HB 1271 2003
1	A bill to be entitled
2	An act relating to insurance; creating s. 624.156, F.S.;
3	providing applicability of specified consumer protection
4	laws to the business of insurance; providing construction
5	relating to application; amending s. 627.062, F.S.;
6	revising procedures, requirements, and limitations for
7	filing and setting rates, rate schedules, and rating
8	manuals; providing responsibilities of the Office of
9	Insurance Regulation; excluding certain bad faith judgment
10	amounts in certain rate bases; creating s. 627.351, F.S.;
11	limiting rates for medical malpractice insurance; limiting
12	rate increases to approvals by the Chief Financial
13	Officer; creating s. 627.352, F.S.; prohibiting issuance
14	of certain types of insurance policies without also
15	issuing medical malpractice insurance policies;
16	prohibiting denial of medical malpractice insurance to
17	health care providers under certain circumstances;
18	amending s. 505.212, F.S.; deleting an obsolete
19	nonapplication provision relating to the Department of
20	Insurance; providing an effective date.
21
22	Be It Enacted by the Legislature of the State of Florida:
23
24	Section 1. Section 624.156, Florida Statutes, is created
25	to read:
26	624.156 Applicability of consumer protection laws to the
27	business of insurance.--
28	(1) Notwithstanding any provision to the contrary, the
29	business of insurance shall be subject to the laws of this state
30	applicable to any other business, including, but not limited to,
31	the Florida Civil Rights Act of 1992 set forth in part I of
32	chapter 760, the Florida Antitrust Act of 1980 set forth in
33	chapter 542, the Florida Deceptive and Unfair Trade Practices
34	Act set forth in part II of chapter 501, and the consumer
35	protection provisions contained in chapter 540. It is also the
36	intent of this provision that all such protections afforded by
37	chapters 501, 540, 542, and 760 apply to insurance consumers.
38	(2) Nothing in this section shall be construed to
39	prohibit:
40	(a) Any agreement to collect, compile, and disseminate
41	historical data on paid claims or reserves for reported claims,
42	provided such data is contemporaneously transmitted to the
43	Office of Insurance Regulation;
44	(b) Participation in any joint arrangement established by
45	law or the office to ensure availability of insurance;
46	(c) Any agent or broker, representing one or more
47	insurers, from obtaining from any insurer it represents
48	information relative to the premium for any policy or risk to be
49	underwritten by that insurer;
50	(d) Any agent or broker from disclosing to an insurer it
51	represents any quoted rate or charge offered by another insurer
52	represented by that agent or broker for the purpose of
53	negotiating a lower rate, charge, or term from the insurer to
54	whom the disclosure is made; or
55	(e) Any agent, broker, or insurer from utilizing or
56	participating with multiple insurers or reinsurers for
57	underwriting a single risk or group of risks.
58	Section 2. Section 627.062, Florida Statutes, is amended
59	to read:
60	627.062 Rate standards; prior approval of rates.--
61	(1) The rates for all classes of insurance to which the
62	provisions of this part are applicable shall be set by the
63	director of the Office of Insurance Regulation andshall not be
64	excessive, inadequate, or unfairly discriminatory.
65	(2) As to all such classes of insurance:
66	(a) Insurers or rating organizations shall apply for
67	establishand use rates, rating schedules, or rating manuals to
68	allow the insurer a reasonable rate of return on such classes of
69	insurance written in this state. A copy of rates, rating
70	schedules, rating manuals, premium credits or discount
71	schedules, and surcharge schedules, and changes thereto, shall
72	be filed with the Office of Insurance Regulation as follows
73	department under one of the following procedures:
74	1. If the filing must beis made at least 18090days
75	before the proposed effective date and the filing shallis not
76	be implemented during the office’sdepartment'sreview of the
77	filing and any proceeding and judicial review, then such filing
78	shall be considered a "file and use" filing. In such case, the
79	department shall finalize its review by issuance of a notice of
80	intent to approve or a notice of intent to disapprove within 90
81	days after receipt of the filing. The notice of intent to
82	approve and the notice of intent to disapprove constitute agency
83	action for purposes of the Administrative Procedure Act.
