Senate Bill sb1926c1
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Florida Senate - 2004 CS for SB 1926
By the Committee on Banking and Insurance; and Senator Atwater
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1 A bill to be entitled
2 An act relating to workers' compensation;
3 creating s. 624.4315, F.S.; requiring workers'
4 compensation insurers to notify the Office of
5 Insurance Regulation of significant
6 underwriting changes; amending s. 627.171,
7 F.S.; providing that the 10-percent limit on
8 the percentage of commercial insurance policies
9 that an insurer may write at a rate in excess
10 of the applicable filed rate excludes workers'
11 compensation policies written for an employer
12 in lieu of coverage from the joint underwriting
13 plan established under s. 627.311(5), F.S.;
14 amending s. 627.211, F.S.; revising the
15 standards used by the Office of Insurance
16 Regulation in approving or disapproving an
17 insurer's deviation from the approved workers'
18 compensation rate filing; requiring the Office
19 of Insurance Regulation to submit an annual
20 report to the Legislature which evaluates
21 competition in the workers' compensation
22 insurance market; amending s. 627.311, F.S.;
23 revising provisions governing the depopulation
24 program of the workers' compensation joint
25 underwriting plan; providing an effective date.
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27 Be It Enacted by the Legislature of the State of Florida:
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29 Section 1. Section 624.4315, Florida Statutes, is
30 created to read:
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1 624.4315 Workers' compensation insurers; notice of
2 significant underwriting change.--Each workers' compensation
3 insurer shall notify the office in writing or by electronic
4 means of a significant underwriting change that materially
5 limits or restricts the number of workers' compensation
6 policies or premiums written in this state. The commission may
7 adopt rules to administer this requirement.
8 Section 2. Section 627.171, Florida Statutes, is
9 amended to read:
10 627.171 Excess rates.--
11 (1) With written consent of the insured signed prior
12 to the policy inception date and filed with the insurer, the
13 insurer may use a rate in excess of the otherwise applicable
14 filed rate on any specific risk. The signed consent form must
15 include the filed rate as well as the excess rate for the risk
16 insured, and a copy of the form must be maintained by the
17 insurer for 3 years and be available for review by the office.
18 (2) An insurer may not use excess rates pursuant to
19 this section for more than 10 percent of its commercial
20 insurance policies written or renewed in each calendar year
21 for any line of commercial insurance or for more than 5
22 percent of its personal lines insurance policies written or
23 renewed in each calendar year for any line of personal
24 insurance. In determing the 10-percent limitation for
25 commercial insurance policies, the insurer shall exclude any
26 workers' compensation policy that was written for an employer
27 who had coverage in the joint underwriting plan created by s.
28 627.311(5) immediately prior to the writing of the policy by
29 the insurer and any workers' compensation policy that was
30 written for an employer who had been offered coverage in the
31 joint underwriting plan but who was written a policy by the
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1 insurer in lieu of accepting the joint underwriting plan
2 policy. These workers' compensation policies shall be excluded
3 from the 10-percent limitation for the first 3 years of
4 coverage.
5 Section 3. Subsection (3) of section 627.211, Florida
6 Statutes, is amended, and subsection (6) is added to that
7 section, to read:
8 627.211 Deviations; workers' compensation and
9 employer's liability insurances.--
10 (3) In considering an application for the deviation,
11 the office shall give consideration to the applicable
12 principles for ratemaking as set forth in ss. 627.062 and
13 627.072 and, the financial condition of the insurer, and the
14 impact of the deviation on the current market conditions
15 including the composition of the market, the stability of
16 rates, and the level of competition in the market. In
17 evaluating the financial condition of the insurer, the office
18 may consider: (1) the insurer's audited financial statements
19 and whether the statements provide unqualified opinions or
20 contain significant qualifications or "subject to" provisions;
21 (2) any independent or other actuarial certification of loss
22 reserves; (3) whether workers' compensation and employer's
23 liability reserves are above the midpoint or best estimate of
24 the actuary's reserve range estimate; (4) the adequacy of the
25 proposed rate; (5) historical experience demonstrating the
26 profitability of the insurer; (6) the existence of excess or
27 other reinsurance that contains a sufficiently low attachment
28 point and maximums that provide adequate protection to the
29 insurer; and (7) other factors considered relevant to the
30 financial condition of the insurer by the office. The office
31 shall approve the deviation if it finds it to be justified, it
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1 would not endanger the financial condition of the insurer, it
2 would not adversely affect the current market conditions
3 including the composition of the market, the stability of
4 rates, and the level of competition in the market, and it that
5 the deviation would not constitute predatory pricing. The
6 office It shall disapprove the deviation if it finds that the
7 resulting premiums would be excessive, inadequate, or unfairly
8 discriminatory, would endanger the financial condition of the
9 insurer, or would adversely affect current market conditions
10 including the composition of the marketplace, the stability of
11 rates, and the level of competition in the market, or would
12 result in predatory pricing. The insurer may not use a
13 deviation unless the deviation is specifically approved by the
14 office.
