Monday July 29, 2013
The Strength You Need is in Your Hands and Heart
I attended the Latin American Association of Insurance Agencies (LAAIA) Conference and spent quality time with over 500 attendees who are seasoned insurance veterans. Many shared stories of the challenges they face in serving insurance customers with limited markets, high premiums and strict underwriting. Despite these challenges, these insurance warriors were amazingly resilient, strong, and frankly an inspiration. When I asked one 30+ year agent to give me his secret to success, he said, “All the strength I need is in my hands and my heart.” May all of you find this agent’s strength in all you do and I hope the below information helps in some small way!
Looking At Issues in Sandy States, Florida in Good Shape on Public Adjuster Regulations
We are inching closer to the heart of this year’s Atlantic Hurricane Season and in a couple of months the first anniversary of Super Storm Sandy will be upon us. Taking a look at some of the issues reported surrounding the Sandy storm region, particularly New Jersey and New York, it’s easy to see that Florida’s policymakers and insurance industry have been much more effective and supportive of establishing better consumer protections in the public adjusting arena than perhaps some other states. This is not meant to be critical of other state legislatures or the insurance industry operating in those states because as we know, establishing legislative priorities from year to year can be a daunting task. Let’s also recognize that every line of work has its share of bad actors who intentionally violate regulations in order to get ahead. Media accounts of some consumer complaints that have garnered attention in the northeast include allegations of some public adjusters:
•Charging excessive fees (as much as 50 percent of the claim recovery)
•Claiming to have the ability to recover 40-60 percent higher settlements by hiring the particular adjuster
•Authorizing vendor work without the consumer’s approval
•Failing to act with dispatch and return customer inquiries
•Having a conflict of interest; serving as the public adjuster and having interest in the reconstruction firm on the same claim
Additionally, New York and New Jersey put procedures in place in the aftermath of Sandy to issue emergency or temporary public adjuster licenses, a practice Florida stopped not long after Hurricane Andrew in 1992 when it saw large numbers of out-of-state individuals claiming to be public adjusters come in to sign up storm victims. Many of these out-of-state individuals generated significant consumer complaints and a large investigative backlog for the then Florida Department of Insurance. Certainly some of these individuals were perhaps licensed adjusters in their home states; however, in 1992 fewer states licensed adjusters and one of the main purposes of regulation and consumer protection is that you obtain permission to practice first, not after the fact. This past session and after Sandy’s landfall, the New Jersey State Assembly considered legislation to impose a 10% fee cap on public adjusting fees in the aftermath of disaster events. Working together diligently after Andrew and again after the 2004-2005 storms, Florida’s policymakers with support from the insurance industry and reputable public adjuster organizations put an array of law changes in place to, especially after disasters, enhance protections for policyholders and increase accountability within the public adjusting industry. Some of these protections include:
•Making unlicensed public adjusting activity a 3rd degree felony
•Limiting the issuance of emergency/CAT adjuster licenses to company and independent adjusters
•Lower fee caps during states of emergency/disaster events
•Five days for a consumer to cancel a contract during states of emergency and for one year thereafter
•Fee limitations on supplemental or reopened claims
•Requirement that insurers be provided with copy of public adjusting contract with insured/claimant
•Prohibition against requiring up-front payment of fees/receiving payment for services not performed
•Prohibition against fee-splitting with unlicensed persons or receiving kickbacks for referrals
•Restrictions on conflicts of interest, being both the adjuster and repair contractor on the same claim, etc.
•Restrictions on obtaining salvaged property rights
•Requirement for certain information/conditions to be in contracts
•Requirements regarding advertisements, their content and disclosures
•Prohibition against activities or arrangements to circumvent fee cap restrictions
Granted, no state’s laws are perfect and further improvements or tweaking are at times necessary to refine or even repair unintended consequences. However, Florida likely has the most comprehensive and effective body of statutes and administrative rules when it comes to public adjusting. In Florida at least, the debate and discussion will continue on these and related issues. In fact, teams of volunteers, including public adjusters and insurance industry leaders are convening to explore common ground for the 2014 session and beyond. For example, whether charging a percentage of the settled claim amount (as a fee) is truly the best method of regulation and if so, what those fee caps should be or the on-going problem of contractors and remediation firms engaging in unlicensed adjusting activities. We’ll remain in the middle of these issues for you and always share important developments.
