Monday January 13, 2014

 Below Freezing Temps Didn’t Slow Down Committee Week

We love living in Tallahassee for lots of reasons, and of course, our “mostly” beautiful weather is one of the biggies!  This last week reminded us how really fortunate we are to live here.  While other Americans were kept in their homes by the bitterly cold snow and ice, we put on our wool coats, scarves and mittens, and kept on keeping on.  Those were chilly walks up Capitol Hill for committee meetings, but we were still walking.

Sharing some events of the week with you, we begin:

On the Agenda for Insurance Committees this Week – January 13-17, 2014

The Florida Legislature’s insurance committees will be meeting this week to continue preparations for the upcoming 2014 Regular Session. The Senate Banking and Insurance Committee will meet tomorrow (Tuesday, January 14) from 2:00-4:00 p.m. in room 110 of the Senate Office Building. Items on the agenda include:

•SB 416 (Simpson) Establishing a Citizens Sinkhole Stabilization Repair Program.

•SB 444 (Galvano) Revising requirements for the release of stop-work orders.

•SB 490 (Garcia) Revising motor vehicle liability policy requirements.

•SB 424 (Lee) Prohibiting unfair discrimination in the purchase of property and automobile insurance due to gun ownership.

•Citizens Property Insurance Corporation-Further Discussion on Potential Legislation.

Additionally, the House Insurance & Banking Subcommittee will meet on Wednesday, January 15 from 8:00-10:00 a.m. in Room 404 of the House Office Building (HOB). The following items are currently on the agenda:

•HB 143 (Raburn) regarding the Florida Insurance Guaranty Association (FIGA).

•HB 321 (Passidomo) regarding title insurance.

•Presentation regarding Citizens Property Insurance Corporation Sinkhole Repair Program.

Your LMA team will cover both meetings and provide you with an update in our next newsletter.

CFO Atwater out of FAU race

On Saturday, January 4, media rumors begin to swirl that Chief Financial Officer Jeff Atwater would pursue the presidency of Florida Atlantic University, vacated by Mary Jane Saunders last year. Speculation continued during the week as other candidates were revealed.  One longtime political hand, former U.S. Sen. George LeMieux, declared his interest, as well as Christopher Earley, dean of the Krannert School of Management at Purdue University, and John Kelly, vice president for economic development at Clemson University. However, on Saturday, January 11, it was revealed that the CFO will remain in his position after a committee at Florida Atlantic University did not include his name on a list of three finalists for the school’s presidency.

On a Facebook page, Atwater wrote, “As I said to my staff about accepting an invitation to apply, my passion for serving as Florida’s CFO and my commitment to working with my great colleagues for years to come remains undiminished.”

We look forward to our continued work with CFO Atwater as he leads the Department of Financial Services.  His public service contributions do not go unnoticed by those of us in the process.

Senate Committee Considers Further Citizens Reforms for 2014 Session

Wednesday 1/8/14- During today’s Senate Banking and Insurance Committee meeting Chairman David Simmons (R-Seminole/Volusia) held a workshop to consider a series of potential further reforms to Citizens Property Insurance Corporation for the upcoming 2014 Regular Session. Released earlier this week, the list of reforms came on the heels of last session’s SB 1770, which brought us the soon to be initiated Citizens Clearinghouse and several other changes regarding eligibility for coverage with the state-run insurer. Potential Citizens reforms reviewed during the Senate Banking and Insurance workshop which could later morph into legislation are as follows:

Proposal 1:  Establish Commercial-Residential Clearinghouse, Stair-Step and Eligibility Cap- Recommendations:

1. Require Citizens to create a commercial – residential clearinghouse so that private insurers and surplus lines carriers can make offers of coverage on policies currently written by Citizens. Over time this would hopefully significantly reduce Citizens’ exposure in the Commercial Account.

