee County continues to take the lead in Motor Vehicle crashes and fatalities with Alcohol, Marijuana and cocaine playing a role in some of the crashes. We continue to see 48 -52 % with alcohol or drugs on board at time of crash.”, said Syndi Bultman of Lee Trauma. Florida has about 50% higher vehicular fatalities than the US average. Lee County has a higher rate of fatalities than the state of Florida.
Florida also ranks in the top five states for the worst legal environment with percentage of times that attorneys are involved. An attorney is used in ~60% of all claims. From an insurer’s perspective, Florida ranks in the same upper ranks for worst “litigation climate”. At the state level, Florida takes #1 position for claims abuse which can be fraud but also includes excessive or unnecessary medical treatment. In ~35% of the claims, the IRC found claim abuse.
So how do we lower car insurance rates in Florida? Uninsured motorists needs to be <8% of drivers vs 20-25% current level. Claims abuse needs to go from 35% to 8.5% and attorney involvement needs to go from 59% to 32%. Serious injuries and fatalities need to drop by 45%.
So what would a 50% reduction in car insurance mean to the pockets of Florida residents who are paying for insurance now which is about 14M vehicles? Assuming an equal split between full and minimal coverage….it would mean a reduction of ~$9B. Yes, that is a “B” for $Billion. For Lee and Collier counties, it would mean reductions of $290M and $156M respectively. For SWFL, that means $446M back into the pockets of insured, safe, drivers. Look at your insurance bill and imagine it cut in half.
In future articles, will address how Smart Cities are embracing technology to keep people safe and therefore keeping insurance costs low. In the meantime, slow down, put down the cell phone, find a designated driver if you’re impaired. Enjoy the trip, be safe and help reduce car insurance rates.
1 Source: Insurance Research Council – Auto Insurance Affordability: Countrywide Trends and State Comparisons Research Brief, September 28, 2021