15 (6) The office shall submit an annual report to the
16 President of the Senate and the Speaker of the House of
17 Representatives by January 1 of each year which evaluates
18 competition in the workers' compensation insurance market in
19 this state. The report must contain an analysis of the
20 availability and affordability of workers' compensation
21 coverage and whether the current market structure, conduct,
22 and performance are conducive to competition, based upon
23 economic analysis and tests. The purpose of this report is to
24 aid the Legislature in determining whether changes to the
25 workers' compensation rating laws are warranted. The report
26 must also document that the office has complied with the
27 provisions of s. 627.096 which require the office to
28 investigate and study all workers' compensation insurers in
29 the state and to study the data, statistics, schedules, or
30 other information as it finds necessary to assist in its
31 review of workers' compensation rate filings.
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1 Section 4. Paragraph (c) of subsection (5) of section
2 627.311, Florida Statutes, is amended to read:
3 627.311 Joint underwriters and joint reinsurers;
4 public records and public meetings exemptions.--
5 (5)
6 (c) The operation of the plan shall be governed by a
7 plan of operation that is prepared at the direction of the
8 board of governors. The plan of operation may be changed at
9 any time by the board of governors or upon request of the
10 office. The plan of operation and all changes thereto are
11 subject to the approval of the office. The plan of operation
12 shall:
13 1. Authorize the board to engage in the activities
14 necessary to implement this subsection, including, but not
15 limited to, borrowing money.
16 2. Develop criteria for eligibility for coverage by
17 the plan, including, but not limited to, documented rejection
18 by at least two insurers which reasonably assures that
19 insureds covered under the plan are unable to acquire coverage
20 in the voluntary market. Any insured may voluntarily elect to
21 accept coverage from an insurer for a premium equal to or
22 greater than the plan premium if the insurer writing the
23 coverage adheres to the provisions of s. 627.171.
24 3. Require notice from the agent to the insured at the
25 time of the application for coverage that the application is
26 for coverage with the plan and that coverage may be available
27 through an insurer, group self-insurers' fund, commercial
28 self-insurance fund, or assessable mutual insurer through
29 another agent at a lower cost.
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1 4. Establish programs to encourage insurers to provide
2 coverage to applicants of the plan in the voluntary market and
3 to insureds of the plan, including, but not limited to:
4 a. Establishing procedures for an insurer to use in
5 notifying the plan of the insurer's desire to provide coverage
6 to applicants to the plan or existing insureds of the plan and
7 in describing the types of risks in which the insurer is
8 interested. The description of the desired risks must be on a
9 form developed by the plan.
10 b. Developing forms and procedures that provide an
11 insurer with the information necessary to determine whether
12 the insurer wants to write particular applicants to the plan
13 or insureds of the plan.
14 c. Developing procedures for notice to the plan and
15 the applicant to the plan or insured of the plan that an
16 insurer will insure the applicant or the insured of the plan,
17 and notice of the cost of the coverage offered; and developing
18 procedures for the selection of an insuring entity by the
19 applicant or insured of the plan.
20 d. Provide for a market-assistance plan to assist in
21 the placement of employers. All applications for coverage in
22 the plan received 45 days before the effective date for
23 coverage shall be processed through the market-assistance
24 plan. A market-assistance plan specifically designed to serve
25 the needs of small, good policyholders as defined by the board
26 must be finalized by January 1, 1994.
27 5. Provide for policy and claims services to the
28 insureds of the plan of the nature and quality provided for
29 insureds in the voluntary market.
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1 6. Provide for the review of applications for coverage
2 with the plan for reasonableness and accuracy, using any
3 available historic information regarding the insured.
4 7. Provide for procedures for auditing insureds of the
5 plan which are based on reasonable business judgment and are
6 designed to maximize the likelihood that the plan will collect
7 the appropriate premiums.
8 8. Authorize the plan to terminate the coverage of and
9 refuse future coverage for any insured that submits a
10 fraudulent application to the plan or provides fraudulent or
11 grossly erroneous records to the plan or to any service
12 provider of the plan in conjunction with the activities of the
13 plan.
14 9. Establish service standards for agents who submit
15 business to the plan.
16 10. Establish criteria and procedures to prohibit any
17 agent who does not adhere to the established service standards
18 from placing business with the plan or receiving, directly or
19 indirectly, any commissions for business placed with the plan.
20 11. Provide for the establishment of reasonable safety
21 programs for all insureds in the plan. All insureds of the
22 plan must participate in the safety program.
23 12. Authorize the plan to terminate the coverage of
24 and refuse future coverage to any insured who fails to pay
25 premiums or surcharges when due; who, at the time of
26 application, is delinquent in payments of workers'
27 compensation or employer's liability insurance premiums or
28 surcharges owed to an insurer, group self-insurers' fund,
29 commercial self-insurance fund, or assessable mutual insurer
30 licensed to write such coverage in this state; or who refuses
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1 to substantially comply with any safety programs recommended
2 by the plan.
