Senate Bill sb2004

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    Florida Senate - 2007                                  SB 2004

    By Senator Fasano





    11-1178A-07

  1                      A bill to be entitled

  2         An act relating to title insurance; amending s.

  3         627.777, F.S.; requiring title insurers to make

  4         annual filings regarding premium rates;

  5         requiring the Office of Insurance Regulation to

  6         review the rate filings in order to determine

  7         if a rate is excessive, inadequate, or unfairly

  8         discriminatory based upon certain standards;

  9         requiring the office to consider certain

10         factors when reviewing a rate filing;

11         authorizing the office to require an insurer to

12         provide certain information to the office at

13         the insurer's expense as part of the rate

14         review; authorizing the office to review a rate

15         at any time; requiring the office to follow

16         certain procedures when approving or

17         disapproving rates; requiring the office to

18         order the return of excess premium to

19         policyholders in the form of a credit or

20         refund; providing requirements regarding the

21         contents of rate filings; defining the term

22         "actuary"; providing exemptions to filing

23         deadlines; authorizing the office to enforce

24         specific penalties if an insurer fails to

25         timely make a rate filing; requiring that title

26         insurers, agencies, and agents make an annual

27         filing of certain statistical data before a

28         specified deadline; authorizing the Financial

29         Services Commission to adopt rules; amending s.

30         627.780, F.S.; prohibiting a person from

31         knowingly quoting, charging, accepting,

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    Florida Senate - 2007                                  SB 2004
    11-1178A-07




 1         collecting, or receiving a premium for title

 2         insurance unless the premium is approved by the

 3         office; repealing s. 627.782, F.S., relating to

 4         the adoption of rates by the Financial Services

 5         Commission; repealing s. 627.783, F.S.,

 6         relating to provisions authorizing a deviation

 7         from an adopted premium upon approval by the

 8         office; providing an effective date.

 9  

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

11  

12         Section 1.  Section 627.777, Florida Statutes, is

13  amended to read:

14         627.777  Filing; approval of forms.--

15         (1)  A title insurer may not issue or agree to issue

16  any form of title insurance commitment, title insurance

17  policy, other contract of title insurance, or related form

18  until it is filed with and approved by the office.  The office

19  may not disapprove a title guarantee or policy form on the

20  ground that it has on it a blank form for an attorney's

21  opinion on the title.

22         (2)  Each title insurer shall make an annual filing

23  with the office no later than 12 months after its previous

24  filing, demonstrating that the rate is actuarially sound.

25  Rates for the required filing must include the charges for

26  primary title services and related title services as defined

27  in s. 627.7711.

28         (a)  Upon receiving a rate filing, the office shall

29  review the rate filing to determine if the rate is excessive,

30  inadequate, or unfairly discriminatory. In making that

31  determination, the office shall, in accordance with generally

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    Florida Senate - 2007                                  SB 2004
    11-1178A-07




 1  accepted and reasonable actuarial principles and techniques,

 2  consider the following factors:

 3         1.  Past and prospective loss experience within and

 4  without this state.

 5         2.  Each title insurer's loss experience and

 6  prospective loss experience under closing protection letters

 7  and policy liabilities.

 8         3.  A reasonable margin for underwriting profit and

 9  contingencies, including contingent liability under s.

10  627.7865, sufficient to allow title insurers, agents, and

11  agencies to earn a rate of return on their capital which will

12  attract and retain adequate capital investment in the title

13  insurance business and maintain an efficient title insurance

14  delivery system.

15         4.  Past expenses and prospective expenses for

16  administration and handling of risks.

17         5.  Liability for defalcation.

18         6.  The degree of competition among insurers for the

19  risk insured.

20         7.  Investment income reasonably expected by the

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

22  from investable premiums anticipated in the filing, plus any

23  other expected income from currently invested assets

24  representing the amount expected on unearned premium reserves

25  and loss reserves. The commission may adopt rules using

26  reasonable techniques of actuarial science and economics to

27  specify the manner in which insurers must calculate investment

28  income attributable to such classes of insurance written in

29  this state and the manner in which such investment income must

30  be used in the calculation of insurance rates. The manner of

31  calculation shall contemplate allowances for an underwriting

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    Florida Senate - 2007                                  SB 2004
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 1  profit factor and investment income that produce a reasonable

 2  rate of return; however, investment income from invested

 3  surplus must not be considered.

 4         8.  The reasonableness of the judgment reflected in the

 5  filing.

 6         9.  Dividends, savings, or unabsorbed premium deposits

 7  allowed or returned to Florida policyholders, members, or

 8  subscribers.

