Florida Automobile Joint Underwriting Association Board of Governors Meeting Report: April 20, 2010

 

The Florida Automobile Joint Underwriting Association’s (“FAJUA”) Board of Governors (“Board”) met in Tampa on April 20, 2010.   

During the meeting, the Board devoted much debate to the question of whether to offer payment plans to consumers.  FAJUA General Manager Eugenia Tyus noted that Florida Insurance Commissioner Kevin McCarty has indicated that such a plan, if implemented, would not make the FAJUA competitive with the market insurers that make up its membership and fund its operations.

Kay Womble, Vice President of Dovetail Insurance, an insurance technology and service contractor to the FAJUA, presented the payment plan concept to the Board.  Motorists who turn to the FAJUA for insurance because they are unable to secure it in the voluntary market would be offered a six-payment plan that would require a 25 percent initial payment, she explained.  The proposed installment fee would be $6 per payment.

“If people were not buying insurance simply because they didn’t have money up front, this could be an answer,” Ms. Womble said. 

At present, consumers of FAJUA policies must pay for them in full at the outset of the policy, or seek premium financing from an outside vendor.  The observation was made that joint underwriting associations in some states offer payment plans to consumers, while others do not.

Defenders of the payment plan concept noted that it might encourage high-risk drivers who cannot afford a single large payment to purchase coverage rather than drive uninsured.  Critics, however, warned that many such motorists might make only the first payment to secure their automobile tags and then never make another one.

Certain speakers noted that an FAJUA payment plan would cost consumers considerably less than using premium financing, and might reduce FAJUA’s exposure during the 30- to 60-day period that typically passes before premium finance companies inform the FAJUA of cancelled policies. 

Speakers at the meeting questioned how much difference the offer of financing would make in a consumer’s decision to buy coverage and expressed concern about the additional effort required for the FAJUA to collect monthly payments.

Implementing a payment plan could cost as much as $700,000, with no certainty of resulting in significantly fewer uninsured motorists, Board members were told.

FAJUA staff was asked to review the experiences of similar agencies in other states that offer financing and to gather other information in time for the FAJUA Board’s scheduled September meeting.  

 

General Manager’s Report

Ms. Tyus reported to the Board that the FAJUA’s policy count has continued a downward trend.  She noted that Florida has one of the nation’s highest rates of uninsured drivers, and that less than half of the applications received by FAJUA result in policies being written.  Ms. Tyus voiced her concern that the two statistics might indicate that FAJUA has become so “insensitive” to the needs of high-risk motorists “that even people who want to do the right thing, can’t.”

By next year, one in every six U.S. drivers is likely to be uninsured due to the state of the economy and other factors, she added.

Reminding that the Board’s earlier decision to levy a $2,500 fee on its members rather than implementing a new FAJUA assessment “was favorably received,” Ms. Tyus said she anticipated that the next assessment would occur in February, 2011.      

 

Financial Report

The Finance and Audit Committee (“Committee”) reported that the FAJUA has approximately $1.5 million invested in Florida’s Special Purpose Investment Account (“SPIA”), a government-managed pooled-investment program oriented toward short-term returns.  As of January, 2010, the SPIA yield was 2.067 percent.

A recent SPIA directive limiting agencies such as FAJUA to a maximum investment of $3.5 million is not expected to affect FAJUA, since it is considered unlikely to have that much to invest. 

The Committee also reported that $1.5 million in policy fees was collected during the last year.

The Board was told that the U.S. Internal Revenue Service (“IRS”) Form 990, applicable to non-profit entities, now contains many more questions about governance and compensation.  The Finance and Audit Committee approved a proposal to have the FAJUA Board approve Form 990 before it is submitted to the IRS.

 

Litigation Report

It was reported that the number of FAJUA-related matters in litigation continues to decline.

A request was made to consider reviving funding of $150,000 for a prosecutor designated to uncovering insurance fraud.  A position funded in Miami-Dade County “made money on restitution and put people behind bars,” Mr. Graham said, before funding was terminated three years ago.

Captain John Askins, director of the Florida Division of Insurance Fraud, and officials from Hillsborough County have expressed great interest in creating a new insurance fraud prosecutor position, though it has not been determined if it should be under the oversight of the Division of Insurance Fraud or the State Attorney’s Office.

A presentation on this issue will be made to the Board during its next meeting. 

 

Auditor’s Report

FAJUA is operating at “close to a break-even,” with an operating gain of $188,000 and total committed assets of $3.7 million.

Its pension plan is running a deficit of $74,000, but is expected to recover over time.

In response to a question from a Board member, the FAJUA auditor said he did not specifically scrutinize Travel and Entertainment expenses, nor examine the Board’s policies on such expenses.  He said he would do so in the future to help allay concerns about what the Board member said has “become a sensitive area.”

Ms. Tyus said she would present the FAJUA’s Travel and Entertainment policy to the Board at its next meeting.  She added, “We go to two Board meetings a year. That’s our travel.”

The FAJUA was created in 1973 to provide automobile insurance to qualified applicants unable to buy insurance in the voluntary market.  Every insurer authorized to write automobile liability insurance or automobile physical damage insurance in Florida is a member by law.

 

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

 

To unsubscribe from this newsletter, please send an email to bellis@cftlaw.com.