Senate Bill sb1308c1

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    Florida Senate - 2003                           CS for SB 1308

    By the Committee on Banking and Insurance; and Senator
    Alexander




    311-2518-03

  1                      A bill to be entitled

  2         An act relating to insurance ratemaking;

  3         amending ss. 627.062, 627.0651, F.S.; providing

  4         that filings providing rate increases and

  5         decreases for specified lines of

  6         property/casualty and motor vehicle insurance

  7         within a specified range shall not be subject

  8         to a determination by the Office of Insurance

  9         Regulation that the rate is excessive or

10         unfairly discriminatory; specifying

11         applicability; providing that nothing affects

12         the authority of the office to disapprove a

13         rate as inadequate; providing an exception if

14         the office determines that a competitive market

15         does not exist; requiring the Financial

16         Services Commission to adopt related rules;

17         providing inapplicability to rate filings for

18         medical malpractice; deleting provisions

19         relating to arbitration of certain decisions

20         with respect to property/casualty insurance

21         rate filings; amending s. 627.351, F.S.;

22         requiring that personal lines residential

23         wind-only rates for policies issued or renewed

24         by the Citizens Property Insurance Corporation

25         be no greater than 20 percent of premium;

26         providing for a wind-only ratemaking

27         methodology; requiring a report; requiring the

28         Citizens Property Insurance Corporation to

29         certify at certain intervals that its rates

30         comply with requirements to be set a certain

31         levels relative to other insurers; authorizing

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    Florida Senate - 2003                           CS for SB 1308
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 1         the Office of Insurance Regulation to review

 2         and act upon such certification; requiring the

 3         corporation to appoint a rate methodology panel

 4         to make recommendations for the use of

 5         additional ratemaking methods, including the

 6         use of a rate equalization surcharge to assure

 7         that the cost of coverage is sufficient to

 8         comply with state law; requiring the

 9         corporation to provide a related report to the

10         Legislature and a plan for implementing the

11         additional ratemaking methods; specifying how

12         the plan shall apply to agent commissions;

13         requiring the corporation to develop a notice

14         to policyholders; providing an effective date.

15  

16  Be It Enacted by the Legislature of the State of Florida:

17  

18         Section 1.  Section 627.062, Florida Statutes, is

19  amended to read:

20         627.062  Rate standards.--

21         (1)  The rates for all classes of insurance to which

22  the provisions of this part are applicable shall not be

23  excessive, inadequate, or unfairly discriminatory.

24         (2)  As to all such classes of insurance:

25         (a)  Insurers or rating organizations shall establish

26  and use rates, rating schedules, or rating manuals to allow

27  the insurer a reasonable rate of return on such classes of

28  insurance written in this state.  A copy of rates, rating

29  schedules, rating manuals, premium credits or discount

30  schedules, and surcharge schedules, and changes thereto, shall

31  

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    Florida Senate - 2003                           CS for SB 1308
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 1  be filed with the department under one of the following

 2  procedures:

 3         1.  If the filing is made at least 90 days before the

 4  proposed effective date and the filing is not implemented

 5  during the department's review of the filing and any

 6  proceeding and judicial review, then such filing shall be

 7  considered a "file and use" filing.  In such case, the

 8  department shall finalize its review by issuance of a notice

 9  of intent to approve or a notice of intent to disapprove

10  within 90 days after receipt of the filing. The notice of

11  intent to approve and the notice of intent to disapprove

12  constitute agency action for purposes of the Administrative

13  Procedure Act. Requests for supporting information, requests

14  for mathematical or mechanical corrections, or notification to

15  the insurer by the department of its preliminary findings

16  shall not toll the 90-day period during any such proceedings

17  and subsequent judicial review. The rate shall be deemed

18  approved if the department does not issue a notice of intent

19  to approve or a notice of intent to disapprove within 90 days

20  after receipt of the filing.

21         2.  If the filing is not made in accordance with the

22  provisions of subparagraph 1., such filing shall be made as

23  soon as practicable, but no later than 30 days after the

24  effective date, and shall be considered a "use and file"

25  filing.  An insurer making a "use and file" filing is

26  potentially subject to an order by the department to return to

27  policyholders portions of rates found to be excessive, as

28  provided in paragraph (h).

29         (b)  Upon receiving a rate filing, the department shall

30  review the rate filing to determine if a rate is excessive,

31  inadequate, or unfairly discriminatory.  In making that

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    Florida Senate - 2003                           CS for SB 1308
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 1  determination, the department shall, in accordance with

 2  generally accepted and reasonable actuarial techniques,

 3  consider the following factors:

 4         1.  Past and prospective loss experience within and

 5  without this state.

 6         2.  Past and prospective expenses.

 7         3.  The degree of competition among insurers for the

 8  risk insured.

