Florida Senate Banking and Insurance Committee Meeting Report: March 10

Mar 11, 2009

On Tuesday, March 10, 2009, the Florida Senate Banking and Insurance Committee (“Committee”) met and considered several insurance-related bills. The Committee also heard testimony from Florida Insurance Commissioner Kevin McCarty and Florida Office of Insurance Regulation (“OIR”) Deputy Commissioner Belinda Miller regarding the Florida Hurricane Catastrophe Fund (“FHCF”) solvency and State Farm rate filings. To view the Committee packet, click here.

During the meeting, the Committee passed the following bills:

The following is a brief summary of the activities and discussions that occurred during the meeting.

Senate Bill 714 relating to Condominium Insurance

Also known as the “Condominium Glitch Bill,” SB 714 passed with one amendment by Senator Mike Fasano (R-New Port Richey). The bill is intended to correct several unintended consequences from language relating to insurance that passed in 2008. The 2008 bill requires condominium unit owners to purchase individual unit owner coverage, requires owners to include association as a named insured and provides for other association rights.

As amended, SB 714 revises the loss assessment coverage statute related to residential condominium unit owners. The bill also requires that adequate property insurance be based upon the replacement cost of the property to be insured as determined by an independent appraisal or update of a prior appraisal.

Several insurance-related groups spoke in favor of the bill, including agents, insurers and the Property Section of the Florida Bar.

SB 714 now proceeds to the Senate General Government Appropriations Committee.

Senate Bill 1372 relating to Insurance

The bill amends the laws related to annuity sales to senior consumers by increasing penalties on practices such as “twisting” and “churning.” One of the top legislative priorities for Florida Chief Financial Officer Alex Sink, SB 1372 passed with amendments as a Committee Substitute.

Two provisions being negotiated among the interested parties include:

Changing the surrender charge from five years at 15 percent to 10 years at 10 percent
Shortening the “free look back” period from 60 days to 30 days

CFO Sink testified in favor of SB 1372. Senators Al Lawson (D-Tallahassee) and Chris Smith (D-West Palm Beach) expressed several concerns with the current version of the bill. However, Senator Smith ultimately withdrew several amendments that would have gutted the purpose of the bill.

Several insurance representatives spoke in opposition to the bill. In closing, Senator Bennett recognized the concerns expressed and commented that the bill is “a work in progress.”

SB 1372 now proceeds to the Senate General Government Appropriations Committee.

Senate Bill 1138 relating to Self-Insurance Funds/Electric Cooperatives

The bill passed with one amendment by Senator Gaetz. As amended, this bill authorizes any two or more electric cooperatives to operate a self-insurance fund for certain purposes and exempts certain self-insurance funds from specific provisions of law. Senator Gaetz explained the bill and amendment and there was no further discussion.

SB 1138 now proceeds to the Senate Communications Committee.

Senate Bill 1432 relating to Insurance Premiums

This bill, which passed the Committee unamended, provides that certain provisions of law do not apply to discounts when the premium for the entire policy term is paid at the inception of the term, as long as such discounts meet specified criteria. The bill also prohibits such discounts from being considered related to, or components of premium financing. The bill is supported by the OIR and Progressive Insurance Company.

SB 1432 now proceeds to the Senate Finance and Tax Committee.

Following the consideration of the bills on the agenda, Commissioner McCarty reported on FHCF solvency and the State Farm withdrawal plan. During his testimony, he updated the Committee on recent discussions with the State Board of Administration, which is considering a multifaceted FHCF financing approach that includes “put” options, purchasing pre-event bonds, reinsurance and requesting federal solutions.

Noting that there have been some advancements in liquidity, Commissioner McCarty also reviewed the FHCF statute regarding reimbursements (215.555(5), F.S.), to which the OIR is bound for purposes of reviewing insurer rate filings.

Senator J.D. Alexander asked a series of questions that included to the process of appointing Department of Administrative Hearing (“DOAH”) judges and the OIR’s procedures in reviewing rate filings. Commissioner McCarty stated that OIR does not prematurely engage in rate filing recommendations with private companies, and that while a number of factors are considered in regard to rating, individual risks vary. This comment was in response to a question by Senator Bennett about the rationale for discrepancies in rate among different companies on the same risk. Deputy Commissioner Miller also stated that the OIR does not have personal ties to DOAH Judges.

Senator Fasano concluded the questioning by asking about DOAH’s final determination in State Farm’s most recently requested rate increase. Commissioner McCarty noted that DOAH concluded there was insufficient evidence to justify any rate increase.

Following these discussions, the Committee adjourned.

Should you have any questions regarding the above matters, please contact Colodny Fass.

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Florida Senate Banking and Insurance Committee Meeting Report: March 10

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