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Monday, February 29, 2016
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Important Legislative Calendars
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Quick Links
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Springtime in Tallahassee
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I have traveled many miles in my 55 years and have seen some beautiful sights during those travels. I must say however, that our gorgeous state capital is one of the MOST beautiful sites I’ve found during the Spring of the year. Even now in late February, we’re getting a glimpse of what is to come….and that is flowers, flowers, flowers…everywhere. We are proud here in Tally Town to have an actual Springtime Tallahassee celebration which draws thousands of folks to our pretty little town each year. And while we celebrate the springtime beauty of Tallahassee, many Tallahassee residents don’t know (and probably the visitors either) that the official beginnings of our Springtime Tallahassee festival started back in 1967 as an effort to keep Tallahassee as the state’s capital. When Florida had its first legislative session based on reapportionment in 1967, Southern and Central Florida legislators suggested moving the capital to Orlando. North Florida folks, and especially Tallahasseeans, were in an uproar. Local business and civic leaders met behind closed doors to map a strategy and garner support to keep the state’s capital here at home. At a luncheon of the Tallahassee Real Estate Association in May of that year, it was suggested that Tallahassee have a springtime festival each year. By the fall, over 20 groups were planning the first Annual Tallahassee Spring Festival and as a result, the Legislature historically chose to keep our state’s capital in Tallahassee. With the passing of each festival, Springtime Tallahassee has grown bigger and better through the dedication of its community-minded members. The festival continues to showcase and celebrate our capital city and we are so very glad! So, wherever you live in the surrounding areas, we invite you to come on over to Tallahassee on April 1-2 of this year and see why we are so proud. For info on all the festival events, go to the Springtime Tallahassee website: http://www.springtimetallahassee.com/.
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Insurance Commissioner Applicant Watch
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The total number of applicants for the Florida OIR Commissioner position has reached 36 as of February 25. There are still a few days left to apply before the closing date of March 11.
Current applicants can be viewed at
http://www.myflorida.com/myflorida/cabinet/agenda16/oircommissioner/ |
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Marsh Recommends NFIP Reforms
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When we discuss the National Flood Insurance Program (NFIP) with clients, regulators, and legislators, we’re often reminded that it’s not just the program’s rates and methodology that is the problem, but the outright coverage as well.
In last week’s newsletter, we reported on efforts by the Office of Insurance Regulation to find out exactly how the NFIP sets its rates. OIR Commissioner McCarty says NFIP is now willing to have an audience with outside regulators to hear their collective concerns, possibly as early as next month. Florida has the largest number of participants in NFIP and pays four times more in premiums than it receives in claim payments. According to the General Accounting Office, NFIP is $23 billion in debt and not actuarially sound. The global insurance broker Marsh recently weighed in, publishing a report recommending a series of reforms that it says would strengthen NFIP’s role in the U.S. flood insurance market. The suggested reforms, directed at policymakers in Congress and the NFIP itself, fall under the areas of cost control and reduction, customer service, debt reduction, and strengthening engagement among relevant stakeholders. Among the specifics, Marsh recommends that more people need to purchase flood insurance, from both the NFIP and the private market, reducing the feds exposure to flood risk. Here’s a link to their news release and report: https://www.marsh.com/us/media/new-marsh-report-urges-reforms-to-nfip.html
I think it’s a misnomer to even call NFIP an insurance policy. The claim trigger isn’t like that of a typical HO3 policy. To qualify for a claim, they require floodwaters within two square miles of your location or on adjacent property. So if your swimming pool overflows into your house, for instance, you’re likely out of luck. NFIP also doesn’t cover any contents or floor coverings or window treatments in a basement nor washers and dryers (unless you purchase a separate personal property policy).