2. Stair-step Citizens policy limits for commercial – residential policies as is done with personal lines residential policies. This proposal would stair – step eligibility for commercial – residential policies from $25 million to $5 million over 4 years. This change will affect about 5 percent of Citizens commercial – residential buildings it insures and will reduce 47 percent of Citizens exposure and 39 percent of the 1 – 100 year probable maximum loss (PML) with regards to the Commercial Account.

3. Cap the total insured value per building at $5 million. According to data, Citizens currently covers about 68,500 commercial-residential structures and approximately 3,700 of those have a total insured value of $5 million or more. This recommendation would reduce 47% of Citizens’ exposure in the Commercial Account.

Proposal 2: Require Citizens to charge actuarially sound rates for commercial non-residential policies-Recommendation:

By a legislatively established date require that all commercial non-residential policyholders be charged actuarially sound rates for coverage. This recommendation would accomplish one of the committee chairman’s most sought-after reforms, doing away with subsidized insurance rates. Data shows that the majority of Citizens’ commercial wind-only and multi-peril policies in the Coastal Account are underfunded. Underfunded policies in the Coastal Account place other Citizens policyholders and the private market at risk of huge surcharges and assessments should a major storm impact Florida.

Proposal 3:  Address wind-only policies-Recommendation:

1. Cease allowing Citizens to write wind-only policies in the Coastal Account and require the corporation to instead sell these insureds multi-peril policies as is done in the Personal Lines Account. With this recommendation Citizens will still cover the wind portion of the new policy and Citizens will also cover the AOP. While a multi – peril policy sold by Citizens is still rated below being actuarially sound, the AOP portions tend to be closer to being actuarially sound which should help Citizens reduce the likelihood of surcharges and assessments.  Additionally, the new multi – peril policies can easily be placed into the clearinghouse as currently operated.

2. For the purposes of the clearinghouse, submit personal – lines residential wind – only policies as if they were written by Citizens as a multi – peril policy. This change would require Citizens to price wind – only policies as if they were a multi – peril policy. If a private insurer participating in the clearinghouse agrees to write that policy at the Citizens rate the policy is no longer eligible for Citizens. If the insurer making the offer does not currently write the AOP on that policy it would require the consumer to switch carriers unless the AOP carrier is willing to match the full multi – peril offer.

Proposal 4: Citizens Policyholder Surcharge-Recommendation

Shift 5 percent of the PLA 15 percent Surcharge to the Coastal Account. The Personal Lines Account is on a state-wide average, 3.7 percent from being actuarially sound. The Coastal Account on a state-wide average is 24.1 percent from being actuarially sound. It is the underfunding of the Coastal Account that places the most risk of assessments being passed on to policyholders insured in the private market. With this recommendation the total surcharge risk to a Citizens policyholder remains the same at no more than 45 percent.  However, the 70 percent of policyholders not in Citizens and 100 percent of automobile owners in the state will be better protected from assessment in storms where underfunding of the Coastal Account is the cause for assessments.

Proposal 5: Glide Path Eligibility for Higher Value Homes-Recommendation:

Remove “Glide Path” protection for homes with a replacement cost value greater than $400,000 and require those insureds to pay actuarially sound rates. Many individuals who are insured by Citizens can easily afford to pay actuarially sound rates. Of the 125,760 non – homesteaded (i.e. second homes) properties in Citizens 104,052 (83 percent) do not have a mortgage and most were paid for in cash. There appears to exist a wealthy subset of individuals in Citizens who are not in Citizens because they couldn’t afford insurance but rather Citizens was the only policy available to them. Therefore, this recommendation allows those individuals with homes of value greater than $400,000 to remain in Citizens; however, they must pay an actuarially sound rate.

Proposal 6: Address Clearinghouse Eligibility Offers for Higher Value Homes-Recommendation:

Increase the clearinghouse eligibility offer on renewal to 15 percent for homes that have a replacement cost value of $300,000 or more. There are 341,322 (40 percent) homes and condos covered by Citizens that have a replacement cost value greater than $300,000. Of that number 290,005 of these are multi – peril policies that will be submitted through the clearinghouse.  Just like all other renewals, private insurers participating in the clearinghouse must offer the same rate as Citizens or less to make these risks ineligible for Citizens.  This recommendation addresses these high – end homes where the private market is available but unable to match Citizens’ current lower rates. The 15 percent only applies to offers received through the clearinghouse and is the same rate that is applied to all new business entering Citizens regardless of home value.