84	Requests for supporting information, requests for mathematical
85	or mechanical corrections, or notification to the insurer by the
86	department of its preliminary findings shall not toll the 90-day
87	period during any such proceedings and subsequent judicial
88	review. The rate shall be deemed approved if the department does
89	not issue a notice of intent to approve or a notice of intent to
90	disapprove within 90 days after receipt of the filing.
91	2. If the filing is not made in accordance with the
92	provisions of subparagraph 1., such filing shall be made as soon
93	as practicable, but no later than 30 days after the effective
94	date, and shall be considered a "use and file" filing. An
95	insurer making a "use and file" filing is potentially subject to
96	an order by the department to return to policyholders portions
97	of rates found to be excessive, as provided in paragraph (h).
98	(b) Upon receiving a rate filing and within a reasonable
99	time, the officedepartment shall review the rate filing and set
100	a rate or rate schedule that is notto determine if a rate is
101	excessive, inadequate, or unfairly discriminatory. In making
102	that determination, the officedepartmentshall, in accordance
103	with generally accepted and reasonable actuarial techniques,
104	consider the following factors:
105	1. Past and prospective loss experience within and without
106	this state.
107	2. Past and prospective expenses.
108	3. The degree of competition among insurers for the risk
109	insured.
110	4. Investment income reasonably expected by the insurer,
111	consistent with the insurer's investment practices, from
112	investable premiums anticipated in the filing, plus any other
113	expected income from currently invested assets representing the
114	amount expected on unearned premium reserves and loss reserves.
115	The officedepartment may adoptpromulgaterules utilizing
116	reasonable techniques of actuarial science and economics to
117	specify the manner in which insurers shall calculate investment
118	income attributable to such classes of insurance written in this
119	state and the manner in which such investment income shall be
120	used in the calculation of insurance rates. Such manner shall
121	contemplate allowances for an underwriting profit factor and
122	full consideration of investment income which produce a
123	reasonable rate of return; however, investment income from
124	invested surplus shall not be considered. The profit and
125	contingency factor as specified in the filing shall be utilized
126	in computing excess profits in conjunction with s. 627.0625.
127	5. The reasonableness of the judgment reflected in the
128	filing.
129	6. Dividends, savings, or unabsorbed premium deposits
130	allowed or returned to Florida policyholders, members, or
131	subscribers.
132	7. The adequacy of loss reserves.
133	8. The cost of reinsurance.
134	9. Trend factors, including trends in actual losses per
135	insured unit for the insurer making the filing.
136	10. Conflagration and catastrophe hazards, if applicable.
137	11. A reasonable margin for underwriting profit and
138	contingencies.
139	12. The cost of medical services, if applicable.
140	13. Other relevant factors which impact upon the frequency
141	or severity of claims or upon expenses.
142	(c) In the case of fire insurance rates, consideration
143	shall be given to the availability of water supplies and the
144	experience of the fire insurance business during a period of not
145	less than the most recent 5-year period for which such
146	experience is available.
147	(d) If conflagration or catastrophe hazards are given
148	consideration by an insurer in its rates or rating plan,
149	including surcharges and discounts, the insurer shall establish
150	a reserve for that portion of the premium allocated to such
151	hazard and shall maintain the premium in a catastrophe reserve.
152	Any removal of such premiums from the reserve for purposes other
153	than paying claims associated with a catastrophe or purchasing
154	reinsurance for catastrophes shall be subject to approval of the
155	department. Any ceding commission received by an insurer
156	purchasing reinsurance for catastrophes shall be placed in the
157	catastrophe reserve.