 9         4.  Investment income reasonably expected by the

10  insurer, consistent with the insurer's investment practices,

11  from investable premiums anticipated in the filing, plus any

12  other expected income from currently invested assets

13  representing the amount expected on unearned premium reserves

14  and loss reserves.  The department may promulgate rules

15  utilizing reasonable techniques of actuarial science and

16  economics to specify the manner in which insurers shall

17  calculate investment income attributable to such classes of

18  insurance written in this state and the manner in which such

19  investment income shall be used in the calculation of

20  insurance rates.  Such manner shall contemplate allowances for

21  an underwriting profit factor and full consideration of

22  investment income which produce a reasonable rate of return;

23  however, investment income from invested surplus shall not be

24  considered. The profit and contingency factor as specified in

25  the filing shall be utilized in computing excess profits in

26  conjunction with s. 627.0625.

27         5.  The reasonableness of the judgment reflected in the

28  filing.

29         6.  Dividends, savings, or unabsorbed premium deposits

30  allowed or returned to Florida policyholders, members, or

31  subscribers.

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 1         7.  The adequacy of loss reserves.

 2         8.  The cost of reinsurance.

 3         9.  Trend factors, including trends in actual losses

 4  per insured unit for the insurer making the filing.

 5         10.  Conflagration and catastrophe hazards, if

 6  applicable.

 7         11.  A reasonable margin for underwriting profit and

 8  contingencies.

 9         12.  The cost of medical services, if applicable.

10         13.  Other relevant factors which impact upon the

11  frequency or severity of claims or upon expenses.

12         (c)  In the case of fire insurance rates, consideration

13  shall be given to the availability of water supplies and the

14  experience of the fire insurance business during a period of

15  not less than the most recent 5-year period for which such

16  experience is available.

17         (d)  If conflagration or catastrophe hazards are given

18  consideration by an insurer in its rates or rating plan,

19  including surcharges and discounts, the insurer shall

20  establish a reserve for that portion of the premium allocated

21  to such hazard and shall maintain the premium in a catastrophe

22  reserve.  Any removal of such premiums from the reserve for

23  purposes other than paying claims associated with a

24  catastrophe or purchasing reinsurance for catastrophes shall

25  be subject to approval of the department.  Any ceding

26  commission received by an insurer purchasing reinsurance for

27  catastrophes shall be placed in the catastrophe reserve.

28         (e)  After consideration of the rate factors provided

29  in paragraphs (b), (c), and (d), a rate may be found by the

30  department to be excessive, inadequate, or unfairly

31  discriminatory based upon the following standards:

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    Florida Senate - 2003                           CS for SB 1308
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 1         1.  Rates shall be deemed excessive if they are likely

 2  to produce a profit from Florida business that is unreasonably

 3  high in relation to the risk involved in the class of business

 4  or if expenses are unreasonably high in relation to services

 5  rendered.

 6         2.  Rates shall be deemed excessive if, among other

 7  things, the rate structure established by a stock insurance

 8  company provides for replenishment of surpluses from premiums,

 9  when the replenishment is attributable to investment losses.

10         3.  Rates shall be deemed inadequate if they are

11  clearly insufficient, together with the investment income

12  attributable to them, to sustain projected losses and expenses

13  in the class of business to which they apply.

14         4.  A rating plan, including discounts, credits, or

15  surcharges, shall be deemed unfairly discriminatory if it

16  fails to clearly and equitably reflect consideration of the

17  policyholder's participation in a risk management program

18  adopted pursuant to s. 627.0625.

19         5.  A rate shall be deemed inadequate as to the premium

20  charged to a risk or group of risks if discounts or credits

21  are allowed which exceed a reasonable reflection of expense

22  savings and reasonably expected loss experience from the risk

23  or group of risks.

24         6.  A rate shall be deemed unfairly discriminatory as

25  to a risk or group of risks if the application of premium

26  discounts, credits, or surcharges among such risks does not

27  bear a reasonable relationship to the expected loss and

28  expense experience among the various risks.

29         (f)  In reviewing a rate filing, the department may

30  require the insurer to provide at the insurer's expense all

31  information necessary to evaluate the condition of the company

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    Florida Senate - 2003                           CS for SB 1308
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 1  and the reasonableness of the filing according to the criteria

 2  enumerated in this section.

 3         (g)  The department may at any time review a rate,

 4  rating schedule, rating manual, or rate change; the pertinent

 5  records of the insurer; and market conditions.  If the

 6  department finds on a preliminary basis that a rate may be

 7  excessive, inadequate, or unfairly discriminatory, the

 8  department shall initiate proceedings to disapprove the rate

 9  and shall so notify the insurer. However, the department may

10  not disapprove as excessive any rate for which it has given

11  final approval or which has been deemed approved for a period

12  of 1 year after the effective date of the filing unless the

13  department finds that a material misrepresentation or material

14  error was made by the insurer or was contained in the filing.