Citizens CEO Barry Gilway was in attendance during the workshop and noted his opposition to phasing out wind-only policies. In doing so, he asserted, that there is no private market for wind coverage currently provided by Citizens’ Coastal Account. According to Gilway, one huge factor is rate inadequacy, which ranges from 35 percent to 70 percent. “You must be careful you are not withdrawing the only market in Florida for wind,” he said. The corporation’s chief executive went on to say that a stronger argument exists for eliminating multi-peril in Citizens where there exists a strong private market for such coverage.  Gilway also raised concern that discontinuing wind-only policies in the Coastal Account would likely increase the corporation’s overall exposure because it would be picking up all other perils policies for Coastal Account risks now in the private market.  Chairman Simmons expressed his displeasure with CEO Gilway’s opposition to phasing out wind-only policies and instructed Gilway to commit to writing what he could and could not support. Mr. Gilway said late Wednesday that he can immediately endorse a number of the proposals which are being considered by the Senate Banking and Insurance Committee to reduce the corporation’s commercial-residential exposure. The proposals with Gilway’s support include reducing the cap for commercial-residential coverage from the present $25 million in value to $10 million or something close; establishing a commercial-residential clearinghouse program; allow rating structures outside the glide path at a lower layer than currently, initially property valued at $5 million and in time down to $2.5 million; and, finally an increase in the glide path from 10 percent to 15 percent. Some of the above proposals considered by the committee are obviously more controversial than others and we will continue to closely monitor the committee’s activities in this area and let you know the minute any are included in a bill for the upcoming session.

Flood Insurance Bill Heard Quickly, Passes Unanimously

Wednesday 1/8/14- As we reported in our December 23rd newsletter would likely occur, Senator Jeff Brandes’ (R-Hillsborough/Pinellas) flood insurance legislation (SB 542) was the first item on Chairman Simmons’ agenda during Wednesday’s Senate Banking and Insurance Committee meeting. Received with warm support by many committee members, the bill is a strong attempt to create a state-based, private market alternative to purchasing flood insurance through the National Flood Insurance Program, which will provide rate-making and form flexibility to encourage private insurers to write flood insurance in Florida.  By a 12-0 vote the committee approved an amended strike-all version of the bill which Senator Brandes said includes additional consumer protections. The approved committee substitute allows insurance companies to offer a flood insurance policy that provides more coverage than the NFIP policy and gives consumers choices to fit their individual circumstances. Consumers can choose the amount of coverage they want rather than having to purchase full replacement cost and can limit flood coverage to the main structure to reduce the cost of the policy. Although consumers must be offered policies that provide at least as much coverage as the policy offered by the NFIP, they can pick a deductible which fits their individual financial situation. While word continues to flow from Washington that the U.S. House and Senate are considering delays to the federal Biggert-Waters Act imposing drastic increases in NFIP premiums, final congressional action is not likely or at least cannot be counted on, said Senator Brandes during his presentation of the amended bill. Brandes and several committee members concurred that Florida must take steps to encourage and provide a mechanism to facilitate the writing of flood insurance by private insurers. While there was little testimony from the industry Wednesday, the bill was publically supported by the Florida Realtors, the Office of Insurance Regulation, Security First Insurance Company, Reinsurance Association of America, Florida Bankers Association and the Florida League of Cities, among others. Senator Alan Hayes (R-Lake/Marion/Orange/Sumter) did raise two issues during discussion on the bill and requested that Senator Brandes meet with him to engage in further discussion. Senator Hayes said he would like to see the bill amended to make it clear that surplus lines companies will have authority under the statute to participate in the writing of flood insurance and a further amendment to make it clear that Citizens Property Insurance Corporation will be prohibited from writing flood insurance. Hayes noted that the Legislature is trying to restore Citizens to its appropriate role as the property insurer of last resort and not competing with the private marketplace.  Senator Brandes and other committee members appeared to support Senator Hayes’ contention that Citizens should remain focused on its primary mission. We’ll keep you posted on developments regarding this critical piece of legislation.