 9         10.  The adequacy of loss reserves.

10         11.  The cost of reinsurance.

11         12.  Trend factors, including trends in actual losses

12  per insured unit for the insurer making the filing.

13         13.  Other relevant factors that affect the frequency

14  or severity of claims or upon expenses.

15         (b)  After consideration of the rate factors provided

16  in paragraph (a), a rate may be found by the office to be

17  excessive, inadequate, or unfairly discriminatory based upon

18  the following standards:

19         1.  Rates shall be deemed excessive if they are likely

20  to produce a profit from Florida business which is

21  unreasonably high in relation to the risk involved in the

22  class of business or if expenses are unreasonably high in

23  relation to services rendered.

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

25  things, the rate structure established by a stock insurance

26  company provides for replenishment of surpluses from premiums,

27  when the replenishment is necessitated by investment losses.

28         3.  Rates shall be deemed inadequate if the rates and

29  the investment income attributable to them are clearly

30  insufficient to sustain projected losses and expenses in the

31  class of business to which they apply.

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    Florida Senate - 2007                                  SB 2004
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 1         4.  A rate shall be deemed inadequate as to the premium

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

 3  that exceed a reasonable reflection of expense savings and

 4  reasonably expected loss experience from the risk or group of

 5  risks are allowed.

 6         5.  A rate shall be deemed unfairly discriminatory as

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

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

 9  bear a reasonable relationship to the expected loss and

10  expense experience among the various risks.

11         (c)  In reviewing a rate filing, the office may require

12  the insurer to provide at the insurer's expense all

13  information necessary to evaluate the condition of the company

14  and the reasonableness of the filing according to the criteria

15  enumerated in this section.

16         (d)  The office may at any time review a rate, rating

17  schedule, rating manual, or rate change; the pertinent records

18  of the insurer; and market conditions. If the office finds on

19  a preliminary basis that a rate may be excessive, inadequate,

20  or unfairly discriminatory, the office shall initiate

21  proceedings to disapprove the rate and shall notify the

22  insurer. However, the office may not disapprove as excessive

23  any rate for which it has given final approval or which has

24  been deemed approved for a period of 1 year after the

25  effective date of the filing unless the office finds that a

26  material misrepresentation or material error was made by the

27  insurer or was contained in the filing. Upon being notified,

28  the insurer shall, within 60 days, file with the office all

29  information that, in the belief of the insurer, proves the

30  reasonableness, adequacy, and fairness of the rate or rate

31  change. The office shall issue a notice of intent to approve

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    Florida Senate - 2007                                  SB 2004
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 1  or a notice of intent to disapprove pursuant to the procedures

 2  of paragraph (a) within 90 days after receipt of the insurer's

 3  initial response. In such instances and in any administrative

 4  proceeding relating to the legality of the rate, the insurer

 5  or rating organization has the burden of proof to show by a

 6  preponderance of the evidence that the rate is not excessive,

 7  inadequate, or unfairly discriminatory. After the office

 8  notifies an insurer that a rate may be excessive, inadequate,

 9  or unfairly discriminatory, unless the office withdraws the

10  notification, the insurer may not alter the rate except to

11  conform with the office's notice until the earlier of 120 days

12  after the date the notification was provided or 180 days after

13  the date of the implementation of the rate. The office may,

14  subject to chapter 120, disapprove without the required 60-day

15  notification any rate increase filed by an insurer within the

16  prohibited time period or during the time that the legality of

17  the increased rate is being contested.

18         (e)  If the office finds that a rate or rate change is

19  excessive, inadequate, or unfairly discriminatory, the office

20  shall issue an order of disapproval specifying that a new rate

21  or rate schedule that responds to the findings of the office

22  be filed by the insurer. The office shall further order that

23  premiums charged to each policyholder constituting the portion

24  of the rate above that which was actuarially justified be

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

26  refund. If the office finds that a insurer's rate or rate

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

28  the office in response to such a finding applies only to new

29  or renewal business of the insurer written on or after the

30  effective date of the responsive filing.