Secondly, they call it a replacement policy with a building value cap of up to $250,000. You pay a premium based on the full policy value, but after a claim, NFIP pays only actual damage and replacement costs, not the full value of the policy. Also, unlike many homeowners policies, it’s not a guaranteed replacement cost policy – it does not pay more than the policy limit. Passage last year of SB 1094, sponsored by Senator Jeff Brandes (R-Pinellas), provided Florida consumers greater private market alternatives to NFIP. Those private carriers who offer flood have lots of ways now to differentiate themselves from NFIP and fellow private competitors. The NFIP expires in September 2017 and Congress is expected to consider its reauthorization – and the recommendations from Marsh – before then. |
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Google Supposedly Shutting Down its On-Line Foray Into Auto Insurance Sales
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Just a little over one year after Google made its big announcement about kicking off an on-line auto insurance agency operation (Google Compare), industry media sources are reporting that the internet giant is pulling the plug. Some have referred to Google’s entry into the insurance sales market place as a grand experiment and an experiment it certainly appears to have been. It’s not just one product, auto insurance, that the company appears to be backing away from either. One industry source said early last week that the exit would be global and that in addition to shutting down the Google Compare Agency, the exit also includes credit cards, banking products, as well as its mortgage products in the U.S. and the U.K. At least one close observer in the insurance industry, however, has been reported as saying that Google’s real plan is to diminish from on-line view to retool all of its consumer product sites and improve the customer experience. Another source has commented that the reason for the withdrawal is challenges Google has been having with a few of its affiliated carriers.
Last January when Google made its entry announcement into the insurance marketplace, one industry media source reported that Google’s move would be sure to bring anxiety to independent agents who are already struggling with the challenges presented by direct writers. Another source published a piece saying that independent agents selling auto coverage should be very afraid of Google’s entry into the market which might trigger a massive market disruption. But all of the supposed doom and gloom talk for independent agents that began last January hasn’t come to pass, apparently. ITC President Laird Rixford even noted recently that U.S. customers remain enamored with their insurance agents. If so, this likely bodes well for the continued success of street corner independent insurance agencies. We’ll continue to keep an eye on this situation and bring you an update when the picture completely clears.
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Another Record Year for Florida Tourism
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Florida has hit and exceeded a longtime tourist goal of 100 million visitors with recent news that the Sunshine State received a record 105 million visitor in 2015. That’s up from 98.5 million visitors in 2014 and marks the fifth record year in a row! Most of our visitors were from other parts of the U.S. (89.8 million), with the rest (15.2 million) from around the world.
Not only did we hit a record number of tourists, but we also set a record in tourist-related employment. A whopping 1.2 million Floridians are employed in the tourism industry, a 5% increase from 2014.
This has an impact on insurance jobs and revenue as well. Tourism is the number one provider of jobs for Floridians. It’s also a major provider of tax revenue for our state and local governments. It’s a more durable industry than others during times of recession. Florida TaxWatch research showed reaching the 100 million annual visitors mark would create 121,298 jobs, of which 14,318 would be private non-farm jobs. Direct tourism jobs make up 50.7 percent of the total, with indirect and induced jobs accounting for the other 49.3 percent (that includes insurance agents and other industry support staff). The estimated average salary of these jobs is $43,751, according to TaxWatch.
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Legislative Updates
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Look for budget negotiations to dominate action this week in the Florida Legislature. Budget chiefs Tom Lee in the Senate and Richard Corcoran in the House worked late into last week to agree on budget allocations to resolve an almost $1 billion difference in their respective chambers’ budgets, including the tax-cut and economic-incentives proposals pushed by Governor Scott.
Still unresolved as well going into this week is the gambling compact between the Seminole Indian Tribe and the state. Signed by the Governor and Tribe last year, it must be ratified by the Legislature to be binding.
A floor vote in the Senate is possible as early as this week on a revamped death penalty rule in Florida. Still to be resolved between the House and Senate is whether a unanimous jury – or a 10 to 2 vote – should be required in recommending the death sentence to a judge. Meanwhile, efforts to change the burden of proof in “stand your ground” self-defense cases to make it more defendant friendly is dead this session.
A re-hearing is possible on the fracking bill blocked in the Senate appropriations committee last week over concerns that the list of chemicals used in the process to extract valuable oil from rock and soil would not be made publicly available prior to any operations.
And efforts to keep alive a potential compromise on ride-sharing in Florida found new life late last week. That’s among the issues in this week’s legislative update below.
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2016 Key Legislative Issues
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Property Insurance
There are no bills moving that would address bad faith, civil remedy or other issues where frivolous lawsuits are filed with the sole purpose to garner attorney’s fees. It is striking to look at 2016 legislation as a whole to see that bills introduced to rein in practices that drive insurance rates (most notably the one way attorney’s fee statute–627.428, Florida Statutes) die in the process or will not be entertained for debate. We have been following closely and will be happy to discuss with you individually should you have an interest in this year’s philosophical debate.
