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Florida lawmakers have new plan for insurance crisis: ‘Insurer accountability’

The legislation is an acknowledgement that property insurers have received a light touch from regulators.
 
Homes surrounded by knee-high floodwaters off Southwest Fourth Street and Eighth Avenue in the Little Havana neighborhood of Miami, Florida, on Saturday, June 4, 2022.
Homes surrounded by knee-high floodwaters off Southwest Fourth Street and Eighth Avenue in the Little Havana neighborhood of Miami, Florida, on Saturday, June 4, 2022. [ DANIEL A. VARELA | Miami Herald ]
Published April 5, 2023|Updated April 5, 2023

TALLAHASSEE — After years of giving Florida’s homeowners insurance companies largely what they wanted in an effort to stem rapidly rising premiums and insurer insolvencies, state lawmakers introduced a new approach this week: “insurer accountability.”

That’s the title of a new bill that would increase fines for bad behavior by insurance companies, require them to report more information to the state and follow “best practices” for handling claims.

Property insurance companies would also be prohibited from dropping a policyholder until the repairs on their home have been completed.

“If there’s bad actors out there, we’re going to hold them accountable,” said the bill sponsor, Sen. Travis Hutson, R-Elkton.

Hutson said the bill is meant to bring a “healthy balance” of oversight to the state’s insurance market.

Related: Trump blasts DeSantis for insurance company ‘bailout’ legislation

On Wednesday, a Senate committee voted in favor of the bill, but not before hearing insurance industry lobbyists and groups speak against it.

“(We) just want to ensure that we’re truly going after the bad actors and not the entire insurance industry as a whole,” said Carolyn Johnson, a senior director for the Florida Chamber of Commerce, which counts insurance companies among its members.

“New sheriff in town”

The legislation is an acknowledgment that insurance companies have received a light touch from state regulators, who routinely approve company rate filings and have advocated for making it harder to sue insurers.

The previous Office of Insurance Regulation commissioner, David Altmaier, became an insurance industry lobbyist and joined the board of directors for a Bermuda-based reinsurance company after leaving the post in December.

The state’s elected chief financial officer, Jimmy Patronis, oversees insurance fraud and complaints against insurers while collecting nearly $2 million in campaign contributions from the industry. After a surge in complaints about insurance companies following Hurricane Ian, Patronis’ office limited the state’s complaint hotline to just three hours a day, citing limited staffing.

Related: Here’s why Florida’s home insurance hotline is only open 3 hours a day

The new Office of Insurance Regulation commissioner, Mike Yaworsky, is Altmaier’s former chief of staff. Hutson said he’s interested in holding insurers accountable.

“We’ve got a new sheriff in town ... who really wants to go after these guys,” Hutson said of Yaworsky. “Some of this language came directly from him, where he said, ‘I need more tools in the toolbox.’”

Under SPB 7052:

  • Insurers would be required to report their claims-handling policies to the state.
  • Fines against insurers would increase from a maximum of $20,000 to $100,000 for “nonwillful” violations and from a maximum of $200,000 to $1 million for “willful” violations.
  • Regulators would have broader authority to conduct examinations into insurer conduct.
  • Insurers would be prohibited from paying bonuses to officers and directors while an insurer is impaired or insolvent.

Patronis’ office would get five new positions, and Hutson said he wants to assign more resources to the Office of Insurance Regulation, at Yaworsky’s suggestion.

Changes haven’t led to lower rates

The legislation also targets specific actions by insurers to undermine paying claims.

During one of last year’s special legislative sessions to address the property insurance crisis, lawmakers eliminated the requirement that insurers had to pay the policyholder’s attorneys’ fees if the policyholder sues them and wins. It was the latest change by lawmakers to make it harder for homeowners to sue their insurers, after the companies complained that lawsuits were driving up rates.

Since then, insurance companies have argued in court that the provision was retroactive, applying to policies that were in force prior to the legislation passing. SPB 7052 clarifies that the provision is not retroactive.

It also addresses allegations made by several private adjusters working for insurance companies who said that insurers manipulated their reports to pay homeowners less for their claims. The allegations were reported in a Washington Post story last month.

The bill would require insurers to document any changes to an adjuster’s report and include the name of the person who ordered the changes.

The Legislature’s recent reforms haven’t yet led to lower rates. In recent weeks, First Community Insurance Co. requested an overall 44.8% rate increase, Kin Insurance Network asked for an overall 61.5% rate increase and American Strategic Insurance Corp. and ASI Preferred Insurance Corp. are requesting near-20% rate increases.

During the rate hearings for First Community Insurance and Kin Insurance, company representatives said recent legislation hasn’t yet had a meaningful effect on rates.

Under the bill, insurers would be required to calculate in their rate filings the effect of recent legislative changes.

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