Financial Services Commission Meeting 2/02/2006

On January 31, 2006, the Financial Services Commission (FSC) met to discuss several items on the Agenda, which is attached. Item 2 on the Agenda proposed a reconsideration of the approval for adoption of Rule 690-170, Part 1, which relates to Property and Casualty Insurance Rating, Filing Procedures, and Rule 690-175.003, which relates to Motor Vehicle Insurance Ratemaking and Rate Filing Procedures. These Rules were approved at the January 11, 2006, FSC meeting and were up for reconsideration in order to provide an opportunity for public comment on the proposed rules. These Rules improve the quality of rate filings by requiring a company to provide all rate filing information up front, in order to minimize OIR’s processing of incomplete files.

The Florida Insurance Council (FIC) testified that the industry has a problem with the Rules, in that the Rules limit a company’s right to a second hearing in the case that a company’s rate filing has been denied. They stated that the Rules propose to limit the evidence that a company can provide in a rate filing and prevents information sharing once a Notice of Intent to Deny a rate filing is issued. Currently, the Rules are in litigation, and Mr. Newman requested that the issue be tabled until a final ruling on the matter.

OIR General Counsel, Steve Parton, emphasized that the Rules have been challenged by the industry since August, 2005, and he requested that the FSC come to a final decision in order to prevent further rule disapproval. Despite the pending litigation and testimony, the FSC approved the rules.

Item 3 on the Agenda requested the approval for adoption of the new Rule 690-125.005, related to Use of Credit Reports and Credit Scores by Insurers. This new rule established standards and requirements for the use of credit reports or scores by insurers and prohibits their use, unless the insurer can prove that the credit reports and scores are not unfairly discriminatory against insured’s based on their race, color, religion, marital status, age, gender, income, national origin or place of residence.

The FIC challenged the rule because he believed the rule does not limit credit scoring, but eliminates it altogether. Mr. Newman explained that the burden is on the insurance company to collect the necessary information from insureds or prospective insureds in order to demonstrate that the credit scoring used is not discriminatory, and this should not be the industry’s responsibility.

Mr. Parton, on behalf of OIR, responded that insurance companies could have collected the necessary data for years, but instead have turned a blind eye to the discrimination.

CFO Gallagher explained that the rule was developed in 2003, and has been in litigation since August, 2005. The CFO motioned that the rule be approved and that OIR begin implementing the rule. The FSC approved the rule, despite the current litigation.

Item 4 on the Agenda requested the approval to publish the new Rule 690-170.020, related to Reasonable Degree of Competition Criteria- Monroe County. This new rule provides criteria to be used by OIR in making a determination of whether there is a reasonable degree of competition in Monroe County. CFO Gallagher explained that the Florida Legislature believes that Citizens Property Insurance Company’s rates are too high in Monroe County; however, he stated that companies have not filed for rate changes in Monroe County for years because they are not writing business there and, more than likely, the Monroe County rates are actually lower than rates in other counties. The FSC approved this item.

Additionally, the Florida Hurricane Catastrophe Fund provided a brief presentation to the Governor and Cabinet, and the presentation is attached.