Florida Property Casualty Association Participates in Recent Meeting on 2011 Insurance Legislative Priorities
Date Published: 11-22-2010
A recent meeting of insurance industry interests in which the Florida Property and Casualty Association participated yielded the following summary of priority issues and proposed action items for the 2011 Florida Legislative Session:
The objective of this meeting was to reach a consensus on critical issues that are impacting the health of the Florida property insurance market; and, more importantly, reach consensus on solutions and implementation.
Following are the Legislative Priorities that insurer trade associations want to focus on and collaboratively work together to achieve the stated outcomes.
Groups and their members are encouraged to volunteer to work on one or more issues; it was noted that trade groups, legislative staff and others are already working on bill language on some of these issues, so time is of the essence.
It was agreed that all participants will share their work product as it evolves, ask for additional input, and then seek final agreement with the overall solution and proposed statutory language.
Finally, it was recognized that the insurance industry needs to reach out to the experts for assistance in developing the messaging around these issues. Each working group needs to draft preliminary talking points and also suggest a P.R./Media firm to engage for their issue.
Key Issues and Recommended Solutions:
1. Replacement cost - repeal statutory language that requires insurers to pay Replacement Cost upfront; return to the standard insurance contract provision of indemnification where ACV is paid up front with a holdback for depreciation, with the replacement cost paid by insurer upon actual repair/replacement.
We will seek to repeal this entirely - no distinction between structure and contents, or hurricane/catastrophe claims versus non-catastrophe claims.
Critical messaging points:
a. People are being enriched (at the expense of the rest of us) by collecting total replacement cost upfront, and not even required to make any repairs.
b. Homes are not being repaired, which makes them vulnerable to losses again in the future.
c. We also need to explain the process in simple terms - assuring policymakers that people are going to get replacement cost coverage as long as they actually repair or replace the covered loss. On a related note, we need to make certain policymakers understand that insureds will get the coverage they paid for as long as repairs are made (i.e., counter the argument "that they're paying for RC, but not getting it")
2. Sinkhole Claims - amend the existing statutory language with a focus on narrowing the definition to structural damage tied to catastrophic ground cover collapse; and removing the mandatory offer requirement for insurers.
Additional elements to be included in this issue's existing statutory language amendments:
a. Require that homes are actually repaired
b. 3-year claims bar for filing sinkhole claims
c. Insurer has the presumption of correctness in its determination of sinkhole
d. Change to a claims-made policy form
It was also suggested that a policy sub-limit be pursued if meaningful legislative reform was not achievable - with the intent of allowing insureds to have some level of coverage while taking the profit potential away from Public Adjusters.
There was also discussion, but not consensus, on addressing the sinkhole problem by creating a "Sinkhole Facility".
All agreed that, regardless of whether a separate Sinkhole Facility should be formed or not, it was critical to first address and solve the fundamental underlying issues of sinkhole claim abuse.
3. Public Adjuster Reform
a. Implement solicitation rules similar to the Florida Bar standard for attorneys
b. 3-year claims bar for filing - applies to all claims
c. A percentage fee is against public policy, as noted in Louisiana. Public Adjuster fees should be reformed, prohibiting the payment of a percentage of the claims amount.
d. The obligations placed on insurers must be reduced.
e. There needs to be real consequences for Public Adjuster abuse.
4. Repeal the Citizens HRA boundary reduction language, which increases the overall size of Citizens.
The following bills are not being initiated by the industry, but will be supported:
5. Citizens Property Insurance
It was noted that the Governor's Office will be working on a "Citizens Reform" bill. It was agreed that the industry will support this, and will offer that the following items are a critical component of such a bill:
a. Return Citizens to "Insurer of Last Resort" status for eligibility purposes
i. If any offer by an admitted insurer, insured is not eligible for coverage by Citizens (i.e., remove "15% rate differential threshold")
[It was agreed that a "safety net" threshold might have to be retained, and if so, it should be increased to 25%]
ii. Takeout offers make an insured ineligible for continued coverage - with protection of the agent/policyholder relationship
iii. Strongly consider permitting surplus lines carriers to be treated the same as admitted insurers for purposes of deeming a policyholder ineligible for Citizens; at least for certain segments.
b. Citizens' rates must be "actuarially sound" and/or not competitive with voluntary insurers. "Actuarially sound" needs to be defined in the context of Citizens being a residual market facility.
Citizens must include risk load factors to reflect FHCF layers and/or private market reinsurance purchases in their determination of actuarial soundness. Also, G&A expenses, profit and contingency factors, and other factors should be addressed in defining "actuarial soundness" for Citizens.
c. Reduce policy coverages offered to Citizens policyhlders
d. Citizens' "glide path" of rate increases should be accelerated to 15% or 20% - with this being applied to all policies, without any policyholder receiving a reduction. At a minimum, some segments should be accelerated.
e. Segment Citizens' business for eligibility, pricing and coverage options to be provided. Segments identified that should be addressed this way:
i. High-value homes
ii. Non-homestead properties
iii. Commercial non-residential
f. Require a notice to policyholders and applicants stating that (1) its rates are intended to be higher than private insurer rates, and (2) Citizens policyholders will receive up to a 45% assessment before other policyholders in the case of deficits.
6. Rate and Form Regulation
It was noted that Rep Proctor is already working on a "Rate Deregulation" bill.
All agreed that Rate and Form Regulation is not a major priority for the industry this year, but we will work to make certain Rep Proctor's bill produces a positive outcome for all insurers. And, this will be a separate bill.
The industry will support the Proctor bill, with the following:
a. The bill will make all carriers eligible for the benefits under the bill.
b. Flex band rating with the ability to do "consent-to-rate" on as much as twenty percent (20%) of a company's book of business.
The industry does not support the idea of exempting the consent-to-rate policies from Citizens' assessments.
c. Windstorm Mitigation Credits - follow the Windstorm Mitigation Committee recommendation that base rates and an insurer's mitigation credit plan are balanced or aligned to achieve adequate rates; offsets should be permitted.
7. Florida Hurricane Catastrophe Fund ("Cat Fund") - no action should be taken this year
8. Mitigation - the industry will support funding for the My Safe Florida Home program.
Should you have any questions or comments, please contact Katie Webb (firstname.lastname@example.org) at Colodny, Fass, Talenfeld, Karlinsky & Abate.