Florida Insurance Commissioner Tom Gallagher on Thursday offered three major insurance companies a choice:
Stop collecting fees for servicing homeowners who end up in the new, state-created insurer of last resort, or resign from that insurer's board.
For homeowners insurance, the conflict-of-interest rules issued by Gallagher affect Allstate Insurance, State Farm Insurance and Bankers Insurance.
Each of the three companies holds a seat on the board on the Florida Residential Property & Casualty Joint Underwriting Association. They also are among eight insurers designated to service Floridians who can't get homeowners policies on the open market after Hurricane Andrew.
For servicing a homeowner in the residential JUA, an insurance company is paid 20 percent of the annual premium charged the customer. The insurance agent who places the homeowner in the JUA receives an additional 10 percent commission.
"Citizens expressed deep concern that some insurers are being paid to be JUA-servicing carriers while those same insurers have representatives on the board who selected those servicing carriers," said Gallagher.
While the ethics rules address one case of potential self-dealing by insurance companies, they do not deal with another, said Steve Burgess, consumer advocate at the state Insurance Department.
If Allstate, State Farm or Bankers Insurance opt to resign as JUA board members, they are still eligible to service customers insured by the JUA.
For example, Allstate said it plans to not renew 300,000 of its higher-risk policyholders in order to cut back its exposure to hurricane losses in Florida.
The notion that Allstate could dump so many risky customers into the more expensive JUA _ and still profit as their servicer _ has been sharply criticized in recent public insurance hearings.
"We should address that issue at some point," said Burgess.
For now, a six-month moratorium prohibits insurance companies from not renewing or canceling policyholders. That has temporarily slowed the influx of homeowners into the JUA, and has given state regulators time to work on solutions to the insurance crisis.
Between 45,000 and 50,000 Florida homeowners are currently in the process of becoming JUA policyholders. The JUA has said as many as 500,000 homeowners eventually could end up in the insurance pool.
Thursday's decision also affects several other "JUAs" or insurance pools of last resort that exist in Florida.
They include the Florida Joint Underwriting Association, which provides auto coverage to those who can't find it elsewhere; the Florida Medical Malpractice JUA; the Florida Patients Compensation Fund; the Florida Comprehensive Health Association; and the Florida Windstorm Underwriting Association.