15  Upon being so notified, the insurer or rating organization

16  shall, within 60 days, file with the department all

17  information which, in the belief of the insurer or

18  organization, proves the reasonableness, adequacy, and

19  fairness of the rate or rate change.  The department shall

20  issue a notice of intent to approve or a notice of intent to

21  disapprove pursuant to the procedures of paragraph (a) within

22  90 days after receipt of the insurer's initial response.  In

23  such instances and in any administrative proceeding relating

24  to the legality of the rate, the insurer or rating

25  organization shall carry the burden of proof by a

26  preponderance of the evidence to show that the rate is not

27  excessive, inadequate, or unfairly discriminatory.  After the

28  department notifies an insurer that a rate may be excessive,

29  inadequate, or unfairly discriminatory, unless the department

30  withdraws the notification, the insurer shall not alter the

31  rate except to conform with the department's notice until the

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 1  earlier of 120 days after the date the notification was

 2  provided or 180 days after the date of the implementation of

 3  the rate.  The department may, subject to chapter 120,

 4  disapprove without the 60-day notification any rate increase

 5  filed by an insurer within the prohibited time period or

 6  during the time that the legality of the increased rate is

 7  being contested.

 8         (h)  In the event the department finds that a rate or

 9  rate change is excessive, inadequate, or unfairly

10  discriminatory, the department shall issue an order of

11  disapproval specifying that a new rate or rate schedule which

12  responds to the findings of the department be filed by the

13  insurer.  The department shall further order, for any "use and

14  file" filing made in accordance with subparagraph (a)2., that

15  premiums charged each policyholder constituting the portion of

16  the rate above that which was actuarially justified be

17  returned to such policyholder in the form of a credit or

18  refund. If the department finds that an insurer's rate or rate

19  change is inadequate, the new rate or rate schedule filed with

20  the department in response to such a finding shall be

21  applicable only to new or renewal business of the insurer

22  written on or after the effective date of the responsive

23  filing.

24         (i)  Except as otherwise specifically provided in this

25  chapter, the department shall not prohibit any insurer,

26  including any residual market plan or joint underwriting

27  association, from paying acquisition costs based on the full

28  amount of premium, as defined in s. 627.403, applicable to any

29  policy, or prohibit any such insurer from including the full

30  amount of acquisition costs in a rate filing.

31  

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    Florida Senate - 2003                           CS for SB 1308
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 1         (j)  Any provisions of this section to the contrary

 2  notwithstanding:

 3         1.  With respect to any class of insurance subject to

 4  regulation under this section, a base rate filing reflecting

 5  an overall statewide average increase or decrease in the rate

 6  level of no more than 15 percent, above or below the insurer's

 7  rates then in effect, shall not be subject to a determination

 8  by the office that the rate is excessive or unfairly

 9  discriminatory, if the filing does not result in a premium

10  increase of more than 40 percent to any policyholder as a

11  result of the rate filing alone, before taking into account

12  changes in coverage or insured value. As used in this

13  subparagraph, the term "insurer's rates then in effect"

14  includes only rates that have been approved under this section

15  or rates that have been determined to be lawful through

16  administrative proceedings or judicial proceedings, or, prior

17  to July 1, 2003, through arbitration.

18         2.  An insurer may not make more than one filing under

19  this paragraph with respect to any one class of insurance in

20  any calendar year. A filing under this paragraph must be made

21  electronically.

22         3.  This paragraph does not affect the authority of the

23  office to disapprove a rate as inadequate.

24         4.  This paragraph does not apply to rate filings for

25  medical malpractice.

26         5.  This paragraph does not apply to a rate filing for

27  a type or line of insurance for which the Office of Insurance

28  Regulation determines that a competitive market does not

29  exist. The Financial Services Commission shall adopt rules

30  establishing standards for determining whether or not a

31  competitive market exists for a particular type or line of

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    Florida Senate - 2003                           CS for SB 1308
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 1  insurance. It is presumed that a competitive market exists

 2  unless the office establishes that a competitive market does

 3  not exist.

 4  

 5  The provisions of this subsection shall not apply to workers'

 6  compensation and employer's liability insurance and to motor

 7  vehicle insurance.

 8         (3)(a)  For individual risks that are not rated in

 9  accordance with the insurer's rates, rating schedules, rating

10  manuals, and underwriting rules filed with the department and

11  which have been submitted to the insurer for individual

12  rating, the insurer must maintain documentation on each risk

13  subject to individual risk rating.  The documentation must

14  identify the named insured and specify the characteristics and

15  classification of the risk supporting the reason for the risk

16  being individually risk rated, including any modifications to

17  existing approved forms to be used on the risk.  The insurer

18  must maintain these records for a period of at least 5 years

19  after the effective date of the policy.

20         (b)  Individual risk rates and modifications to

21  existing approved forms are not subject to this part or part

22  II, except for paragraph (a) and ss. 627.402, 627.403,

23  627.4035, 627.404, 627.405, 627.406, 627.407, 627.4085,

24  627.409, 627.4132, 627.4133, 627.415, 627.416, 627.417,

25  627.419, 627.425, 627.426, 627.4265, 627.427, and 627.428, but

26  are subject to all other applicable provisions of this code

27  and rules adopted thereunder.