158	(e) After consideration of the rate factors provided in
159	paragraphs (b), (c), and (d), the office shall determine and set
160	the appropriate rate, as long as thea rate is notmay be found
161	by the department to beexcessive, inadequate, or unfairly
162	discriminatory,based upon the following standards:
163	1. Rates shall be deemed excessive if they are likely to
164	produce a profit from Florida business that is unreasonably high
165	in relation to the risk involved in the class of business or if
166	expenses are unreasonably high in relation to services rendered.
167	2. Rates shall be deemed excessive if, among other things,
168	the rate structure established by a stock insurance company
169	provides for replenishment of surpluses from premiums, when the
170	replenishment is attributable to investment losses.
171	3. Rates shall be deemed inadequate if they are clearly
172	insufficient, together with the investment income attributable
173	to them, to sustain projected losses and expenses in the class
174	of business to which they apply.
175	4. A rating plan, including discounts, credits, or
176	surcharges, shall be deemed unfairly discriminatory if it fails
177	to clearly and equitably reflect consideration of the
178	policyholder's participation in a risk management program
179	adopted pursuant to s. 627.0625.
180	5. A rate shall be deemed inadequate as to the premium
181	charged to a risk or group of risks if discounts or credits are
182	allowed which exceed a reasonable reflection of expense savings
183	and reasonably expected loss experience from the risk or group
184	of risks.
185	6. A rate shall be deemed unfairly discriminatory as to a
186	risk or group of risks if the application of premium discounts,
187	credits, or surcharges among such risks does not bear a
188	reasonable relationship to the expected loss and expense
189	experience among the various risks.
190	(f) In reviewing a rate filing, the department may require
191	the insurer to provide at the insurer's expense all information
192	necessary to evaluate the condition of the company and the
193	reasonableness of the filing according to the criteria
194	enumerated in this section.
195	(g) The officedepartmentmay at any time review a rate,
196	rating schedule, rating manual, or rate change; the pertinent
197	records of the insurer; and market conditions. If the office
198	departmentfinds on a preliminary basis that a rate may be
199	excessive, inadequate, or unfairly discriminatory, the office
200	department shall initiate proceedings to set a newdisapprove
201	therate and shall so notify the insurer. However, the
202	department may not disapprove as excessive any rate the office
203	has setfor which it has given final approval or which has been
204	deemed approvedfor a period of 1 year after the effective date
205	of the filing unless the officedepartmentfinds that a material
206	misrepresentation or material error was made by the insurer or
207	was contained in the filing. Upon being so notified, the insurer
208	or rating organization shall, within 60 days, file with the
209	officedepartmentall information which, in the belief of the
210	insurer or organization, proves the reasonableness, adequacy,
211	and fairness of the rate or rate change. The officedepartment
212	shall determine and set an appropriate rate within a reasonable
213	timeissue a notice of intent to approve or a notice of intent
214	to disapprove pursuant to the procedures of paragraph (a) within
215	90 days after receipt of the insurer's initial response,
216	pursuant to paragraphs (b)-(f). In such instances and in any
217	administrative proceeding relating to the legality of anythe
218	rate, the insurer or rating organization shall carry the burden
219	of proof by a preponderance of the evidence to show that the
220	rate is not excessive, inadequate, or unfairly discriminatory.
221	After the department notifies an insurer that a rate may be
222	excessive, inadequate, or unfairly discriminatory, unless the
223	department withdraws the notification, the insurer shall not
224	alter the rate except to conform with the department's notice
225	until the earlier of 120 days after the date the notification
226	was provided or 180 days after the date of the implementation of
227	the rate. The department may, subject to chapter 120, disapprove
228	without the 60-day notification any rate increase filed by an
229	insurer within the prohibited time period or during the time
230	that the legality of the increased rate is being contested.
