2010 Regular Session Bill Analysis: HB 447 Relating to Residential Property Insurance

 

Background and Overview

Filed in the Florida Legislature by State Representative Bill Proctor on December 8, 2009, HB 447 would allow residential property insurers to use rates in excess of their filed rates.  The bill also provides that policies using such rates do not count toward the excess rate calculation, which allows an insurer to use excess rates for up to five percent of its personal lines insurance policies.  HB 447 requires such rates to be filed with the Florida Office of Insurance Regulation (“OIR”), which specifically retains the authority to disapprove a rate as inadequate or to disapprove a rate filing for charging any insured a higher premium solely because of the insured’s or applicant’s race, color, creed, marital status, sex or national origin. 

Under HB 447, an insurer offering or renewing policies at such rates may not purchase coverage from the Florida Hurricane Catastrophe Fund (“FHCF”) under the Temporary Increase in Coverage Limit (“TICL”) option.  The insurer must provide the applicant or insured with a specified rate notice and must provide or offer-for comparison purposes-an estimate of the premium for a comparable policy from Citizens Property Insurance Corporation (“Citizens”).  In addition, the applicant or insured must provide the insurer or agent with a signed copy of a specified acknowledgement form. 

HB 447 provides that an insurer’s use of rates in excess of filed rates does not apply to residential property insurance policies that exclude coverage for the perils of windstorm or hurricane and that, notwithstanding s. 627.4133, F.S., an insurer issuing a policy under this section must provide the named insured with written notice of nonrenewal at least 180 days before the effective date of nonrenewal.

HB 447 also provides that any Citizens policyholder surcharges attach as of the date of the order levying the surcharge, or upon the initial issuance of a policy within the first 12 months after the date of the order.  Citizens policyholder surcharges are payable upon cancellation or termination of the policy, upon renewal of the policy, or upon issuance of a new policy within the first 12 months after the date of the levy. 

Further, the bill prohibits Citizens from levying certain regular assessments with respect to a particular year’s deficit until it has first levied a surcharge upon its policyholders.  Agents are required to obtain an acknowledgement of potential surcharge and assessment liability from Citizens’ applicants and policyholders. 

 

Analysis of HB 447 by Section

 

Section 1

• Amends s. 627.062(2), F.S., by creating a new paragraph (1) that allows an insurer that meets the requirements of s. 627.7031, F.S. to use a rate in excess of its filed rate for residential property insurance policies;
• Provides that policies using an excess rate as authorized by HB 447 do not count toward the excess rate calculation in s. 627.171, F.S., which allows an insurer to use excess rates for up to five percent of its personal lines insurance policies;
• Requires such rates to be filed with the OIR, which retains authority to disapprove a rate as inadequate or to disapprove a rate filing that charges any insured a higher premium solely because of the insured’s or applicant’s race, color, creed, marital status, sex, or national origin.

Section 2

• Amends s. 627.351(6), F.S. by creating a new paragraph (b)3.i.II to provide that the policyholder’s liability for the Citizens policyholder surcharge attaches as of the date of the order levying the surcharge, or upon the initial issuance of a policy within the first 12 months after the date of the order. This new paragraph further provides that the Citizens policyholder surcharge is payable upon cancellation or termination of the policy, upon renewal of the policy, or upon issuance of a new policy within the first 12 months after the date of the levy.
• Amends s. 627.351(6), F.S., by creating a new paragraph (b)3.i.IV that requires Citizens to first levy its policyholders with respect to a particular year’s deficit before levying regular assessments under paragraph (q);
• Amends s. 627.351(6), F.S., by creating a new paragraph (c)(19) that requires agents to obtain a signed acknowledgement of potential surcharge and assessment liability from applicants and existing Citizens’ policyholders. The signed acknowledgement must be permanently maintained by Citizens and creates a conclusive presumption that the policyholder understood and accepted the potential surcharge and assessment liability.

Section 3 

• Creates s. 627.7031, F.S., which  permits property insurers to offer residential property insurance policies covering the perils of windstorm or hurricane that use a rate in excess of the insurer’s filed rate if all of the following apply:
  • The insurer is authorized to write property insurance in Florida.
  • The insurer does not purchase TICL coverage pursuant to s. 215.555(17), F.S. from the FHCF.
  • The applicant or insured is provided with printed notice in 12-point, boldfaced type that reads: “the rate for this policy is not subject to full rate regulation by the Florida Office of Insurance Regulation and may be higher than rates approved by that office. A residential property policy subject to full rate regulation requirements may be available from this insurer, another insurer, or Citizens Property Insurance Corporation. Please discuss your policy options with an insurance agent.  You may wish to view the office of insurance regulation’s website www.shopandcomparerates.com for more information about choices available to you.”
  • The notice must be furnished in writing on a separate document at the same time as the renewal notice, but may be contained within the same mailing as the renewal notice.
  • Before the effective date of a newly issued policy, or before first renewal of a policy at such rate, the applicant must be provided or offered-for comparison purposes-an estimate of the premium for a comparable policy from Citizens.
  • The applicant or insured must provide the agent or insurer a signed copy of a specified acknowledgement form acknowledging that he or she has reviewed the required disclosures and premium quote from Citizens, understands that the rate for the policy is not regulated by the OIR and may be higher than rates approved by the OIR, understands that a residential property insurance policy subject to full rate regulation may be available elsewhere and understands that the policy may be subject to assessment for a Citizens’ deficit.
• Provides that the section does not apply to residential property insurance policies that exclude coverage for the perils of windstorm or hurricane, or policies that are subject to consent decree, agreement, understanding, or other arrangement between the insurer and the OIR relating to rates or premiums for policies removed from Citizens.
• Provides that, notwithstanding s. 627.4133, F.S., an insurer issuing a policy under this section shall provide the named insured with written notice of nonrenewal at least 180 days before the effective date of the nonrenewal.

Section 4

• Proves the act is effective January 1, 2011.

 

 

Should you have any questions or comments, please contact Colodny Fass.

 

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