Recap: Florida Cabinet Meeting

 

On November 14, 2007, a member of this Firm attended the Florida Cabinet meeting held in Tallahassee, Florida.  The Cabinet heard from several government organizations within its jurisdiction, and discussed and acted upon multiple insurance-related items. 

To view the entire meeting agenda,click here.

Below is a summary of the pertinent discussions and actions that occurred during the meeting:

Division of Financial Services – Office of Insurance Regulation

Florida Insurance Commissioner Kevin McCarty reported on the activities of the Office of Insurance Regulation (“OIR”).  All items were either approved or adopted by the Cabinet, except for the withdrawl of item number 7 pertaining to a proposed amendment to Rule 69O-167.004 F.A.C. that required pre-insurance inspection of private passenger motor vehicles.

The following items were approved by the Cabinet:

1. Approved without objection: Approval of the September 19th, 2007 and October 16th, 2007 meeting minutes.

2. Approved for final adoption without objection: Amendment to Rule 69O-149.003 (6)(d); Maximum Trend F.A.C.(pertaining to the “maximum medical trend” data for medical insurance that can be applied by an insurer that does not have its own credible data needed to make a determination as to medical trend. “Medical trend”  refers to the amount medical bills are expected to increase over the next year.)

3. Approved for final adoption without objection: Amendments to Rule 69O- 162.203; Preferred Mortality Tables F.A.C.(This rule would allow an insurer to use, in specified conditions, the 2001 preferred class structure mortality table, instead of the 2001 CSO smoker or nonsmoker Mortality table.  “2001 CSO Mortality Table” means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the American Academy of Actuaries CSO Task Force from the Valuation Basic Mortality Table developed by the Society of Actuaries Individual Life Insurance Valuation Mortality Task Force.)

4. Approved for final adoption without objection: Amendments to Rule 69O- 164.030; Application of Rule 69O-164.020 to Various Product Designs F.A.C. (Rule 69O-164.030 helps the insurers apply Rule 69O-164.020, which  explains how reserves are to be valued, by setting out various factual scenarios, then explaining how Rule 69O-164.020 would be applied to each scenario.)

5. Approved for final adoption without objection: Amendments to Rule 69O- 149.002; Rating Rule F.A.C. (This Rule is being amended to adopt the recent National Association of Insurance Commissioners (“NAIC”) interstate compact standard for defining incidentals for accelerated death benefits.)

6. Approved for final adoption without objection: Proposed Rule 69O-186.003, .005; Junior Loan Rule F.A.C.  (junior loan title insurance provides lenders with a lower cost title insurance product that provides limited coverage for junior lien mortgage loans.  This rule sets the premium for this type of title insurance.)

7. Approved for publication without objection: Proposed new Rule 69O-204.101;  Disclosures to Viator of Disbursement Pursuant to section 626.9925, F.S. (This new Rule requires a viatical settlement provider to disclose to viators the gross amount paid for the insurance policy being viaticated, the net amount being paid to the viator, and a breakdown of all funds paid to other persons, such as viatical settlement brokers.)

8. Approved for publication without objection: proposed amendments to Rules 69O- 149.003, .004, .007, Health Rate Filings F.A.C. (The first proposed amendment  establishes rules for pooling of cancer claims. The second prohibits an insurer from knowingly and excessively pricing an individual rate to be charged to an insured.  The third tightens requirements for rate certifications.

9. Approved without objection: vendor to conduct the Workers’ Compensation Peer Review pursuant to Section 627.285, F.S. (The Financial Services Commission shall, at least once every other year, contract for an independent actuarial peer review and analysis of the ratemaking processes of any licensed rating organization that makes rate filings for workers’ compensation insurance.)

10. Approved without objection: Citizens Property Insurance Corporation’s revised Plan of Operation pursuant to Section 627.351(6), F.S. (Senate Bill 2498, passed  during  the 2007 Legislative Session, contained items requiring the plan of operations be amended.)

