Monday November 25th
A Time for Giving Thanks
As we move into this week, the vast majority of us will begin preparations for the uniquely American holiday, Thanksgiving. This is that very special holiday when Americans pause for a “day” to give thanks for the amazing bounty of blessings we enjoy from living in a wonderful, free nation. No, everything in our country isn’t perfect, and certainly our country and our state, face a number of challenges to living in peace and prosperity. However, we are reminded this time of year that we are FREE to work together in finding solutions to the problems that face this great Nation.
So like you, I am taking the time to pause and reflect on my many, many blessings, at home and at the LMA organization I am so proud to lead. As I write the newsletter this week, I know I am blessed with the many clients and friends who will receive it, and I am tremendously appreciative for what you mean to me and my organization.
On behalf of the entire LMA team we thank you for allowing us to be an important part of your lives and your businesses, to participate with you in the prosperity which comes from rising early and working hard each day in our industry, and perhaps most importantly, helping you to find ways to grow and expand your services to protect more consumers’ financial futures. For all these many things we are immensely thankful!
Now, here’s a look at many of the insurance issues we’ve followed for you over the past couple of weeks….
Citizens Claims Committee Pushes Forward Sinkhole Repair Program
Thursday 11/14/13- The Citizens Claims Committee met to address a number of agenda items, most importantly of which to consider approving and moving forwards to the Board of Governors the corporation’s proposed $50 million voluntary sinkhole repair program. Based on the proposed “Sinkhole Stabilization Managed Repair Program” (Sinkhole MRP), the corporation will directly pay participating repair vendors for work, as opposed to indemnity payments to its policyholders. In order to participate in the program, repair vendors must have been in business for at least five years, have documentation showing experience in sinkhole repair methodologies, maintain sufficient levels of insurance, issue a five year warranty for all repair work and require its employees to complete background screenings. Repair vendor contracts with Citizens will be for a term of three years and include an option for two one-year extensions. As we reported in an earlier newsletter, under the proposed Sinkhole MRP the decision to participate or choose a repair contractor outside Citizens’ approved list remains entirely with the insured. However, Citizens noted several months ago that it intends at some point to seek legislation establishing a mandatory sinkhole managed repair program. We will continue to monitor this situation closely and report to you should Citizens attempt such an endeavor in the upcoming regular session. One concern raised during the Claims Committee Meeting was the source of the $50 million to fund the program’s operation. Citizens CEO Barry Gilway said the maximum $50 million involved in the contract would come out of funds that would normally go to pay claims, and shouldn’t be considered an additional expense. A committee board member asked, “Are these additional dollars?” The answer is “no,” Gilway told the committee. “We’re just paying for the repairs rather than just writing them (policyholders) a check. After discussion about the program the committee board voted unanimously to move the program forward for a Board of Governors vote during its upcoming meeting scheduled for December 13th. Here is a complete summary of the Sinkhole Stabilization Managed Repair Program as provided by Citizens. As noted above, we’ll keep you apprised of developments regarding this important issue.
Citizens Goes Live With Commercial Lines Upgrade
Thursday 11/14/13- Citizens Property Insurance Corporation has continued its modernization efforts by launching a computer system enhancement designed to coordinate policy underwriting, claims and billing into a seamless system. On November 4, Citizens began routing all commercial policy operations through the Citizens Insurance Suite, a comprehensive software package that will replace a handful of legacy systems now responsible for new and renewal commercial business. Citizens’ handles about 39,000 commercial policies. The rollout is the second major release delivered as planned during 2013 as part of a larger effort to transition Citizens computer network to a centralized and more fully automated system that will ultimately handle all aspects of residential and commercial accounts. Prompted by the need to replace aging technology, the suite is both more agile and cost effective. “The Citizens Insurance Suite will dramatically improve efficiencies and provide better service to both agents and their policyholders,” said Citizens Chief of Systems and Operations Kelly Booten. “We’re pleased with the successful launch for commercial policies and look forward to expanding the system to all lines by the end of 2014.” The suite will handle all commercial policies renewing after January 1, 2014 for multi-peril policies and February 1, 2014 for wind-only commercial customers. Citizens conducted meetings with agents and began online training in October in preparation for the November system enhancement “go-live”.