28         (c)  This subsection does not apply to private

29  passenger motor vehicle insurance.

30         (4)  The establishment of any rate, rating

31  classification, rating plan or schedule, or variation thereof

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 1  in violation of part IX of chapter 626 is also in violation of

 2  this section.

 3         (5)  With respect to a rate filing involving coverage

 4  of the type for which the insurer is required to pay a

 5  reimbursement premium to the Florida Hurricane Catastrophe

 6  Fund, the insurer may fully recoup in its property insurance

 7  premiums any reimbursement premiums paid to the Florida

 8  Hurricane Catastrophe Fund, together with reasonable costs of

 9  other reinsurance, but may not recoup reinsurance costs that

10  duplicate coverage provided by the Florida Hurricane

11  Catastrophe Fund.

12         (6)(a)  After any action with respect to a rate filing

13  that constitutes agency action for purposes of the

14  Administrative Procedure Act, an insurer may, in lieu of

15  demanding a hearing under s. 120.57, require arbitration of

16  the rate filing. Arbitration shall be conducted by a board of

17  arbitrators consisting of an arbitrator selected by the

18  department, an arbitrator selected by the insurer, and an

19  arbitrator selected jointly by the other two arbitrators. Each

20  arbitrator must be certified by the American Arbitration

21  Association. A decision is valid only upon the affirmative

22  vote of at least two of the arbitrators. No arbitrator may be

23  an employee of any insurance regulator or regulatory body or

24  of any insurer, regardless of whether or not the employing

25  insurer does business in this state. The department and the

26  insurer must treat the decision of the arbitrators as the

27  final approval of a rate filing. Costs of arbitration shall be

28  paid by the insurer.

29         (b)  Arbitration under this subsection shall be

30  conducted pursuant to the procedures specified in ss.

31  682.06-682.10. Either party may apply to the circuit court to

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 1  vacate or modify the decision pursuant to s. 682.13 or s.

 2  682.14. The department shall adopt rules for arbitration under

 3  this subsection, which rules may not be inconsistent with the

 4  arbitration rules of the American Arbitration Association as

 5  of January 1, 1996.

 6         (c)  Upon initiation of the arbitration process, the

 7  insurer waives all rights to challenge the action of the

 8  department under the Administrative Procedure Act or any other

 9  provision of law; however, such rights are restored to the

10  insurer if the arbitrators fail to render a decision within 90

11  days after initiation of the arbitration process.

12         Section 2.  Section 627.0651, Florida Statutes, is

13  amended to read:

14         627.0651  Making and use of rates for motor vehicle

15  insurance.--

16         (1)  Insurers shall establish and use rates, rating

17  schedules, or rating manuals to allow the insurer a reasonable

18  rate of return on motor vehicle insurance written in this

19  state.  A copy of rates, rating schedules, and rating manuals,

20  and changes therein, shall be filed with the department under

21  one of the following procedures:

22         (a)  If the filing is made at least 60 days before the

23  proposed effective date and the filing is not implemented

24  during the department's review of the filing and any

25  proceeding and judicial review, such filing shall be

26  considered a "file and use" filing.  In such case, the

27  department shall initiate proceedings to disapprove the rate

28  and so notify the insurer or shall finalize its review within

29  60 days after receipt of the filing.  Notification to the

30  insurer by the department of its preliminary findings shall

31  toll the 60-day period during any such proceedings and

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    Florida Senate - 2003                           CS for SB 1308
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 1  subsequent judicial review.  The rate shall be deemed approved

 2  if the department does not issue notice to the insurer of its

 3  preliminary findings within 60 days after the filing.

 4         (b)  If the filing is not made in accordance with the

 5  provisions of paragraph (a), such filing shall be made as soon

 6  as practicable, but no later than 30 days after the effective

 7  date, and shall be considered a "use and file" filing.  An

 8  insurer making a "use and file" filing is potentially subject

 9  to an order by the department to return to policyholders

10  portions of rates found to be excessive, as provided in

11  subsection (11).

12         (2)  Upon receiving notice of a rate filing or rate

13  change, the department shall review the rate or rate change to

14  determine if the rate is excessive, inadequate, or unfairly

15  discriminatory.  In making that determination, the department

16  shall in accordance with generally accepted and reasonable

17  actuarial techniques consider the following factors:

18         (a)  Past and prospective loss experience within and

19  outside this state.

20         (b)  The past and prospective expenses.

21         (c)  The degree of competition among insurers for the

22  risk insured.

