Senators Review Rate Filings, Cat Fund Savings, My Safe Florida Home

 

On Tuesday, January 8, 2008, the Florida Senate Committee on Banking and Insurance (“Committee”) met and discussed several insurance-related items.  First, Deputy Insurance Commissioner Belinda Miller gave a presentation on the status of property insurance rate filings at the Florida Office of Insurance Regulation (“OIR”).  She also provided a review of the composition of the Florida insurance market, noting that Florida domestic companies comprise 37 percent of the market.  Next, she reviewed the status of the reforms established in House Bill 1A. 

During this testimony, Senator J.D. Alexander asked a series of questions relating to the presumed factor filings required by House Bill 1A.  He was concerned that areas with the highest risk are seeing the greatest savings.  Ms. Miller responded that the playing field is level because the reinsurance rates were already in each insurer’s base rate before applying the presumed factor savings of HB 1A. 

Senators Mike Bennett and Ted Deutch asked several questions regarding the thirteen companies that assumed Allstate’s policies and any proprietary interests that Allstate may have with those companies.  Ms. Miller stated that she was not aware of any such interests.  She also stated that the takeout companies’ rates are largely competitively priced.

Next, Senator Don Gaetz asked several questions about the rate filings.  He was primarily focused on the requirement for company CEOs and officials to certify under penalty of perjury compliance with certain standards.  Ms. Miller reviewed the requirements that CEOs must certify and stated that they may be the subject of potential future litigation.  Also, Senator Gaetz expressed serious concerns that companies are not passing all of their Florida Hurricane Catastrophe Fund (“FHCF”) savings on to policyholders.  Ms. Miller noted that companies are required to pass on savings to consumers and the OIR will not approve rates that do not reflect those savings.  Senator Gaetz concluded his remarks by stating that the OIR should take action against CEOs who may have committed perjury in their rate filings.

Next, Senator Durell Peaden asked whether Floridians in the Panhandle area of the state will have viable insurance options in light of the recent elimination of the “Panhandle exemption.”  Ms. Miller noted that they would.

Senator Deutch posed another line of questions regarding the justifications for increased insurance costs (increases in reinsurance costs, increases in insurance levels, and increases in profit margin) and the relationship between insurance companies and rating agencies.  It was noted that rating agencies receive some revenue from insuance companies.  Senator Bill Posey stated that the relationship is like a “member-owned country club.” Concerns were also expressed because some companies have increased their profit contingency factor.

Discussion among the Committee members continued with regard to rate factors beyond Florida’s control, as well as ways to lower rates through decreasing overhead costs.  Senate President-Elect Jeff Atwater stated that the Legislature, and in particular, this Committee, must find out why FHCF savings are not being passed along to policyholders.  Senator Atwater also expressed his desire that each issue should be considered individually.    

Senator Rhonda Storms discussed what she said she felt were misrepresentations by rating agencies relating to the State Board of Administration (“SBA”) and its handling of the Local Government Investment Pool.

Senator J.D. Alexander suggested that the Committee consider ways to bring in additional capital to Florida so that the State can have greater control over rates.  Senator Peaden supported this proposal and Ms. Miller noted that the Capital Incentive Build-Up Program enacted by the Legislaure has been successful.

Ms. Miller provided a review of the pending litigation with Allstate.  She noted that the OIR denied Allstate’s rate filing and the filing is now with the Department of Administrative Hearings, however a hearing date has not been set.  She also noted that Allstate used the short-term model in its filing, which is problematic.  Further, Allstate continues to nonrenew policies. 

Responding to questions be Senators Deutch and Gaetz, Ms. Miller reviewed mitigation initiatives.  She noted that not all companies are implementing mitigation credits as they are required.  Also, she stated that the OIR is in the process of compiling a list of companies to ensure they are complying with the requirement to write homeowners policies if the are writing auto policies in Florida and homeowners coverage in any other state. 

Next, Tami Torres with the Department of Financial Services, provided a status report on the My Safe Florida Home program (“MSFH”).  Senator Al Lawson asked about renters.  It was noted that the policyholder of the property would receive the savings.  Senator Posey noted that MSFH is very successful to date.  Following this presentation, the meeting concluded. 

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

 

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