231	(h) When the office sets a new rate or rate schedule, the
232	officeIn the event the department finds that a rate or rate
233	change is excessive, inadequate, or unfairly discriminatory, the
234	department shall issue an order of disapproval specifying the
235	that a new rate or rate schedule andwhich responds tothe
236	findings of the officedepartment be filed by the insurer. The
237	order shall constitute agency action for purposes of the
238	Administrative Procedure Act.The department shall further
239	order, for any "use and file" filing made in accordance with
240	subparagraph (a)2., that premiums charged each policyholder
241	constituting the portion of the rate above that which was
242	actuarially justified be returned to such policyholder in the
243	form of a credit or refund. If the department finds that an
244	insurer's rate or rate change is inadequate, the new rate or
245	rate schedule filed with the department in response to such a
246	finding shall be applicable only to new or renewal business of
247	the insurer written on or after the effective date of the
248	responsive filing.
249	(i) Except as otherwise specifically provided in this
250	chapter, the officedepartmentshall not prohibit any insurer,
251	including any residual market plan or joint underwriting
252	association, from paying acquisition costs based on the full
253	amount of premium, as defined in s. 627.403, applicable to any
254	policy, or prohibit any such insurer from including the full
255	amount of acquisition costs in a rate filing.
256
257	The provisions of this subsection shall not apply to workers'
258	compensation and employer's liability insurance and to motor
259	vehicle insurance.
260	(3)(a) For individual risks that are not rated in
261	accordance with the insurer's rates, rating schedules, rating
262	manuals, and underwriting rules filed with the officedepartment
263	and which have been submitted to the insurer for individual
264	rating, the insurer must maintain documentation on each risk
265	subject to individual risk rating. The documentation must
266	identify the named insured and specify the characteristics and
267	classification of the risk supporting the reason for the risk
268	being individually risk rated, including any modifications to
269	existing approved forms to be used on the risk. The insurer must
270	maintain these records for a period of at least 5 years after
271	the effective date of the policy.
272	(b) Individual risk rates and modifications to existing
273	approved forms are not subject to this part or part II, except
274	for paragraph (a) and ss. 627.402, 627.403, 627.4035, 627.404,
275	627.405, 627.406, 627.407, 627.4085, 627.409, 627.4132,
276	627.4133, 627.415, 627.416, 627.417, 627.419, 627.425, 627.426,
277	627.4265, 627.427, and 627.428, but are subject to all other
278	applicable provisions of this code and rules adopted thereunder.
279	(c) This subsection does not apply to private passenger
280	motor vehicle insurance.
281	(4) The establishment of any rate, rating classification,
282	rating plan or schedule, or variation thereof in violation of
283	part IX of chapter 626 is also in violation of this section.
284	(5) With respect to a rate filing involving coverage of
285	the type for which the insurer is required to pay a
286	reimbursement premium to the Florida Hurricane Catastrophe Fund,
287	the insurer may fully recoup in its property insurance premiums
288	any reimbursement premiums paid to the Florida Hurricane
289	Catastrophe Fund, together with reasonable costs of other
290	reinsurance, but may not recoup reinsurance costs that duplicate
291	coverage provided by the Florida Hurricane Catastrophe Fund.
292	(6)(a)Any portion of a judgment entered as a result of a
293	bad faith action under law or the common law and any portion of
294	a judgment entered that which awards punitive damages against an
295	insurer shall not be included in the insurer's rate base and
296	shall not be used to justify a rate or rate change. Any portion
297	of a settlement entered as a result of a bad faith action under
298	law or the common law identified as such and any portion of a
299	settlement wherein an insurer agrees to pay specific punitive
300	damages shall not be used to justify a rate or rate change. The
301	portion of the taxable costs and attorney's fees that which is
302	identified as being related to the bad faith and punitive
303	damages in these judgments and settlements shall not be included
304	in the insurer's rate base and shall not be used to justify a
305	rate or rate change.After any action with respect to a rate
306	filing that constitutes agency action for purposes of the
307	Administrative Procedure Act, an insurer may, in lieu of
308	demanding a hearing under s. 120.57, require arbitration of the
309	rate filing. Arbitration shall be conducted by a board of
310	arbitrators consisting of an arbitrator selected by the
311	department, an arbitrator selected by the insurer, and an
312	arbitrator selected jointly by the other two arbitrators. Each
313	arbitrator must be certified by the American Arbitration
314	Association. A decision is valid only upon the affirmative vote
315	of at least two of the arbitrators. No arbitrator may be an
316	employee of any insurance regulator or regulatory body or of any
317	insurer, regardless of whether or not the employing insurer does
318	business in this state. The department and the insurer must
319	treat the decision of the arbitrators as the final approval of a
320	rate filing. Costs of arbitration shall be paid by the insurer.