31  

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    Florida Senate - 2007                                  SB 2004
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 1         (f)  When submitting a rate filing, the chief executive

 2  officer or the chief financial officer of the title insurer

 3  and the chief actuary of the title insurer must certify the

 4  following information on a form approved by the commission,

 5  under oath and subject to penalty of perjury:

 6         1.  The signing officer and actuary have reviewed the

 7  rate filing;

 8         2.  Based on the knowledge of the signing officer and

 9  actuary, the rate filing does not contain any untrue statement

10  of a material fact or omit a material fact necessary to make

11  the statements not misleading, in light of the circumstances

12  under which such statements were made;

13         3.  Based on the knowledge of the signing officer and

14  actuary, the information and other factors described in this

15  section, including, but not limited to, investment income,

16  fairly present the basis of the rate filing in all material

17  respects for the periods presented in the filing; and

18         4.  Based on the knowledge of the signing officer and

19  actuary, the rate filing reflects all premium savings that are

20  reasonably expected to result from legislative enactments and

21  are in accordance with generally accepted and reasonable

22  actuarial techniques.

23  

24  A signing officer or actuary who knowingly makes a false

25  certification under this subsection commits a violation of s.

26  626.9541(1)(e) and is subject to the penalties prescribed in

27  s. 626.9521. Failure to provide such certification by the

28  officer and actuary shall result in the rate filing being

29  disapproved without prejudice. Under such circumstances, the

30  insurer or rating organization may refile its rate filing with

31  the required certification. As used in this paragraph, the

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 1  term, "actuary" means an individual who is a member of the

 2  Society of Actuaries or the American Academy of Actuaries.

 3         (g)  If, at the time a filing is required under this

 4  section, an insurer is in the process of completing a rate

 5  review, the insurer may apply to the office for an extension

 6  of up to an additional 30 days to make the filing. The request

 7  for an extension must be received by the office no later than

 8  the date the filing is due.

 9         (h)  After receiving a request to be exempted from the

10  provisions of this section before the filing is due, the

11  office may, due to insignificant numbers of policies in force

12  or insignificant premium volume, exempt a company from filing

13  rates or rate certification as required by this section.

14         (i)  If an insurer fails to meet the filing

15  requirements of this subsection and does not submit the filing

16  within 60 days following the date on which the filing is due,

17  the office may, in addition to any other penalty authorized by

18  law, order the insurer to discontinue the issuance of policies

19  for which the required filing was not made until such time

20  that the office determines that the required filing has been

21  submitted properly.

22         (3)  Each title insurer, agency, and agent shall make

23  an annual filing of statistical data for related title

24  services as defined in s. 627.7711 with the office no later

25  than 12 months after its previous filing. The commission may,

26  by rule, require title insurers, agencies, or agents under

27  this part to annually submit statistical information,

28  including loss and expense data, as the office determines to

29  be necessary to analyze premium rates, retention rates, and

30  the condition of the title insurance industry.

31  

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    Florida Senate - 2007                                  SB 2004
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 1         (4)  The commission may establish procedures for the

 2  required filings by rule.

 3         Section 2.  Subsection (1) of section 627.780, Florida

 4  Statutes, is amended to read:

 5         627.780  Illegal dealings in risk premium.--

 6         (1)  A person may not knowingly quote, charge, accept,

 7  collect, or receive a premium for title insurance other than

 8  the premium approved by the office adopted by the commission.

 9         Section 3.  Section 627.782, Florida Statutes, is

10  repealed.

11         Section 4.  Section 627.783, Florida Statutes, is

12  repealed.

13         Section 5.  This act shall take effect January 1, 2008.

14  

15            *****************************************

16                          SENATE SUMMARY

17    Requires title insurers to make annual filings regarding
      premium rates. Requires the Office of Insurance
18    Regulation to review the rate filings to determine if a
      rate is excessive, inadequate, or unfairly discriminatory
19    based upon certain standards. Requires the office to
      consider certain factors when reviewing a rate filing.
20    Authorizes the office to require an insurer to provide
      certain information to the office at the insurer's
21    expense as part of the rate review. Authorizes the office
      to review a rate at any time. Requires the office to
22    follow certain procedures when approving or disapproving
      rates. Requires the office to order the return of excess
23    premium to policyholders in the form of a credit or
      refund. Provides requirements regarding the contents of
24    rate filings. Provides definitions. Provides exemptions
      to filing deadlines. Authorizes the office to enforce
25    specific penalties if an insurer fails to timely make a
      rate filing. Requires title insurers, agencies, and
26    agents to make an annual filing of certain statistical
      data before a specified deadline. Authorizes the
27    Financial Services Commission to adopt rules. Provides
      that a person may not knowingly quote, charge, accept,
28    collect, or receive a premium for title insurance unless
      the premium is approved by the office. Repeals s.
29    627.782, F.S., which provides for adoption of rates.
      Repeals s. 627.783, F.S., which provides for deviation
30    from the adopted premium upon approval of the office.

31  

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