Assignment of Benefits: HB 1097 (Caldwell) and SB 596 (Hukill)
Prohibited Insurance Practices: HB 671 (Broxson) and SB 1248 (Diaz de la Portilla)
You will recall from our past newsletters that we have been front and center in the debate about Assignment of Benefit (AOB) usage and reform. There have been two major proposals: one that deals with eliminating contractor kickbacks and the other that deals with reforming how AOBs are used. AOB reform as originally proposed in legislation earlier this year most likely won’t succeed. What may succeed is a bill filed by Senator Diaz de la Portilla and Representative Doug Broxson that has provisions which prevent illegal kickbacks and referral fees to contractors involved in an insurance claim. In the continuing battle, Citizens Property Insurance Corporation sent a two page memo with the “problem,” the “effect,” and the “solution” to Gov. Rick Scott, the Cabinet and legislative leaders warning that the number of policies could increase and the company’s financial strength decrease if the Legislature does not limit assignment of benefits “abuse.”
“Failure this session to enact reforms halting the abuse of Assignment of Benefits threatens the progress made in reducing the size of Citizens and its potential assessment burden on Florida’s insurance consumers,” John Rollins, Citizens’ chief risk officer, wrote in the memo. “Absent reform, there are stark signs that depopulation will reverse and Citizens will grow in risk level even as its own financial strength is sapped.” It appears the memo’s intent was to be a part of the conversation the day before a Senate hearing about SB 1248, or what’s being called “assignment of benefits light” reform measures which passed and the House version HB 671 passed as well in a meeting on Thursday. Both bills are poised for Senate and House floors.
Property Insurance Appraisers & Appraisal Umpires: HB 79 (Artiles) and SB 336(Richter)
HB 79 by Representative Frank Artiles and SB 336 by Senator Garrett Richter create a property insurance appraisal umpire licensing program within the Department of Financial Services. The collective bills also repeal provisions relating to appraisal conflicts of interest and limit appraisal fees charged by a public adjuster. The House bill passed the entire House floor and the Senate bill is awaiting a hearing in one more committee before it heads to the Senate floor.
Peril of Flood: HB 929 (Ahern) and SB 584 (Brandes)
HB 929 by Representative Larry Ahern and SB 584 by Senator Jeff Brandes when originally introduced, authorizes the Division of Emergency Management to administer a matching grant program providing up to $50 million annually to local governments for flood risk reduction. Flood mitigation would also be added to the list of eligible projects under the Florida Communities Trust program and allow the Trust to acquire and dispose of real and personal property to reduce flood hazards. The bills also extend the informational filing of rates for flood coverage from October 1, 2019 to October 1, 2025, exempting insurers from the standard rate filing process. The Senate bill has one more committee stop in appropriations and is awaiting a complete debate on the House floor.
Motor Vehicle Insurance
Transportation Network Companies: HB 509 (Gaetz) and SB 1118 (Simmons)
HB 509 by Representative Matt Gaetz and SB 1118 by Senator David Simmons collectively provide requirements for transportation networks companies, as well as their drivers, to operate in Florida. This includes maintaining primary automobile insurance under certain circumstances and additional obligations on insurers. The collective bills also direct the Department of Highway Safety and Motor Vehicles to issue appropriate permits and to require statements on certain crash reports if the driver was providing such transportation services. Both bills are moving but the differences are stark between them so with the session ending March 11, one has to wonder if this year any ride sharing legislation will pass.
Automobile Insurance: HB 659 (Santiago) and SB 1036 (Brandes)
HB 659 by Representative David Santiago and SB 1036 by Senator Jeff Brandes collectively allow automobile insurers to utilize a single zip code rating if the territory incorporates sufficient loss and loss adjustment expense data to be actuarially measurable and credible. FLOIR would also have to determine the rate filing does not contain a rate or rate change that is excessive, inadequate, or unfairly discriminatory. The collective bills also allow all auto insurers to apply the unearned portion of a premium to unpaid balances of other policies within the same insurer or group and charge an insufficient funds fee of up to $15, among other provisions. Interestingly, the original bills deleted pre-insurance auto inspections that have been around forever in about 7 counties, but the company that does those inspections has successfully fought to keep the inspections in law (they earn about $20 a car and do over 100,000 cars a year!) which is unfortunate since consumers ultimately pay this “tax.” Both bills are in process with the Senate bill in committee and the House bill awaiting floor debate.