321	(b) Arbitration under this subsection shall be conducted
322	pursuant to the procedures specified in ss. 682.06-682.10.
323	Either party may apply to the circuit court to vacate or modify
324	the decision pursuant to s. 682.13 or s. 682.14. The department
325	shall adopt rules for arbitration under this subsection, which
326	rules may not be inconsistent with the arbitration rules of the
327	American Arbitration Association as of January 1, 1996.
328	(c) Upon initiation of the arbitration process, the
329	insurer waives all rights to challenge the action of the
330	department under the Administrative Procedure Act or any other
331	provision of law; however, such rights are restored to the
332	insurer if the arbitrators fail to render a decision within 90
333	days after initiation of the arbitration process.
334	(7)(a) Underwriting rules not contained in rating manuals
335	shall be filed for private passenger automobile insurance and
336	homeowners' insurance.
337	(b) The submission of rates, rating schedules, and rating
338	manuals to the Office of Insurance Regulation by a licensed
339	rating organization of which an insurer is a member or
340	subscriber will be sufficient compliance with this subsection
341	for any insurer maintaining membership or subscribership in such
342	organization, to the extent the insurer uses the rates, rating
343	schedules, and rating manuals of such organization. All such
344	information shall be available for public inspection, upon
345	receipt by the office, during usual business hours.
346	Section 3. Section 627.351, Florida Statutes, is created
347	to read:
348	627.351 Rates for medical malpractice insurance.--
349	(1) No insurer issuing policies of medical malpractice
350	insurance in this state may use a rate in excess of the rate
351	such insurer used in this state on January 1, 2001. Insurers
352	issuing polices of medical malpractice insurance if such insurer
353	had no rates in effect in this state on January 1, 2001, may not
354	use rates that exceed the rates used by the insurer with the
355	most policies of medical malpractice insurance in effect in this
356	state on January 1, 2001.
357	(2) Each insurer’s rates for medical malpractice insurance
358	may be increased only if the Chief Financial Officer determines,
359	after a hearing, that the insurer is substantially threatened
360	with insolvency unless its rates for medical malpractice
361	insurance are increased. In such cases, the Chief Financial
362	Officer shall set the medical malpractice insurance rates for
363	such insurer. Rates set by the Chief Financial Officer may not
364	be excessive, inadequate, or unfairly discriminatory.
365	Section 4. Section 627.352, Florida Statutes, is created
366	to read:
367	327.352 Medical malpractice insurance; issuance required
368	of certain insurers.--No insurer may issue policies of motor
369	vehicle insurance, commercial property insurance, or residential
370	property insurance in this state unless such insurer also issues
371	policies of medical malpractice insurance in this state. No
372	insurer issuing policies of medical malpractice insurance may
373	deny issuance of a policy of medical malpractice insurance to
374	any health care provider unless such denial is based on
375	underwriting standards approved by the Chief Financial Officer.
376	Section 5. Subsection (4) of section 501.212, Florida
377	Statutes, is amended to read:
378	501.212 Application.--This part does not apply to:
379	(4) Any person or activity regulated under laws
380	administered by the Department of Insurance orBanks and savings
381	and loan associations regulated by the Department of Banking and
382	Finance or banks or savings and loan associations regulated by
383	federal agencies.
384	Section 6. This act shall take effect upon becoming a law.