Gov. Scott Demands Presidential Action to Delay NFIP Rate Hikes

Thursday 1/9/14- One day after the Senate Banking and Insurance Committee unanimously approved CS/SB 542 authorizing the sale of flood insurance by private insurers in Florida, Governor Rick Scott sent President Barack Obama a letter demanding his immediate action to delay the significant premium rate hikes imposed by the federal Biggert-Waters Act of 2012. Governor Scott’s letter is as follows:

President Barack Obama

The White House

1600 Pennsylvania Avenue, NW

Washington, D.C. 20500

Dear Mr. President:

Your decision to sign the Biggert-Waters Flood Insurance Reform Act of 2012 has had devastating consequences for Florida’s families. 

Over the past 35 years, Floridians have paid over $16 billion into the National Flood Insurance Program-roughly four times more than they have received in payments.  Yet, as a result of Biggert-Waters, today many Floridians are facing the horror of losing their homes due to soaring flood insurance costs. 

One Pinellas County family saw their annual insurance premium skyrocket from $4,300 to nearly $44,000.  A couple in Holmes Beach saw their insurance bill climb 614 percent-from $914 a year to $6,500 a year.  In Fort Myers Beach, the owners of a small inn and gift shop will see their premiums jump from $2,722 to $46,907-a 1,700 percent increase.  The law you signed has brought unthinkable hardship on Floridians. 


Uncertainty hangs over thousands of homes.  By many accounts, sales have stalled in low-lying areas, sellers are dropping prices, and real-estate closings are becoming more complex.  You delayed implementation of the Affordable Care Act, but you have failed to delay a law that saddles Floridians with unfair and unaffordable rate hikes.  


Act now and undo the effects of this mistaken law before it cripples Florida’s real-estate market, harms even more Floridians, and reverses our state’s burgeoning economic recovery.

Sincerely, Rick Scott

LMA has been aggressively involved in this issue from the start and will continue to monitor and report developments as they occur.

The House Insurance and Banking Committee Moves Bills Forward

Wednesday, 1/8/14-The House Insurance and Banking Committee, Chaired by Representative Bryan Nelson (District 31) met to discuss four bills, HB4005, HB0291, HB0271 and PCB-S1.  HB4005, Fireworks, presented by Representative Matt Gaetz (District 4) was quickly tp’d (temporarily postponed).  HB0291, Warranty Associations, presented by Representative David Santiago (District 27) was passed unanimously. This bill will authorize electronic transmission of service agreements and home warranties, and provide requirements for transmission and notice; will revise criteria authorizing premiums of certain warranty associations to exceed net asset limitations; revises requirements relating to contractual liability policies and delivery of contracts. HB0271, General, presented by Representative Travis Cummings (District 18) was discussed and passed unanimously. This bill will revise the powers of the DFS Division of Workers’ Compensation recognizing that there are those that deserve a “second chance” if they are operating without workers’ comp insurance.  Rep. Goodson, a contractor, was focused on not giving a break to those who don’t deserve it but interestingly, the contractor/carpenter’s union supported the bill.

OIR Order Expires, Personal Lines Forms Now Require Prior State Approval

Tuesday 12/31/13- Sandra Starnes, Director of the Office of Insurance Regulation’s (OIR) Property and Casualty Product Review, sent a reminder email to all property and casualty insurers regarding informational personal lines form filings. In her communication Ms. Starnes notified insurers of the expiration of OIR Order 137063-13 issued June 24, 2013. The Order exempted for a period of time certain personal lines forms from the advanced filing requirements in Section 627.410, Florida Statutes. As a result of the Order’s expiration, effective January 1, 2014, all personal lines form filings subject to s. 627.410 became subject to prior review and approval by the Office of Insurance Regulation, but in an odd twist, the order indicated that companies will be given more time as OIR trains its new forms review personnel.  We are still studying this order for more guidance but it is apparent that most insurers are filing for pre-approval of forms/product approval. Please let us know of your experience with OIR as you make personal lines forms filings, or have any questions concerning this issue so we can address OIR and others about its impact.