Workers Compensation Health Care Provider Reimbursement Manual Ratification: HB 7073 (House Rulemaking Oversight & Repeal Subcommittee) and SB 1402 (Simmons) HB 7073 by Representative Lake Ray and SB 1402 by Senator David Simmons ratify the Florida Workers’ Compensation Health Care Provider Manual into law. This is a necessary update of the 2008 version of the manual and will, among other things, update the reimbursement rates to health care providers treating injured workers. Both bills are poised to pass the House and Senate.
Workers Compensation System Administration: HB 613 (Sullivan) and SB 986(Simpson)
Insurer Reporting Unclaimed Property by Life Insurers: HB 1041 (Hager) and SB 966 (Benacquisto) Insurer Regulatory Reporting: HB 1163 (Hager) and SB 1422 (Simmons)
HB 1163 by Representative Bill Hager and SB 1422 by Senator David Simmons would implement the ORSA Model Act and the Corporate Governance Annual Disclosure or CGAD Model Act developed by the National Association of Insurance Commissioners. The Office of Insurance Regulation has sought these bills to maintain Florida’s accreditation with the NAIC. These bills are poised to pass and head to the governor.
Construction Building Codes: HB 535 (Eagle) and SB 704 (Hutson) |
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Sinkhole Only Insurance Legislation Arrives at Senate Committee
End Game; House Companion on Similar Path
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On Wednesday of last week (2/24/16), the Senate Appropriations Subcommittee on General Government gave its blessing to SB 1274, the measure that if passed will create a stand-alone insurance product covering only the sinkhole peril. A single amendment was adopted by the committee that deleted the provision in the measure that prohibited AOBs for the proposed stand-alone sinkhole policy.
As we have previously reported in our newsletter, the current version of the bill substantially reduces the required surplus for brand new insurance companies that will transact sinkhole-only insurance. These newly created insurers must have at least $7.5 million in surplus, as opposed to the $15 million required of existing property insurance COA holders. And once licensed, sinkhole-only insurers will be required to maintain the lesser $7.5 million in surplus in order to maintain their COAs. This new type of insurance covers damage from sinkhole loss as is currently defined in the insurance code, which requires structural damage in order to successfully make a claim. A major difference with this new form of coverage is that underwriting insurers will be allowed to constrain coverage to only repairs for the structure and foundation, excluding benefits to stabilize the property on which the structure sits. ALE coverage can also be excluded under this bill ‘s present form. As we have reported before, OIR continues to have concerns about the lack of policy forms approval authority, which is absent from the measure. Further, OIR will not gain rate review authority for sinkhole-only insurance until October 1, 2019. The sponsor of this bill as well as that of its House companion are trying to create a market of consumer choices with respect to sinkhole or settlement insurance coverage. Should the AOB prohibition language be amended back into the bill, it may cause concern among interested insurers and the bill may pass with no interested insurers. We will see how the House reacts to the changes in the Senate bill. As noted above, the Senate bill is now in its very last committee and the House companion (HB 1327) has one last committee stop as well before it can be considered on the House floor.
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The Sky Is the Limit
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Along with our travels around the country, seeing and enjoying those beautiful sights we mentioned in our opening article, we also are blessed with the opportunity to meet new folks. What an interesting culture of people we have in our amazing country. We are most definitely students of life at LMA and always enjoy the opportunity to share what we learn with our readers. Something crossed my path this last week that I found very profound as a life lesson. That is the question of “what stands in the way of a person reaching their greatest potential?” Sad but true is that our habit of making excuses is what keeps us from reaching our greatest potential. What was most interesting is that excuses are nothing more than an expression of fear that won’t allow us to step out of our comfort zones. Excuses make us worry about what other people think and make us feel like we can’t. The good news is that when we remove the fear behind these excuses, we will gain the confidence to move forward. Successful people face the same fears as everyone else. The only difference is that they tackle and conquer their fear and do not allow it to defeat them. So we encourage you to face any fears that are holding you back. Go boldly forward. Be fearless. Be successful. The sky is the limit!
All the best from
Lisa and the Team
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Upcoming Events
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| 30th Annual Governor’s Hurricane Conference
May 8-13, 2016 National Flood Summit May 17-20, 2015 FHCF 16th Annual Participating Insurers Workshop May 18 & 19, 2016
Disney’s Coronado Springs Resort
Lake Buena Vista, Florida
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