23         (d)  Investment income reasonably expected by the

24  insurer, consistent with the insurer's investment practices,

25  from investable premiums anticipated in the filing, plus any

26  other expected income from currently invested assets

27  representing the amount expected on unearned premium reserves

28  and loss reserves.  Such investment income shall not include

29  income from invested surplus.  The department may promulgate

30  rules utilizing reasonable techniques of actuarial science and

31  economics to specify the manner in which insurers shall

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 1  calculate investment income attributable to motor vehicle

 2  insurance policies written in this state and the manner in

 3  which such investment income is used in the calculation of

 4  insurance rates.  Such manner shall contemplate the use of a

 5  positive underwriting profit allowance in the rates that will

 6  be compatible with a reasonable rate of return plus provisions

 7  for contingencies. The total of the profit and contingency

 8  factor as specified in the filing shall be utilized in

 9  computing excess profits in conjunction with s. 627.066. In

10  promulgating such rules, the department shall in all instances

11  adhere to and implement the provisions of this paragraph.

12         (e)  The reasonableness of the judgment reflected in

13  the filing.

14         (f)  Dividends, savings, or unabsorbed premium deposits

15  allowed or returned to Florida policyholders, members, or

16  subscribers.

17         (g)  The cost of repairs to motor vehicles.

18         (h)  The cost of medical services, if applicable.

19         (i)  The adequacy of loss reserves.

20         (j)  The cost of reinsurance.

21         (k)  Trend factors, including trends in actual losses

22  per insured unit for the insurer making the filing.

23         (l)  Other relevant factors which impact upon the

24  frequency or severity of claims or upon expenses.

25         (3)  Rates shall be deemed excessive if they are likely

26  to produce a profit from Florida business that is unreasonably

27  high in relation to the risk involved in the class of business

28  or if expenses are unreasonably high in relation to services

29  rendered.

30         (4)  Rates shall be deemed excessive if, among other

31  things, the rate structure established by a stock insurance

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 1  company provides for replenishment of surpluses from premiums,

 2  when such replenishment is attributable to investment losses.

 3         (5)(a)  Rates shall be deemed inadequate if they are

 4  clearly insufficient, together with the investment income

 5  attributable to them, to sustain projected losses and expenses

 6  in the class of business to which they apply.

 7         (b)  The Insurance Commissioner shall have the

 8  responsibility to ensure that rates for private passenger

 9  vehicle insurance are adequate.  To that end, the department

10  shall promulgate rules and regulations establishing standards

11  defining inadequate rates on private passenger vehicle

12  insurance as defined in s. 627.041(8).  In the event that the

13  department finds that a rate or rate change is inadequate, the

14  department shall order that a new rate or rate schedule be

15  thereafter filed by the insurer and shall further provide

16  information as to the manner in which noncompliance of the

17  standards may be corrected.  When a violation of this

18  provision occurs, the department shall impose an

19  administrative fine pursuant to s. 624.4211.

20         (6)  One rate shall be deemed unfairly discriminatory

21  in relation to another in the same class if it clearly fails

22  to reflect equitably the difference in expected losses and

23  expenses.

24         (7)  Rates are not unfairly discriminatory because

25  different premiums result for policyholders with like loss

26  exposures but different expense factors, or like expense

27  factors but different loss exposures, so long as rates reflect

28  the differences with reasonable accuracy.

29         (8)  Rates are not unfairly discriminatory if averaged

30  broadly among members of a group; nor are rates unfairly

31  discriminatory even though they are lower than rates for

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 1  nonmembers of the group.  However, such rates are unfairly

 2  discriminatory if they are not actuarially measurable and

 3  credible and sufficiently related to actual or expected loss

 4  and expense experience of the group so as to assure that

 5  nonmembers of the group are not unfairly discriminated

 6  against. Use of a single United States Postal Service zip code

 7  as a rating territory shall be deemed unfairly discriminatory.

 8         (9)  In reviewing the rate or rate change filed, the

 9  department may require the insurer to provide at the insurer's

10  expense all information necessary to evaluate the condition of

11  the company and the reasonableness of the filing according to

12  the criteria enumerated herein.

13         (10)  The department may, at any time, review a rate or

14  rate change, the pertinent records of the insurer, and market

15  conditions; and, if the department finds on a preliminary

16  basis that the rate or rate change may be excessive,

17  inadequate, or unfairly discriminatory, the department shall

18  so notify the insurer.  However, the department may not

19  disapprove as excessive any rate for which it has given final

20  approval or which has been deemed approved for a period of 1

21  year after the effective date of the filing unless the

22  department finds that a material misrepresentation or material

23  error was made by the insurer or was contained in the filing.

24  Upon being so notified, the insurer or rating organization

25  shall, within 60 days, file with the department all

26  information which, in the belief of the insurer or

27  organization, proves the reasonableness, adequacy, and

28  fairness of the rate or rate change.  In such instances and in

29  any administrative proceeding relating to the legality of the

30  rate, the insurer or rating organization shall carry the

31  burden of proof by a preponderance of the evidence to show

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 1  that the rate is not excessive, inadequate, or unfairly

 2  discriminatory.  After the department notifies an insurer that

 3  a rate may be excessive, inadequate, or unfairly

 4  discriminatory, unless the department withdraws the

 5  notification, the insurer shall not increase the rate until

 6  the earlier of 120 days after the date the notification was

 7  provided or 180 days after the date of the implementation of

 8  the rate.  The department may, subject to chapter 120,

 9  disapprove without the 60-day notification any rate increase

10  filed by an insurer within the prohibited time period or

11  during the time that the legality of the increased rate is

12  being contested.