Citizens Clearinghouse Launch Draws Near, “Go Live” Set For January 2
Monday 11/18/13- During an Actuarial & Underwriting Committee meeting Steve Bitar, Citizens’ Senior Director of Consumer and Agents Services and another staff member, provided committee members and interested parties with an update concerning the Clearinghouse launch which is inching closer by the day. While eighteen private market insurers have signed on the dotted line to participate in the Clearinghouse program, four are on the cusp of full approval and are bringing final implementation steps to completion. Those insurers are Safe Harbor (Cabrillo), United Property and Casualty, Heritage Property and Casualty Insurance Company, and Florida Peninsula Insurance Company. The program update indicated that over a dozen insurers may well be actively participating by this coming spring. When the program initially begins on January 2, all new applications for coverage will be run through the Clearinghouse’s paces to ensure the risks meet all criteria for coverage through the corporation. Starting sometime this spring, policy renewals will begin flowing through the same rigorous process. There will be actual quoting of coverage when the Clearinghouse goes live January 2, Bitar said. He noted that with the underlying computer system’s programming, it is expected that return quoting responses from participating private insurers should arrive within a 30 second time period. Yong Gilroy, the corporation’s chief insurance officer stated, “We saw a live demo of the actual quoting process and it worked.” Approximately 50 percent of all new business placed with the corporation is coming from captive agents in addition to another large amount from independent agents with limited markets. The Clearinghouse is designed to provide these agents with access to markets and companies with which they carry no current DFS appointment. Thomas Popko, director of personal lines for Citizens noted, “We are very optimistic that the Clearinghouse is going to help us dramatically,” Popko went on to give the committee the following update on corporation depopulation efforts. OIR has identified about 900,000 policies for takeout during 2013. When all is said and done, only 250,000 to 260,000 probably will actually be removed, he said. But “that is not a number to sneeze at. That is a very good number.”
Two issues account for the lower number of policies that are likely to actually see takeout – duplicative requests are made for some of the same policies; and Citizens policyholders have the ability to refuse to participate in a takeout. The ability to decline a takeout disappears when renewal policies began going through the Clearinghouse, as long as the private market offer is within 15 percent of the Citizens rate or lower.
OIR Announces $4 Million Multi-State Settlement Agreement with Aviva
Thursday 11/21/13- Insurance Commissioner Kevin McCarty announced a $4 million life claim settlement agreement has been reached with two companies (Aviva Life & Annuity Company and Aviva Life & Annuity Company of New York) who are collectively referred to as “Aviva.” The settlement agreement with Aviva and other similar insurers focuses primarily on the asymmetrical use of the Social Security Administration’s Death Master File (DMF) to cease making annuity payments, but not to search for beneficiaries of a life insurance policy who may be due benefits. Aviva has agreed to implement business reforms correcting this practice and to make a multi-million dollar payment, which will be disbursed among the participating states. Florida’s allocation of the $4 million payment is expected to be over $342,000. The multi-state examination was conducted by Florida, California, Illinois (managing lead state), Iowa, New Hampshire, North Dakota, and Pennsylvania. Along with these states, the agreement includes the Florida Department of Financial Services (DFS), the Office of the Attorney General (AG), and the Office of Insurance Regulation (Office).”This is the tenth Florida agreement to resolve life claim settlement practices, with more than 50% of the overall life and annuity insurance market represented nationally. These agreements demonstrate the effectiveness of the multi-state examination process which is overseen by the Life/Annuities Claim Settlement Practices Task Force of the National Association of Insurance Commissioners (NAIC),” stated Insurance Commissioner, Kevin McCarty. The settlement agreement requires implementation of the following business practices and reform measures:
• Compare all company records against the DMF Update File every month and against the complete DMF file at least annually from the Agreement effective date.
• Provide quarterly reports to the lead states about the implementation and execution of the requirements of the Agreement for 36 months following its conclusion.
• A follow-up examination to determine compliance 39 months following the conclusion of this Agreement.
Cabinet Was Set To OK Rule Amendment for Electronic Proof of Insurance Law
Tuesday 11/19/13- The Florida Department of Highway Safety and Motor Vehicles was scheduled to appear before the Florida Cabinet and request Gov. Rick Scott and other Cabinet members to approve a proposal that would allow people to display electronic copies of their motor-vehicle insurance through cell phones, tablets or other electronic devices as proof of coverage. However, staff from Florida’s highway safety agency were unable to attend the meeting and the agenda item will be moved to the next available Cabinet meeting. The next and last Cabinet meeting for 2013 will occur on Tuesday, December 10th. “The proposed rule is intended for use during traffic stops when officers ask for proof of insurance,” department spokesman John Lucas said. The use of electronic copies is in state law, but the department’s administrative rule currently requires motorists to carry “3 1/2 inches × 2 1/4 inches” identification cards that list personal-injury protection benefits and property-damage liability insurance providers and policy numbers, along with the vehicle year, make and VIN number. The administrative rule has existed since 1989 and required amendment after the Legislature amended statutes last session allowing insurers to electronically transmit certain insurance documents to policyholders and policyholders in turn to maintain electronic proof of coverage while operating motor vehicles.
PIP Reform Litigation: And the Beat Goes On……
In the most recent development in the on-going legal battle over the Legislature’s 2012 PIP reforms the plaintiffs in the Myers v. McCarty suit challenging the constitutionality of the reforms filed a motion for rehearing en banc at the First District Court of Appeal (DCA) in Tallahassee. The motion for rehearing comes after a three-judge panel of the Court ruled that the lawsuit and resulting injunction failed based upon procedural grounds. As you’ll recall, we reported in an earlier newsletter that the court concluded that a group of chiropractors, massage therapists and acupuncturists, including a fictional “Jane Doe” purporting to represent all injured Florida citizens, lacked standing to bring an access-to-courts challenge when they challenged the implementation of HB 119 (2012 Regular Session). The plaintiffs’ recent motion is to have the entire Court rehear the case and argue that the three-judge panel of the DCA incorrectly ruled on the procedural grounds and request review and a rehearing by all judges of the Court. We will keep you posted on developments and the Court’s response to the motion for rehearing.
