Florida Lawmakers Pass Omnibus Property Insurance Bill

On the final day of this legislative session, Florida lawmakers passed omnibus legislation that aims to bring more control over homeowners insurance costs, raises the state’s minimum capital requirements for insurers, cracks down on errant public adjusters, allows insurers more flexibility in passing through costs of reinsurance to policyholders, and shields independent agents’ commissions from regulation by state regulators.

The bill, SB 2044, sponsored by Sen. Garrett Richter, R-Naples, also allows the Office of Insurance Regulation (OIR) to examine managing general agencies affiliated with insurers it regulates and puts a three-year limit on filing claims after a hurricane. It requires that insurance payments are actually used to repair homes damaged by a hurricane or sinkhole.

The bill must still be signed by Gov. Charlie Crist before it can become law. Crist has threatened to veto legislation raising premiums.

But Florida Insurance Commissioner Kevin McCarty welcomed the passage of the Richter bill. “I am grateful that the Legislature has addressed some of the cost drivers causing instability in our homeowners’ insurance market,” said McCarty. “Furthermore, the legislation strengthens our solvency tools to ensure that insurers are capable of paying claims.”

While some insurers had hoped for a stronger price deregulation bill, most backed this measure and its rules on public adjusters and claims payments. Insurer CEOs pushed for its passage in the final days of the session.

Liz Reynolds, Southeast state affairs manager for the National Association of Mutual Insurance Companies (NAMIC), said her members had hoped for a stronger bill but were pleased something passed.

“Addressing cost drivers, such as public adjuster expenses, replacement cost claims, reinsurance premiums, and inappropriate mitigation discounts, should help companies that are struggling to maintain surplus and stay in business to make good on promises to policyholders,” she said.

In other activity, Florida lawmakers, who turned aside efforts to deregulate home insurance prices, passed legislation aimed at deregulating certain commercial property/casualty insurance rates. They also made changes to the state’s own workers’ compensation program.

The commercial lines deregulation bill that passed, SB 2176, excludes certain categories of commercial insurance from the rate filing and approval process. Current state law exempts only those policies with annual premiums above $500,000 in addition to other criteria.

Under the bill, categories of insurance that will be exempt from the filing and approval process include excess or umbrella, surety and fidelity, commercial auto, and directors and officers liability.

Under SB 2176, insurers will still be required to develop rates that are subject to legal standards of not being excessive, inadequate or unfairly discriminatory.

The bill now goes to Gov. Charlie Crist for his signature.

The bill has had the strong support of commercial insurers doing business in Florida.

“This legislation will help insurers more quickly respond to the needs of Florida’s businesses that require a competitive and healthy commercial insurance market,” said Cecil Pearce, American Insurance Association vice president of state affairs, Southeast region. “We are hopeful that Gov. Crist will sign this bill into law when it reaches his desk.”

Homeowners Bill

Among the issues addressed in SB2044, that is on Gov. Charlie Crist’s desk:

Streamlines the existing process for insurers to pass through reinsurance costs but these costs cannot result in an overall premium increase of more than 10 percent a year. Insurers are also given more flexibility in the type of hurricane loss funding they can buy.

Gives insurers some leeway in payment of replacement costs claims to make sure repairs are actually being made. The insurer must pay the actual cash value of the insured loss less any deductible. It can pay the remaining amounts as repair work is performed. In cases of total loses, the insurer must still pay the replacement cost coverage without reservation or holdback.

Expresses the intent that mitigation credits should not be unreasonable and should not result in a net loss for any insurer.

Encourages and sets forth rules for medication o settle claims disputes.

Sets forth rules on handling sinkhole claims and verification of mitigation credits.

Prohibits state regulators from regulating commissions paid to independent agents in its regulation of insurer rates. “The office shall not, directly or indirectly, impede, abridge, or otherwise compromise an insurer’s right to acquire policyholders, advertise, or appoint agents, including the calculation, manner, or amount of such agent commissions, if any,” states the bill.

Proposes stricter rules on a public claims adjusters, their advertising and what they can be paid.

Requires that all hurricane-related claims be filed within three years, not five, as is now the case.

Imposes a higher capital requirement of $15 million for a homeowners insurer, although for current insurers it is only $5 million until 2015 and $15 million after that date.

Requires insurers, if requested by OIR, to submit information on any affiliated managing general agencies or other affiliated companies to which they have made payments. “The acts of the managing general agent are considered to be the acts of the insurer on whose behalf it is acting. A managing general agent may be examined as if it were the insurer,” states the bill. Current law exempted MGAs solely representing a single domestic insurer from scrutiny.

Appeals an exemption medical malpractice premiums enjoyed from any catastrophic loss assessments

Allows an insurer to cancel policies with only 45 days notice if OIR determines this is in best interest of the public due to the insurer’s financial or reinsurance condition.

Requires that annual report cards issued by the state’s consumer advocate be based on objective information and valid consumer complaints only.

Instructs OIR to develop a plan for a new web site to aid insureds in shopping for residential property insurance.