DFS Issues Workers’ Compensation Fraud and Non-Compliance Report

The Department of Financial Services’ Division of Insurance Fraud (the Division), Bureau of Workers’ Compensation Fraud and the Division of Workers’ Compensation, Bureau of Compliance have issued a joint annual report detailing their respective efforts and activities in curbing fraud within the state’s workers’ compensation system and employer non-compliance with coverage requirements. The joint report covers the period of July 1, 2012 through June 30, 2013. The complete report can be viewed by clicking HERE.  The Division’s pursuit of fraud solutions was highlighted from its 2012 efforts:

–35% increase in Workers’ Compensation Fraud related presentations for prosecution (475 up from 353 in 2012).

–53% increase in Workers’ Compensation Fraud related arrests (418 up from 274 in 2012).

–25% increase in Workers’ Compensation Fraud related convictions (259 up from 208 in 2012).

OIR Releases 2013 Workers’ Compensation Annual Report

Monday 12/30/13- The Office of Insurance Regulation has released its 2013 Workers’ Compensation Annual Report to the Florida Legislature, which among other things, evaluates competition in Florida’s workers’ compensation market. The Office’s analysis of 2012 data found that of the six most populous states, Florida is one of two states where private market insurers dominate the market. Florida also ranked fourth nationally with over $2 billion in direct written premium in the workers’ compensation market. In conclusion, the report found the market is not overly concentrated and remains competitive. The report was completed pursuant to Section 627.096, Florida Statutes, which requires the Office to investigate and study the data, statistics, schedules, or other information, as it deems necessary to assist in its review of workers’ compensation rate filings. For more information on workers’ compensation in Florida, visit the Workers’ Compensation webpage or click HERE to access previous workers’ compensation annual reports from 2004 – 2012. For your convenience, we are including the report’s Executive Summary:


As mandated by Subsection 627.211(6), Florida Statutes, the analysis presented in this report finds the following:

1. Based on a comparative analysis across a variety of economic measures, the workers’ compensation market in Florida is competitive.

a. The workers’ compensation market in Florida is served by a large number of independent insurers and none of the insurers have sufficient market share to exercise any meaningful control over the price of workers’ compensation insurance.

b. The Herfindahl-Hirschman Index (HHI) – a measure of market concentration – indicates that the market is not overly concentrated.

c. There are no significant barriers for the entry and exit of insurers into the Florida workers’ compensation market and based on the record of new entrants and voluntary withdrawals with no market disruptions, the Florida workers’ compensation market is competitive, well capitalized and robust.

2. Of the six most populous states, Florida is one of only two where private market insurers, rather than a state-sponsored residual market dominate the market. This degree of private activity indicates that coverage should be generally available in the voluntary market. The residual market is small, suggesting that the voluntary market is absorbing the vast majority of demand.

3. Reforms to section 440.34, Florida Statutes, which affected attorney’s fee provisions, were a significant factor in the decline of workers’ compensation insurance rates and the reforms continue to impact Florida’s workers’ compensation rates.

4. Medical cost drivers, particularly in the areas of hospital inpatient, hospital outpatient and ambulatory surgical centers (ASC) are noticeably higher in Florida than a countrywide average. Legislative reform in the reimbursement of these services could produce substantial savings for Florida employers. The total saving would vary from 7.5% to 8.3% based on the percentage of Medicare that was adopted.