3 13. Authorize the board of governors to provide the
4 services required by the plan through staff employed by the
5 plan, through reasonably compensated service providers who
6 contract with the plan to provide services as specified by the
7 board of governors, or through a combination of employees and
8 service providers.
9 14. Provide for service standards for service
10 providers, methods of determining adherence to those service
11 standards, incentives and disincentives for service, and
12 procedures for terminating contracts for service providers
13 that fail to adhere to service standards.
14 15. Provide procedures for selecting service providers
15 and standards for qualification as a service provider that
16 reasonably assure that any service provider selected will
17 continue to operate as an ongoing concern and is capable of
18 providing the specified services in the manner required.
19 16. Provide for reasonable accounting and
20 data-reporting practices.
21 17. Provide for annual review of costs associated with
22 the administration and servicing of the policies issued by the
23 plan to determine alternatives by which costs can be reduced.
24 18. Authorize the acquisition of such excess insurance
25 or reinsurance as is consistent with the purposes of the plan.
26 19. Provide for an annual report to the office on a
27 date specified by the office and containing such information
28 as the office reasonably requires.
29 20. Establish multiple rating plans for various
30 classifications of risk which reflect risk of loss, hazard
31 grade, actual losses, size of premium, and compliance with
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1 loss control. At least one of such plans must be a
2 preferred-rating plan to accommodate small-premium
3 policyholders with good experience as defined in
4 sub-subparagraph 22.a.
5 21. Establish agent commission schedules.
6 22. Establish four subplans as follows:
7 a. Subplan "A" must include those insureds whose
8 annual premium does not exceed $2,500 and who have neither
9 incurred any lost-time claims nor incurred medical-only claims
10 exceeding 50 percent of their premium for the immediate 2
11 years.
12 b. Subplan "B" must include insureds that are
13 employers identified by the board of governors as high-risk
14 employers due solely to the nature of the operations being
15 performed by those insureds and for whom no market exists in
16 the voluntary market, and whose experience modifications are
17 less than 1.00.
18 c. Subplan "C" must include all insureds within the
19 plan that are not eligible for subplan "A," subplan "B," or
20 subplan "D."
21 d. Subplan "D" must include any employer, regardless
22 of the length of time for which it has conducted business
23 operations, which has an experience modification factor of
24 1.10 or less and either employs 15 or fewer employees or is an
25 organization that is exempt from federal income tax pursuant
26 to s. 501(c)(3) of the Internal Revenue Code and receives more
27 than 50 percent of its funding from gifts, grants, endowments,
28 or federal or state contracts. The rate plan for subplan "D"
29 shall be the same rate plan as the plan approved under ss.
30 627.091-627.151, and each participant in subplan "D" shall pay
31 the premium determined under such rate plan, plus a surcharge
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1 determined by the board to be sufficient to ensure that the
2 plan does not compete with the voluntary market rate for any
3 participant, but not to exceed 25 percent. However, the
4 surcharge shall not exceed 10 percent for an organization that
5 is exempt from federal income tax pursuant to s. 501(c)(3) of
6 the Internal Revenue Code.
7 23. Provide for a depopulation program to reduce the
8 number of insureds in subplan "D." If an employer insured
9 through subplan "D" is offered coverage from a voluntary
10 market carrier:
11 a. During the first 30 days of coverage under the
12 subplan;
13 b. Before a policy is issued under the subplan;
14 c. By issuance of a policy upon expiration or
15 cancellation of the policy under the subplan; or
16 d. By assumption of the subplan's obligation with
17 respect to an in-force policy,
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19 that employer is no longer eligible for coverage through the
20 plan. The premium for risks assumed by the voluntary market
21 carrier must be the same premium plus, for the first 2 years,
22 the surcharge as determined in sub-subparagraph 22.d. A
23 premium under this subparagraph, including surcharge, is
24 deemed approved and is not an excess premium for purposes of
25 s. 627.171.
26 24. Require that policies issued under subplan "D" and
27 applications for such policies must include a notice that the
28 policy issued under subplan "D" could be replaced by a policy
29 issued from a voluntary market carrier and that, if an offer
30 of coverage is obtained from a voluntary market carrier, the
31 policyholder is no longer eligible for coverage through
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1 subplan "D." The notice must also specify that acceptance of
2 coverage under subplan "D" creates a conclusive presumption
3 that the applicant or policyholder is aware of this potential.
4 Section 5. This act shall take effect July 1, 2004.
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6 STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
COMMITTEE SUBSTITUTE FOR
7 Senate Bill 1926
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9 Makes a conforming change to s. s. 627.311, F.S., by deleting
the provision of current law that allows premiums for risks
10 assumed by a carrier from the Florida Workers' Compensation
Joint Underwriting Association (JUA) to be at the JUA rate and
11 not be considered an excess premium for purposes of s.
6217.171, since broader authority is provided by the bill in
12 Section 2.
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