Workers’ Compensation Division Amending Rule on Stop-Work Orders
The Department of Financial Services’ Division of Workers’ Compensation has submitted to the Department of State a Notice of Proposed Rule 69L-6.031, F.A.C., Stop-Work Orders in Effect Against Successor Corporations or Business Entities. The notice provides that, if requested in writing within 21 days of the publication of the official notice, a rule hearing will be held on Tuesday, December 10, 2013 @ 10:00 a.m. in Room 102, Hartman Building, and 2012 Capital Circle SE, Tallahassee, Florida. The official Notice of Proposed Rule appeared in Volume 39, Number 219, of the Florida Administrative Register published on November 8, 2013. The proposed rule implements applicable sections of HB 553 passed by the 2013 Legislature. HB 553 amended s. 440.107(7)(b), F.S., revising the law to include a limited liability company as a successor entity for purposes of effectuating a stop-work order. The proposed rule is updated to include limited liability companies as successor entities for purposes of effectuating a stop-work order. If you have questions about this communication please contact Robin Delaney, Chief, Bureau of Compliance, Division of Workers’ Compensation, Department of Financial Services, 200 East Gaines Street, Tallahassee, Florida 32399-4232, (850) 413-1775 or Robin.Delaney@myfloridacfo.com.
NCCI: Workers’ Compensation Insurers Enjoying Improved Financial Performance
Wednesday 11/20/13- Workers’ compensation insurers saw improved financial results in 2012 with signs that the positive trend continued into 2013, the National Council on Compensation Insurance, Inc., said in a report. Workers’ compensation insurers reported net written premiums of $35.1 billion in 2012, up 8.7% from $32.3 billion in 2011, Boca Raton, Fla.-based NCCI said in the report. The workers’ compensation ratings and research agency estimates that net written premiums will climb 6% year-over-year to $37.2 billion in 2013.Combined ratios for workers’ compensation insurers dipped to 108% in 2012, an improvement from 115% in 2011, NCCI said. The agency said it expects to see a combined ratio of 106% for comp insurers in 2013. “This projection for 2013 is tempered by an improving but fragile economy,” NCCI said in its report. “Additionally, loss drivers and market conditions, while still favorable, remain uncertain.” NCCI’s findings track with a recent report by Old wick, N.J.-based rating agency A.M. Best Co., Inc., that also showed increased net written premiums and lower combined ratios for workers’ compensation insurers.
D.C. Based ‘R Street’ Raises Concerns over Reinsurance Tax Proposal
Tuesday 11/19/13 – The R Street Institute recently reported news about a new proposal from the federal Senate Finance Committee would raise catastrophe insurance rates by limiting the ability of foreign-based insurers and reinsurers to manage their risks in a cost-effective manner. Included in a tax reform discussion draft released by Chairman Max Baucus, D-Mont., the proposal would deny U.S. subsidiaries the ability to deduct the cost of reinsurance ceded to affiliates that are not subject to U.S. taxes.”In order to make coverage available for big catastrophes – everything from earthquakes and hurricanes to crop failures to acts of terrorism – the U.S. market relies to a significant extent on insurance capacity provided by global companies,” R Street Senior Fellow R.J. Lehmann said. “This protectionist scheme, long sought by a handful of large domestic insurance groups, would inevitably make the United States less attractive to global insurers and reinsurers, encouraging them to commit their capital elsewhere.” The plan is similar to earlier proposals from Sen. Robert Menendez, D-N.J., Rep. Richard Neal, D-Mass. and President Barack Obama. Analysis by the Cambridge, Mass.-based Brattle Group finds that insurance consumers would see their premiums rise by as much as $130 billion over the course of a decade. Lehmann expressed optimism that Baucus and the committee remain open to alternative approaches, noting that staff has requested public comment on the draft’s reinsurance provisions with the proviso that staff members understand “that risk spreading is an important and valid part of multinational insurance operations.” “This proposal would do more damage than harm, and we are confident that members of Congress will come to understand that,” Lehmann said.
Giving Thanks and Praying for Continue Blessings
So, as you, I will slow down the wheels of business and truly stop to give thanks during our Thanksgiving Day. Along with those thanks, I will be saying a special prayer as we prepare for the ending of 2013 and the beginning of 2014. As you all know in the world of LMA and Associates, we seldom stop working but we will for that special day. Then we’ll be back to it and back in touch with you all as we prepare for the upcoming legislative session.
So, eat well and take that blessed afternoon nap on Thursday.
As always, let us hear from you often.
Warmest thoughts, Lisa