5. Affordability within the Florida Workers’ Compensation Joint Underwriting Association, Inc. (FWCJUA), which is the residual market, has been an ongoing issue. Senate Bill 50-A enacted in 2003 and House Bill 1251 enacted in 2004 addressed affordability in the voluntary and residual market respectively and both markets remain stable. It is worth noting, however, that over this last year both policy count and premium at the FWCJUA increased significantly, though it still remains a very small portion of the overall workers’ compensation market.

Division of Workers’ Compensation Three-Member Panel to Meet

The Division of Workers’ Compensation posted a meeting notice of a “Three-member panel” meeting on Tuesday, January 21, 2014, 1:00 p.m., EST in Room 116, Larson Bldg to comply with its statutory mandate to adopt schedules of maximum reimbursement allowances for physicians, hospital inpatient care, hospital outpatient care, ambulatory surgical centers, work-hardening programs, and pain programs. Specifically, the Three-Member Panel will consider:

•Adoption of the 2014 Health Care Provider Reimbursement Manual, which proposes the incorporation of a new fee schedule and modifies language regarding dispensed medications to conform to SB 662.

•Adoption of the ambulatory surgical center schedule of rates.

The Three-Member Panel will also receive the Division’s annual report on the resolution of health care provider medical reimbursement disputes and activities conducted pursuant to s. 440.13(8), F.S.

Leon County Resident Attempts To Force Lt. Governor Issue

Monday 1/6/14- Leon County resident and social services advocate, Barbara DeVane, filed a petition for a writ of mandamus with the Florida Supreme Court to force Governor Rick Scott to appoint a lieutenant governor. In her lawsuit, DeVane asserts that by not yet appointing a lieutenant governor the Governor has placed the state at risk of a constitutional crisis and asks the Court to require that a lieutenant governor be named within “a reasonable period of time no less than 30 days.”  Lawyers representing Ms. DeVane argue that state law requires Governor Scott to name a lieutenant and that the position isn’t optional. Under the state’s succession protocol, a lieutenant governor would assume gubernatorial responsibilities should the governor become mentally or physically incapacitated or be impeached. We’ll monitor this issue and keep you posted as the Court considers the matter.

Rules Proposed By DFS for Registering and Disciplining Insurance Navigators

Monday 1/6/14- The Florida Department of Financial Services, Division of Agent & Agency Services,  will hold a rule development workshop relating to navigators and will be held on Wednesday, January 22, 2014, at 10:00 a.m. in the Larson Building. Here’s what the workshop notice provided:

Purpose of proposed rule amendments to Rule Chapter 69B-211, F.A.C.:

The proposed rule amendment provides a procedure to register navigators pursuant to section 626.9953, Florida Statutes. “Navigator” is a new category of insurance professional created to assist health insurance consumers to find insurance coverage through insurance exchanges created to fulfil mandates imposed by the Patient Protection and Affordable Care Act. You may access the notice via the following link:

Purpose of proposed rule amendments to Rule Chapter 69B-231, F.A.C.:

The rule amendment provides penalties for violations of section 626.9957, F.S., regarding the conduct of health insurance navigators. “Navigator” is a new category of insurance professional created by Ch. 2013-101, Laws of Florida, to help health insurance consumers to understand the options available under the Patient Protection and Affordable Care Act. Additionally, “section” is replaced with “subsection” to conform to the present convention. The new penalties are listed in Rule 69B-231.115, F.A.C., and are analogous to penalties for similar violations by other insurance licensees. You may access the notice via the following link:

Did we forget to mention….THE GAME!!!!!

Yes, the week was filled with legislative “excitement”, BUT, the excitement of our FSU Seminole Team playing for the BCS championship in the Rose Bowl stadium last Monday night was without comparison.  Wow….like many of you, we sat on the edge of our seats, feeling with full force the range of emotions watching our team come from behind and win the game in the last seconds.  Lots of our friends and family were in Pasadena for the game and some even were stuck there for a while on Tuesday due to weather problems.  Whew…..a close one for the team and the fans.  We are a proud bunch and look forward to the big celebration at the stadium on Saturday.  See you there for sure.

Always working for you and our great State,