13         (11)  In the event the department finds that a rate or

14  rate change is excessive, inadequate, or unfairly

15  discriminatory, the department shall issue an order of

16  disapproval specifying that a new rate or rate schedule which

17  responds to the findings of the department be filed by the

18  insurer.  The department shall further order for any "use and

19  file" filing made in accordance with paragraph (1)(b), that

20  premiums charged each policyholder constituting the portion of

21  the rate above that which was actuarially justified be

22  returned to such policyholder in the form of a credit or

23  refund. If the department finds that an insurer's rate or rate

24  change is inadequate, the new rate or rate schedule filed with

25  the department in response to such a finding shall be

26  applicable only to new or renewal business of the insurer

27  written on or after the effective date of the responsive

28  filing.

29         (12)  Any portion of a judgment entered as a result of

30  a statutory or common-law bad faith action and any portion of

31  a judgment entered which awards punitive damages against an

                                  17

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    Florida Senate - 2003                           CS for SB 1308
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 1  insurer shall not be included in the insurer's rate base, and

 2  shall not be used to justify a rate or rate change. Any

 3  portion of a settlement entered as a result of a statutory or

 4  common-law bad faith action identified as such and any portion

 5  of a settlement wherein an insurer agrees to pay specific

 6  punitive damages shall not be used to justify a rate or rate

 7  change.  The portion of the taxable costs and attorney's fees

 8  which is identified as being related to the bad faith and

 9  punitive damages in these judgments and settlements shall not

10  be included in the insurer's rate base and shall not be

11  utilized to justify a rate or rate change.

12         (13)(a)  Underwriting rules not contained in rating

13  manuals shall be filed for private passenger automobile

14  insurance and homeowners' insurance.

15         (b)  The submission of rates, rating schedules, and

16  rating manuals to the department by a licensed rating

17  organization of which an insurer is a member or subscriber

18  will be sufficient compliance with this subsection for any

19  insurer maintaining membership or subscribership in such

20  organization, to the extent that the insurer uses the rates,

21  rating schedules, and rating manuals of such organization.

22  All such information shall be available for public inspection,

23  upon receipt by the department, during usual business hours.

24         (14)  Any provisions of this section to the contrary

25  notwithstanding:

26         (a)  A base rate filing for private passenger motor

27  vehicle insurance reflecting an overall statewide average

28  increase or decrease in the rate level of no more than 15

29  percent, above or below the insurer's rates then in effect,

30  shall not be subject to a determination by the office that the

31  rate is excessive or unfairly discriminatory, if the filing

                                  18

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    Florida Senate - 2003                           CS for SB 1308
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 1  does not result in a premium increase of more than 40 percent

 2  to any policyholder as a result of the rate filing alone,

 3  before taking into account changes in coverage or insured

 4  value. As used in this subparagraph, the term "insurer's rates

 5  then in effect" includes only rates that have been approved

 6  under this section or rates that have been determined to be

 7  lawful through administrative proceedings or judicial

 8  proceedings, or, prior to July 1, 2003, through arbitration.

 9         (b)1.  An insurer may not make more than one filing

10  under this subsection with respect to private passenger motor

11  vehicle insurance in any calendar year. A filing under this

12  paragraph must be made electronically.

13         2.  This paragraph does not affect the authority of the

14  office to disapprove a rate as inadequate.

15         3.  This subsection does not apply to a rate filing for

16  a type or line of insurance for which the Office of Insurance

17  Regulation determines that a competitive market does not

18  exist. The Financial Services Commission shall adopt rules

19  establishing standards for determining whether or not a

20  competitive market exists for a particular type or line of

21  insurance. It is presumed that a competitive market exists

22  unless the office establishes that a competitive market does

23  not exist.

24         Section 3.  Paragraph (d) of subsection (6) of section

25  627.351, Florida Statutes, is amended to read:

26         627.351  Insurance risk apportionment plans.--

27         (6)  CITIZENS PROPERTY INSURANCE CORPORATION.--

28         (d)1.  It is the intent of the Legislature that the

29  rates for coverage provided by the corporation be actuarially

30  sound and not competitive with approved rates charged in the

31  admitted voluntary market, so that the corporation functions

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    Florida Senate - 2003                           CS for SB 1308
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 1  as a residual market mechanism to provide insurance only when

 2  the insurance cannot be procured in the voluntary market.

 3  Rates shall include an appropriate catastrophe loading factor

 4  that reflects the actual catastrophic exposure of the

 5  corporation.

