Recap – Liberty American And Liberty Select Public Rate Hearing

 

On November 1, 2007, a member of this Firm attended a public rate hearing for Liberty American and Liberty American Select Insurance Companies (collectively, “Liberty American”) in Tallahassee, Florida.  Belinda Miller (Deputy Commissioner), Michael Milnes (Deputy Director), Ken Ritzenthaler (Actuary), Steve Parton (General Counsel), and Stephen Thomas (Assistant General Counsel) from the Office of Insurance Regulation (“OIR”) were present.  Further, Lauri Goldman and Stephen Alexander from the Consumer Advocate’s Office were in attendance.  The hearing was held to review the true-up filings required under House Bill 1A, which passed during the 2007 Special Session A.
           
Liberty American was seeking a 31% increase in their homeowner’s line and a 28% increase in their mobile home line.  Following introductory remarks by Belinda Miller, the OIR panel and Liberty American began an open dialogue about the true-up filings.  Of note, the questioning revealed that Liberty American used a rate level indication of 31.6%.  Also, Liberty American based their annual premium trend on the ISO industry premium trend.  The OIR panel expressed concerns that Liberty American used an outdated version of the Florida Public Hurricane Model to establish their rates.  They were also concerned that Liberty American based their premiums on a 1 in 250 year event, when they previously used a 1 in 100 year event.  This was one of the main reasons for the rate increase according to Liberty American representatives.  It was also noted that their reinsurance costs were down.  However, Liberty American noted that they had a reduction in policy count that contributed to the need for higher rates. 
           
The next line of questioning was regarding agent commissions.  The OIR panel questioned whether additional services would be provided by agents given the fact that their commission would increase in proportion to the rate filing increase.  There was public testimony from a representative of the Florida Association of Insurance Agents regarding this line of questioning.  He was concerned about the equity of the questioning because the OIR panel did not address additional costs or work load associated with agent activity.  Liberty American representatives stated that they did not expect a significant increase in agent work load.
           
The OIR panel also expressed concerns with the rate filing because it was not reflective of the intent of House Bill 1A to provide rate relief to consumers.    Further, the panel noted that the sink hole presumed factor was not reflective in the filing and that storm surge was checked as a rate factor even though Liberty American policies do not cover storm surge.
           
In summary, the OIR panel found that Liberty American’s filing was incomplete, had errors and did not reflect the savings intended in House Bill 1A.  Ms. Miller suggested that Liberty American consider withdrawing their filing.  Mr. Parton concurred with her recommendation.  The company responded that they were not aware of the missing pieces identified during the hearing and would work to resolve the issues raised by the panel. 
           
Finally, Mr. Alexander from the Office of the Consumer Advocate expressed concerns that Liberty American used a version of the Public Model that was not approved by the Hurricane Modeling Commission.  There being no further business, Ms. Miller adjourned the rate hearing.

 

For your review, we have attached a copy of the meeting Agenda.

 

 

The foregoing is a brief summary of the discussion during the Hearing and is not intended to be a comprehensive review of the items contained herein.  Should you have any questions, please feel free to contact this office.