Commissioner McCarty withdrew item number 7 on the agenda, which pertained to the proposed amendment to Rule 69O-167.004;  Required Pre-insurance Inspection of Private Passenger Motor Vehicles, F.A.C. (This proposed amendment sought to bring into congruity with the statute the form used for pre-insurance inspections of automobiles that have been insured for an uninterrupted two-year period of time.)

In regard to item number six on the agenda–Proposed Rule 69O-186.003,  .005; Junior Loan Rule, F.A.C., Attorney General Bill McCollum questioned how the Commission determined what the rate/premium for this type of title insurance would be.  He was told that these junior loans are not a consumer product, rather, they are a product for banks, which may file a variance if  the rate/premium is considered to be too high.

Because a junior loan mortgage is a loan made on property upon which there already exists a loan, the existing loan has priority on the security. Therefore, the new loan is said to be “junior” to the existing loan. Junior loan title insurance provides lenders with a lower cost title insurance product providing limited coverage for junior lien mortgage loans.  Thus, this Proposed Rule sets the premium for this type of title insurance. Section 627.782 provides that the Commission must adopt a rule specifying the premium to be charged for title insurance. 

In regards to the amendments to Citizens Property Insurance Corporation’s (“Citizens”) Plan of Operation, Suzanne Murphy, Executive Vice President of Citizens, explained that proposed amendments were needed and designed to bring the Plan of Operation into compliance with the revised Citizens statute.  Senate Bill  2498,  passed during the 2007 regular Legislative Session, changed the statute, causing the need to reflect those changes in Citizens’ Plan of Operations.   Notably, sections 2, 8, 16, and 23 of the Plan of Operations underwent revision. 

These revisions have been in process for over a year and come in the wake of disapproval of Citizens’ Plan of Operation on September 19, 2006 by then-Governor Bush and the Florida Cabinet sitting as the Financial Services Commission (“Commission”).  At that time, the Commission found that the Plan failed to state the measures Citizens must take to fulfill its legislative mandate to exist as “an entity organized to achieve efficiencies and economies, while providing services to policyholders…” and to “be held to service standards no less than those applied to insurers in the voluntary market by the office with respect to responsiveness, timeliness, customer courtesy and overall dealings with policyholders…”  Citizens was ordered to develop a new Plan to be submitted to the Commission for review no later than July 31, 2007. 

The amended Plan was approved without objection at this (Nov. 14, 2007) meeting.  Specifically, Section 2 of the Plan, pertaining to Citizens’ Purpose and Mission was amended so as to clarify that Citizens is a governmental entity, not a private corporation. 

Section 8, pertaining to Eligibility was amended and clarifying language was added as to which coverages are deemed to be complete. 

Section 16, pertaining to Assessments and Surcharges, was amended in regards to assessments being collected to cover deficits and changes in the percentage of premium which may be charged to both policyholders and non-policyholders. 

Section 23, pertaining to Immunity was also amended to clarify that immunity is available as provided by law. 

Commissioner Bronson expressed concern about assessments made against owners of second homes.  His concern was that people who take care of elderly relatives and who are paying for what technically is a second home, may be unfairly affected by Citizens’ assessments.  Commissioner Bronson did not believe that these homeowners should be assessed in triplicate and wanted to see a provision included dealing specifically with this concern.  Suzanne Murphy addressed the issue and reported that there is a good deal of consideration over whether the homestead distinction should even be considered in how assessments are made, therefore, the issue may be moot.

The next Florida Cabinet meeting is scheduled for December 4, 2007

Please note that the material above is a brief summary of the discussion and events that took place during the Cabinet Meeting.  It is not intended to be a comprehensive review of any particular issues relating to the policies and/or programs discussed.  Further, this report should not be relied upon for making any specific decisions. 

 

Should you have any questions about any of the above matters, please do not hesitate to contact this office.