 6         2.  For each county, the average rates of the

 7  corporation for each line of business for personal lines

 8  residential policies excluding rates for wind-only policies

 9  shall be no lower than the average rates charged by the

10  insurer that had the highest average rate in that county among

11  the 20 insurers with the greatest total direct written premium

12  in the state for that line of business in the preceding year,

13  except that with respect to mobile home coverages, the average

14  rates of the corporation shall be no lower than the average

15  rates charged by the insurer that had the highest average rate

16  in that county among the 5 insurers with the greatest total

17  written premium for mobile home owner's policies in the state

18  in the preceding year.

19         3.  Rates for personal lines residential wind-only

20  policies must be actuarially sound and not competitive with

21  approved rates charged by authorized insurers. However, for

22  personal lines residential wind-only policies issued or

23  renewed between July 1, 2002, and June 30, 2003, the maximum

24  premium increase must be no greater than 10 percent of the

25  Florida Windstorm Underwriting Association premium for that

26  policy in effect on June 30, 2002, as adjusted for coverage

27  changes and seasonal occupancy surcharges. The personal lines

28  residential wind-only rates for policies issued or renewed by

29  the corporation effective July 1, 2003, must be no greater

30  than 20 percent of the premium for that policy in effect on

31  June 30, 2003, as adjusted for coverage charges and seasonal

                                  20

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    Florida Senate - 2003                           CS for SB 1308
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 1  occupancy surcharges based on a rate filing by the corporation

 2  which establishes rates which are actuarially sound and not

 3  competitive with approved rates charged by authorized

 4  insurers.  Corporation rate manuals shall include a rate

 5  surcharge for seasonal occupancy.  To ensure that personal

 6  lines residential wind-only rates effective on or after July

 7  1, 2003, are not competitive with approved rates charged by

 8  authorized insurers, the corporation, in conjunction with the

 9  office, shall develop a wind-only ratemaking methodology,

10  which methodology shall be used by the corporation in a rate

11  filing made with the office prior to January 1, 2004. If the

12  office thereafter determines that the wind-only rates and

13  rating factors filed by the corporation fail to comply with

14  the wind-only ratemaking methodology provided for in this

15  subsection, it shall notify the corporation and require the

16  corporation to amend its rates or rating factors in its next

17  rate filing. The office must report to the President of the

18  Senate and Speaker of the House of Representatives by March 1,

19  2004, on the provisions of the new wind-only ratemaking

20  methodology. the department, by March 1 of each year, shall

21  provide the corporation, for each county in which there are

22  geographical areas in which personal lines residential

23  wind-only policies may be issued, the average rates charged by

24  the insurer that had the highest average rate in that county

25  for wind coverage in that insurer's rating territories which

26  most closely approximate the geographical area in that county

27  in which personal lines residential wind-only policies may be

28  written by the corporation.  The average rates provided must

29  be from an insurer among the 20 insurers with the greatest

30  total direct written premium in the state for personal lines

31  residential property insurance for the preceding year.  With

                                  21

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    Florida Senate - 2003                           CS for SB 1308
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 1  respect to mobile homes, the five insurers with the greatest

 2  total written premium for that line of business in the

 3  preceding year shall be used.  The corporation shall certify

 4  to the department that its average personal lines residential

 5  wind-only rates are no lower in each county than the average

 6  rates provided by the department.  The department is

 7  authorized to adopt rules to establish reporting requirements

 8  to obtain the necessary wind-only rate information from

 9  insurers to implement this provision.

10         4.  Rates for commercial lines coverage shall not be

11  subject to the requirements of subparagraph 2., but shall be

12  subject to all other requirements of this paragraph and s.

13  627.062.

14         5.  Nothing in this paragraph shall require or allow

15  the corporation to adopt a rate that is inadequate under s.

16  627.062.

17         6.  The corporation shall certify to the office at

18  least twice annually that its personal lines rates comply with

19  the requirements of subparagraphs 1. and 2. If any adjustment

20  in the rates or rating factors of the corporation is necessary

21  to ensure such compliance, the corporation shall make and

22  implement such adjustments and file its revised rates and

23  rating factors with the office. If the office thereafter

24  determines that the revised rates and rating factors fail to

25  comply with the provisions of subparagraphs 1. and 2, it shall

26  notify the corporation and require the corporation to amend

27  its rates or rating factors in conjunction with its next rate

28  filing.  The office must notify the corporation by electronic

29  means of any rate filing it approves for any insurer among the

30  insurers referred to in subparagraph 2. make a rate filing at

31  least once a year, but no more often than quarterly.

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    Florida Senate - 2003                           CS for SB 1308
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 1         7.  In addition to the rates otherwise determined

 2  pursuant to this paragraph, the corporation shall impose and

 3  collect an amount equal to the premium tax provided for in s.

 4  624.509 to augment the financial resources of the corporation.

