Florida Senate Banking and Insurance Committee Passes Consumer Choice Bill Despite Governor’s Opposition; MGA Regulation Amendment Pre-Empted

 

Immediately after the Senate Committee on Banking and Insurance (“Committee”) meeting was called to order yesterday, March 24, Florida Governor Charlie Crist addressed the legislators and urged them not to pass Senate Bill 876, which is commonly known as the “consumer choice” property insurance bill.

Before SB 876 was debated, however, the following insurance-related bills were considered and acted upon during the meeting:

• Senate Bill 1364 relating to Life Insurance by Senator John Thrasher passed with limited discussion.
• Senate Bill 2046 relating to Insurance by Senator Garrett Richter amends laws relating to employee leasing companies. After being amended as a committee substitute, the bill was passed.
• Senate Bill 2190 relating to Residential Property Sales by Senator Thad Altman was passed. The bill, which has an identical House of Representatives companion, repeals a requirement that the results of windstorm inspections must be disclosed to home purchasers. The bill passed with minimal discussion.
• Senate Bill 2176 relating to Commercial Insurance Rates by Senator Durell Peaden Jr. was not considered because of time constraints. Senator Mike Fasano had been prepared to offer a late-filed amendment to SB 2176, however, neither it, nor the bill were considered because of Committee time constraints. Senator Fasano’s amendment would provide that companies affiliated with a domestic insurer may not issue a dividend or distribute cash or other property to shareholders unless the dividend or distribution is from that part of the available and accumulated surplus funds derived from realized net operating profits on insurer business and net realized capital gains.

 

SB 876

In explaining SB 876 to the Committee, Senator Bennett noted that his bill allows insurers to use rates different from those approved by the Florida Office of Insurance Regulation (“OIR”).

Two amendments had been filed to the bill.  The first, 247090, would cap related rate increases to five percent during the first year after SB 876 becomes law.  Rates during the subsequent year would be capped at 10 percent, and then at 15 percent during the third year and thereafter.

Senator Fasano expressed concern that the amendment does not cap rate increases, but rather, allows a statewide average increase.  Senator Ronda Storms echoed his concerns, however, the amendment was adopted. 

The second amendment, 445944, relating to the Citizens Property Insurance Corporate policyholder surcharge, was adopted without debate or discussion.

During public testimony, representatives from insurance agent associations spoke in support of SB 876.

Representatives from a statewide consumer advocate group spoke in opposition to the bill because of its potential to precipitate rate increases. 

Insurance company representatives spoke in support of the bill, arguing that it allows consumers the choice to remain with their own insurer. 

Senator Fasano continued to voice his opposition to SB 876, noting that even the mandate of sinkhole reforms has not been able to bring private insurers back to the Florida marketplace.

Senators Ring and Villalobos questioned how insurers could be unprofitable in a market that has not suffered any non-catastrophe losses.  Senator J.D. Alexander’s questions focused on reinsurance.

Florida Insurance Consumer Advocate Sean Shaw characterized the Florida marketplace as “distorted” one, in which deregulation would be inappropriate. Senator Alexander asked Mr. Shaw about whether he is concerned with the ability of insurers to pay their obligations.

An OIR official testified in opposition to SB 876, stating that insurers have given no indication that they would write new insurance business in Florida even if the bill passed. The OIR representative added that SB 2044 by Senator Richter addresses the problematic issues facing the Florida insurance industry.

Due to a passed motion for a time to vote certain, the Committee engaged in minimal debate on the bill, which was passed as amended by a vote of 6 to 4.

SB 876 must pass the Committee on General Government Appropriations and the Policy and Steering Committee on Ways and Means before being considered on the Senate floor.

 

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

 

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