Florida At Odds With Congress over Reinsurance Tax
Early this past week Governor Rick Scott made clear his opposition to recent congressional legislation aimed at denying tax deductions for reinsurance premiums paid to foreign-based affiliates of domestic insurers. The federal legislation (H.R. 2054 and S. 91 filed by Rep. Richard Neal and Sen. Robert Menendez, both Democrats) would end tax deductions for reinsurance in Bermuda and other offshore locations and is a provision also contained within the President’s budget proposal. Scott’s letter to Florida delegation member, Rep. Vern Buchannan, was part of a cascade of written opposition from the Florida Legislature, Insurance Commissioner Kevin McCarty, the Florida Chamber, the Associated Industries of Florida, the Florida Insurance Council, the Consumer Federation of the Southeast and the Florida Consumer Action Network. Many, if not all cited a report by the Battle Group indicating that the legislation would reduce the net supply of reinsurance in the U.S. by 20 percent, requiring consumers to pay between $11 and $13 billion more per year for insurance coverage. In Florida alone consumers could see their insurance bills increase by more than $817 million as a result of the proposed reinsurance tax. Florida opponents have also noted that global reinsurers play a vital role in Florida’s insurance marketplace by providing about 90 percent of the capacity that supports the state’s domestic insurers and a like amount of the capacity purchased by Citizens Property Insurance Corporation. The Governor and other opponents have made it clear that Florida needs this global reinsurance capacity and the reinsurance tax included in the President’s budget proposal and the Neal-Menendez bill would damage our state’s economic recovery by increasing insurance costs for Florida policyholders.
Workers’ Compensation Trust Fund Assessment
Rate Set
Late last month the Department’s Division of Workers’ Compensation issued an Order establishing the assessment rate for the Workers’ Compensation Administration Trust Fund (WCATF) relating to the 2014 calendar year. The Order set the rate at 1.61 percent. The Division also issued an Informational Bulletin (DFS-02-2013) directed to insurers, self-insurers and others which accompanied the legal order. Please click Informational Bulletin in order to read the bulletin and corresponding order. Click Rates to view established rates for the past several years.
In Wake of Injuries, Parasailing Legislation Again Likely In 2014 Session
Near the recent 4th of July holiday, two young women from Indiana were injured in a Panama City Beach parasailing accident which may result in renewed calls for action by the Florida Legislature to bring about more parasailing safety. Numerous media outlets reported that the two teenagers were severely injured in an accident that caused them to hit the sides of two buildings, a parked car and a power line. Approximately ten years ago the Legislature began entertaining bills to impose certain safety requirements on the parasailing industry. Not long after the Panama City Beach accident, Senator Maria Sachs (D-Broward, Palm Beach) and Representative Gwendolyn Clarke-Reed (D-Broward) announced their intentions to re-file bills (SB 64 and HB 245, respectively) they filed during the 2013 Session requiring safety and insurance requirements for parasailing operators. Senator Sachs media commentary included an explanation that her bill will set standards for parasailing operators to provide a higher level of safety without diminishing the excitement of the parasailing experience. Her bill would require event operators to have at least $2 million in liability insurance and prohibit parasailing during specified weather conditions, including sustained winds of 20 mph or greater, lightning storms in the vicinity, high wind gusts or low visibility due to rain or fog. According to legislative staff analysis data from last year, six deaths and 18 injuries occurred in Florida parasailing accidents. Should these bills be filed and move forward we will certainly monitor their progress and keep you updated regarding important developments.
Compliance Reminder: Customer Representatives (license type: 4-40s) Have Location Limitations
Our firm is often asked about restrictions or limitations placed by the Insurance Code on certain insurance license types. We are always pleased to be able to provide helpful regulatory information because for the industry, remaining compliant is always preferable over responding to inquiries from Florida’s insurance regulators. One such recent industry inquiry concerned whether a licensed Customer Representative (license type: CR, 4-40) could staff a trade association booth to provide quotes and solicit insurance. The short answer to the inquiry was, no. The reason for this response and interpretation is because the Insurance Code prohibits CRs from transacting insurance outside the confines of the insurance agency where he or she is employed. Chapter 626.7354(4), Florida Statutes, states, a customer representative shall not engage in transacting insurance outside of the office of his or her agent or agency. Rule Chapter 69B-213.130, F.A.C. goes on to say, a customer representative may not solicit or conduct sales work outside of the agent’s office. The customer representative must work solely at the supervising agent’s principal place of business when doing any work covered by their customer representative license. However, a customer representative may leave the agent’s office for clerical or administrative tasks not requiring licensure, such as taking photos of a car for the agent or going to the post office. We hope this compliance reminder has been helpful and encourage readers to contact us with any questions about this or other requirements of the Insurance Code.