 5         8.a.  To assist the corporation in developing

 6  additional ratemaking methods to assure compliance with

 7  subparagraphs 1. and 4., the corporation shall appoint a rate

 8  methodology panel consisting of one person recommended by the

 9  Florida Association of Insurance Agents, one person

10  recommended by the Professional Insurance Agents of Florida,

11  one person recommended by the Florida Association of Insurance

12  and Financial Advisors, one person recommended by the insurer

13  with the highest voluntary market share of residential

14  property insurance business in the state, one person

15  recommended by the insurer with the second-highest voluntary

16  market share of residential property insurance business in the

17  state, one person recommended by an insurer writing commercial

18  residential property insurance in this state, one person

19  recommended by the Office of Insurance Regulation, and one

20  board member designated by the board chairman, who shall serve

21  as chairman of the panel.

22         b.  By January 1, 2004, the rate methodology panel

23  shall provide a report to the corporation of its findings and

24  recommendations for the use of additional ratemaking methods

25  and procedures, including the use of a rate-equalization

26  surcharge in an amount sufficient to assure that the total

27  cost of coverage for policyholders or applicants to the

28  corporation is sufficient to comply with subparagraph 1.

29         c.  Within 30 days after such report, the corporation

30  shall present to the President of the Senate, the Speaker of

31  the House of Representatives, the minority party leaders of

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    Florida Senate - 2003                           CS for SB 1308
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 1  each house of the Legislature, and the chairs of the standing

 2  committees of each house of the Legislature having

 3  jurisdiction of insurance issues, a plan for implementing the

 4  additional ratemaking methods and an outline of any

 5  legislation needed to facilitate use of the new methods.

 6         d.  The plan must include a provision that producer

 7  commissions paid by the corporation shall not be calculated in

 8  such a manner as to include any rate-equalization surcharge.

 9  However, without regard to the plan to be developed or its

10  implementation, producer commissions paid by the corporation

11  for each account, other than the quota share primary insurance

12  program, shall remain fixed as to percentage, effective rate,

13  calculation, and payment method, as these were in effect on

14  January 1, 2003.

15         9.  By January 1, 2004, the corporation shall develop a

16  notice to policyholders or applicants that the rates of

17  Citizens Property Insurance Corporation are intended to be

18  higher than the rates of any admitted carrier and providing

19  other information the corporation deems necessary to assist

20  consumers in finding other voluntary admitted insurers willing

21  to insure their property.

22         Section 4.  This act shall take effect July 1, 2003.

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    Florida Senate - 2003                           CS for SB 1308
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 1          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
 2                         Senate Bill 1308

 3                                 

 4  The committee substitute does the following:

 5  -    Provides an exception to the current requirements for
         insurance rate filings for property and casualty insurers
 6       (homeowners, commercial property, commercial multiperil,
         and commercial and professional liability coverages) and
 7       private passenger motor vehicle insurers to make a base
         rate filing reflecting an overall statewide average
 8       increase or decrease of no more than 15 percent, above or
         below the insurer's rates then in effect, which would not
 9       be subject to approval by the Office of Insurance
         Regulation (OIR), provided that the filing does not
10       result in a premium increase to any policyholder of more
         than 40 percent.
11  
    -    Provides that insurers could not make more than one rate
12       filing under the above provision with respect to any one
         class of insurance in any calender year. Excludes medical
13       malpractice rate filings.

14  -    Repeals the current provision that allows property and
         casualty insurers to submit a rate filing that has been
15       disapproved by the OIR to an arbitration panel.

16  -    Requires that personal lines residential wind-only rates
         for the Citizens Property Insurance Corporation
17       (Citizens) must be no greater than 20 percent of the
         premium for that policy in effect on June, 30, 2003, as
18       adjusted for coverage changes and seasonal occupancy
         surcharges.
19  
    -    Provides that Citizens shall develop, in conjunction with
20       the OIR, a wind-only ratemaking methodology which must be
         used in the Citizen's rate filing prior to January 1,
21       2004. Requires Citizens to revise its rates to comply
         with the wind-only ratemaking methodologies if determined
22       by OIR. Requires the OIR to report to the Legislature by
         March 1, 2004, of the new wind-only ratemaking
23       methodology. Require Citizens to certify to OIR twice
         annually that its rates for homeowners policies and
24       similar coverages are not competitive with approved rates
         charged by insurers (in the admitted voluntary market)
25       and that its rates in a particular county be no less than
         the average rate of an insurer with the highest average
26       rates in that county, from among the 20 insurers with the
         greatest statewide market share.
27  
    -    Requires citizens to appoint a Rate Methodology Panel to
28       develop additional ratemaking methods to comply with the
         rate comparison standard; specifies appointments;
29       requires that by January 1, 2004, the Panel provide a
         report to Citizens of its findings and recommendations.
30       Requires Citizens to present a plan for implementing the
         additional ratemaking methods to the Legislature, and
31       other specified parties, within 30 days of the Panel's
         report.
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    Florida Senate - 2003                           CS for SB 1308
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 1  -    Provides that the plan include a provision that producer
         commissions paid by Citizens must not be calculated to
 2       include any rate equalization surcharges, and makes
         permanent the amount and method of producer compensation
 3       in effect on January 1, 2003. Provides for a notice to be
         attached to all Citizens' policies, applications, and
 4       renewal premiums.

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