Senate Banking & Insurance Committee, House Jobs & Entrepreneurship Council Meeting Reports: April 1

On Tuesday, April 1, 2008, the Florida Senate Banking and Insurance Committee met in Tallahassee, Florida to discuss various insurance-related matters.

Also on April 1, the House Jobs and Entrepreneurship Council took up proposed insurance-related legislation. Below is a brief summary of the pertinent bills and discussions that took place.

Senate Banking and Insurance Committee (“Committee”)

Chairman Bill Posey (R- Rockledge) opened the meeting and took up the legislative proposals on the Committee’s agenda.

Senate Bill 2452 by Senator Bill Posey relating to a National Catastrophe Insurance Program. This is a memorial bill that urges Congress to support a national catastrophe fund. The bill passed unanimously with limited discussion.

Senate Bill 2488 by Senator Bill Posey relating to Future Property Insurance Claims/Escrow Reserves. This is also a memorial bill that urges Congress to pass legislation that exempts from taxation all reserves placed in escrow for the exclusive use of paying potential future property insurance claims arising out of natural catastrophes. The bill passed unanimously with limited discussion.

Senate Bill 1422 by Senator Mike Bennett (R- Bradenton) relating to Commercial Property Insurance. This bill passed with two amendments. The amended bill permits insurers to sell commercial property insurance policies that are neither subject to Citizens Property Insurance Corporation (“Citizens”) assessments nor subject to the filing requirement that rates cannot be excessive or unfairly discriminatory.

Insurers that sell “non-assessable commercial property insurance” must also give their insured the option to purchase policies that are subject to Citizens’ assessments.

Representatives from the Florida Chamber and other business interests spoke in favor of SB 1422. However, Citizens’ representatives expressed concerns with the bill, notably that it would pass additional assessment risk to homeowners, automobile owners, and others.

Finally, a representative from the surplus lines industry noted that surplus lines carriers also could insure these types of policies.

The Committee members expressed their desire to free the market in limited situations and help attract new businesses to Florida as contemplated by the provisions of SB 1422.

The Committee members also discussed amending the bill to include policies that are exempt from potential Florida Hurricane Catastrophe Fund (“FHCF”) assessments. Senator Bennett noted that he would consider such an amendment before the next Committee hearing. The bill passed unanimously.

Senate Bill 2174 by Senator Posey relating to Motor Vehicle Insurance. This bill passed the Committee unanimously with one amendment. The bill, as amended, clarifies that insurers’ reimbursement is based on 200 percent of the applicable Medicare Part B fee schedule “for participating physicians.”

Senate Bill 2528 by Senator Ted Deutch (D- Delray Beach) relating to Insurance Agents. The bill,which passed unanimously with one amendment, changes several provisions regarding continuing education (“CE”) requirements for insurance agents.

Specifically, as amended, this bill:

• Prohibits insurers from requiring appointees to complete specified CE courses offered by such insurers in order for the appointment to be issued or renewed;

• Allows Citizens to require its employees to take specified training courses and require CE courses that pertain solely to its internal procedures or products;

• Allows applicants to be exempt from the customer representative licensing examination if they have earned an associate’s or bachelor’s degree from an accredited college or university and have completed at least nine academic hours in property and casualty insurance;

• Authorizes independent study programs offering CE courses through correspondence to allow students to take a final closed book examination without being monitored, provided that the student submits a sworn affidavit attesting he or she did not receive assistance while taking the exam; and

• Creates requirements and qualifications for insurance agents to be designated as “unaffiliated insurance consultants.”

Senate Bill 2462 by Senator Don Gaetz (R- Fort Walton Beach) relating to Group Self-Insurance Funds. This bill passed unanimously with one amendment. The bill, as amended, changes the process by which group self-insurers pay dividends to their members with certain limitations. The bill allows Fund trustees to distribute dividends to Fund members without prior approval of the Florida Office of Insurance Regulation (“OIR”).

House Jobs and Entrepreneurship Council (“Council”)

House Bill 983 by Representative Dennis Ross (R- Lakeland) relating to the Florida Insurance Windstorm Program (“Program”). This bill passed the Council with five amendments. The bill creates the Program and allows an insurer the option to participate in it. The Program is available to insurers by providing windstorm coverage on non-commercial residential property. Insurers also have the option of using the private market that would not be subject to Citizens assessments. The bill authorizes the State Board of Administration to set the rates by a unanimous vote.

Amendments to the bill provide the following changes:

• Specifies that insurers not participating in the Program are still assessable for deficits associated with the FHCF

• Removes the bill’s provision requiring the SBA to set agent compensation amounts for Program policies

• Removes the bill’s provision requiring the private insurers contracting with the Program to comply with its rules relating to agent compensation

• Requires the Program to pay acquisition costs of participating private insurers at the usual and customary amount

• Requires Citizens to auction off only its personal lines residential policies, rather than all of its policies

The discussion on HB 983 related to its potential impacts on the reinsurance market, rates and Citizens. According to Representative Ross, the bill would encourage competition in the Florida reinsurance market, lead to decreased rates, and likely cause Citizens to rapidly depopulate.

House Bill 269 by Representative Alan Hays (R- Umatilla) relating to Hurricane Preparedness and Insurance. HB 269 passed the Council 14-0 with two amendments. As amended, the bill creates The Citizens Property Insurance Corporation Mission Review Task Force. The purpose of this Task Force would be to analyze and compile data for development of a report specifying the statutory and operational changes needed for Citizens to operate as a state-created, non-competitive residual market.

Representative Hays provided an opening statement that the 2007 Legislature’s action in passing HB 1A was a mistake, and that Florida now has policies in place that are irresponsible and dishonest to the citizenry. He noted that Citizens’ rates are unsound, and, but for statutory exceptions, would be woefully inadequate.

Representative Don Brown noted that there exists serious doubt that assessment needs could not be achieved in the current marketplace, and that it is possible that Florida could not meet its obligations to pay claims. In closing, Representative Hays stated that “Citizens is a pig and should be turned into bacon and ham.”

House Bill 1001 by Representative Garrett Richter (R- Naples) relating to Commercial Property Insurance. The bill, which is the House companion bill to Senate Bill 1422 described above, passed unanimously with two amendments. The first amendment provides that OIR can disapprove inadequate or discriminatory rates. The second amendment merely provides conforming and clarifying language. Representatives of the Florida Chamber and Bankers Association spoke in favor of HB 1001.

The above information is a brief review of the insurance-related matters discussed during the Senate Banking and Insurance Committee and House Jobs and Entrepreneurship Council. It is not intended to be a comprehensive review or analysis of the bills discussed.

 

Should you have further questions regarding the above materials, please do not hesitate to contact this office.

 

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