Senator Says Better Resistance Rating Should Lower Premiums; Insurance Accountability Testimony Time Cut Short

Today, both the Senate Banking and Insurance Committee and the Senate Committee on Property Insurance Accountability met to discuss several insurance-related issues.

Senate Banking and Insurance Committee Chairman Bill Posey was absent from the meetings due to an illness.

First, the Banking and Insurance Committee heard a report on the My Safe Florida Home Program by a representative from the Department of Financial Services. The report included a review of statistics regarding inspection applicants and grants approved.  It was noted that the applicants that were awarded grants for mitigation saw an average eighteen (18) percent increase in their rating scale.  Senator Don Gaetz commented that he would like to see the hurricane resistance rating scale have a larger effect on premium discounts, and he also expressed some concerns with the geographic element of the rating scales.

Next, the Committee staff  provided a report on an Interim Project regarding Open Government Sunset Review of Section 626.97411, F.S., Credit Scoring Methodology.  To view the report, click here.

Staff Director Brian Deffenbaugh provided a short review of the credit scoring legislation that passed in 2003, which regulated and limited the use of credit information by insurers.  The Committee staff report recommends that the current public records exemption be maintained for credit scoring methodologies and related information that are trade secrets.

Mr. Deffenbaugh noted that the Florida Office of Insurance Regulation’s current practice of disclosing information unless the insurer obtains a court injunction is inconsistent with its duty as custodian of confidential information.

Senator Storms, Senator Bennett and Senator Gaetz voiced concerns regarding the use of credit scores by insurers, including the concern that insurance companies could unfairly use credit scoring methodologies to increase rates and the current economic situation will only increase this problem.  Senator Storms added that public scrutiny is the best barometer for determining business practices.  The Committee did not vote on the issue, but the Committee members made several comments indicating that they would not support legislation to extend the public records exemption for credit scoring methodologies.

Finally, the Committee staff briefly reported on an Interim Project regarding risk transfer options for the Florida Hurricane Catastrophe Fund (“FHCF”).  To view a copy of the report, click here.

After giving a brief overview regarding the structure of the FHCF, Staff Director Deffenbaugh reviewed some options available to the FHCF, including investments in catastrophe bonds and industry loss warranties.  The Committee meeting ended, however, without a full discussion on these issues.

Following the Senate Banking and Insurance Committee meeting, the Select Committee on Property Insurance Accountability held its first meeting to examine the effects of House Bill 1A on homeowners insurance premiums.  To view the complete Committee packet, click here. 

After some brief opening statements, Insurance Commissioner Kevin McCarty and his staff were sworn in, and Commissioner McCarty gave a brief overview of the legislative changes made in House Bill 1A.  Senator Al Lawson made several inquires regarding circumstances surrounding OIR’s suspension of the Allstate companies ability to conduct business, however, Senator Lawson’s questions were cut short due to time restraints.  Committee Co-Chair Senator Steve Geller promised Senator Lawson that Commissioner McCarty and other OIR staff would be available at a later date to testify.  After Commissioner McCarty’s testimony, Bob Hunter of the Consumer Federation of America gave a presentation focused on the record profits of insurance companies in the last two years, and Mr. Hunter alleged that insurance companies in Florida were “stuffing money in their pockets while abandoning policyholders on the coast.”  To read Mr. Hunter’s report, click here.

Mr. Hunter also suggested that a statutory definition of a “reasonable profit” for insurers in Florida may curtail some of the alleged unnecessary rate increases for Florida insurance companies.  Several Senators voiced concerns over companies that do not appear to have passed along savings to policyholders that the Legislature expected after the passage of House Bill 1A, but the Committee members did not come to any conclusions at the end of the meeting. 

The next Select Committee on Property Insurance Accountability meeting is scheduled for February 4 – 5, 2008.

 

Should you have any questions or comments regarding the above information, please feel free to contact this office.

 

 

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