Policy & Claims Working Group To Reveal Initial Recommendations
After meeting two full days on July 17 and 18 the Homeowners Insurance Policy and Claims Working Group will receive a draft of its recommendations during the first of two conference calls beginning July 30. Michael Kliner, an attorney with the Insurance Consumer Advocate’s office is drafting the recommendations based on discussions and decisions made during the previous two all day meetings of the working group in Tallahassee. The purpose of the upcoming conference calls is to review and discuss the written recommendations that will serve as the basis of the Working Group’s formal report. The written recommendations may address some of the following issues in addition to other topics:
•Legal parameters around Examinations Under Oath (EUO) such as giving claimants a certain amount of notice, setting a scope of inquiry during an EUO as well as perhaps applicability with Florida’s rules of civil procedure.
•Post claims underwriting which results in policy cancellation back to inception and some structure around materiality as it relates to misrepresentation on applications for coverage.
•The solicitation of insured’s immediately after a loss by water remediation firms and other vendors; perhaps a cooling off period or right to cancel remediation services contracts within a certain number of days.
•Complete or unlimited Assignment of Benefits where vendors stand in the shoes of a policyholder/claimant and holding the vendor accountable for their acts under the assignment of benefits.
•The creation of a Policyholders Bill of Rights specific to Homeowners insurance.
•Additional statutory authority for DFS to regulate mediators and neutral evaluators.
As mentioned above, the Working Group’s next meeting is scheduled for July 30 from 10:00 a.m. to 11:30 a.m. via conference call. For those of our readers wishing to monitor the conference call, the call-in number is (850) 413-1558 and the conference ID number is 94583. We will keep you posted regarding key developments as the Working Group continues its activities.
Agent Commission Compensation Study Released
The Florida Association of Insurance Agents (FAIA) recently released its agent compensation study that looks at a number of issues surrounding agents’ transaction of homeowners (HO-3) policies in Florida. FAIA engaged the services of a CPA firm (Thomas Howell Ferguson), actuarial firm (Perr & Knight) and insurance consultant Scott Johnson to assist in completing the study. A number of factors were identified that the study says causes agents’ production and processing costs to be higher in Florida than in other states. Some of those factors include inspections and other underwriting requirements, the uniqueness and restricted capacity of the market, the domestic mono-line carrier dominance as well as the industry’s reinsurance and CAT Fund costs. The study reports that the average cost of servicing an HO-3 policy is about $126. On average 8.88 (FTE) hours are spent processing each HO-3 policy with most time being spent on quoting and the least time spent on servicing. It was also reported that the average per policy premium is $1,866 and the average commission rate being 10.8%. The average dollar commission paid by insurers was reported as $201.12. The report says that the above findings leave on average about $75.00 to cover all other agency indirect operating expenses. However, the report further indicates that agencies with highly automated processes, account rounding proficiencies, niche market products or a high percentage of clients paired with insurers paying commissions at the top ranges may fare much better than the report’s data indicate.
You Must Be the Change You See in the World
Mahatma Ghandi said, “You must be the change you see in the world.” We have seen marked change in the Department of Financial Services’ Division of Insurance Fraud (DIF) for the past 18 to 24 months due to the outstanding and unprecedented leadership of Dan Anderson. Dan attacked insurance fraud with full measure and we’ll truly miss his “get after it” spirit. Insurance fraud is THE major cost driver standing in the way of our goal to deliver our customers the highest quality products at a reasonable cost and it is imperative that the new fraud leader picks that up quickly. We’ll get the message delivered as we always do, working together.
And finally, on July 20th our very own Meghan Kelly was a part of a very successful and popular charity event in Tallahassee, the Tallahassee Top Singles. In an effort to raise awareness and donations for The National Military Family Association, Meghan was auctioned off to the highest bidder for a lunch date. The event was a success and Meghan rose over $3,000 for military families nationwide!
Thank you again for all that you do every day, Lisa
