Florida Senate - 2007 COMMITTEE AMENDMENT
Bill No. SB 4-A
Barcode 650864
CHAMBER ACTION
Senate House
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1 Comm: FAV .
01/17/2007 11:09 AM .
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3 Floor: 7/AD/2R .
01/17/2007 02:29 PM .
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11 The Committee on Banking and Insurance (Deutch) recommended
12 the following amendment:
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14 Senate Amendment (with title amendment)
15 On page 91, line 11,through
16 page 97, line 15, delete those lines
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18 and insert:
19 Section 20. Section 627.062, Florida Statutes, is
20 amended to read:
21 627.062 Rate standards.--
22 (1) The rates for all classes of insurance to which
23 the provisions of this part are applicable shall not be
24 excessive, inadequate, or unfairly discriminatory.
25 (2) As to all such classes of insurance:
26 (a) Insurers or rating organizations shall establish
27 and use rates, rating schedules, or rating manuals to allow
28 the insurer a reasonable rate of return on such classes of
29 insurance written in this state. A copy of rates, rating
30 schedules, rating manuals, premium credits or discount
31 schedules, and surcharge schedules, and changes thereto, shall
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Florida Senate - 2007 COMMITTEE AMENDMENT
Bill No. SB 4-A
Barcode 650864
1 be filed with the office 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 may not be is not
5 implemented during the office'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 office
8 shall finalize its review by issuance of a notice of intent to
9 approve or a notice of intent to disapprove within 90 days
10 after receipt of the filing. The notice of intent to approve
11 and the notice of intent to disapprove constitute agency
12 action for purposes of the Administrative Procedure Act.
13 Requests for supporting information, requests for mathematical
14 or mechanical corrections, or notification to the insurer by
15 the office of its preliminary findings shall not toll the
16 90-day period during any such proceedings and subsequent
17 judicial review. The rate shall be deemed approved if the
18 office does not issue a notice of intent to approve or a
19 notice of intent to disapprove within 90 days after receipt of
20 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 office 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 office 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 - 2007 COMMITTEE AMENDMENT
Bill No. SB 4-A
Barcode 650864
1 determination, the office shall, in accordance with generally
2 accepted and reasonable actuarial techniques, consider the
3 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 commission may adopt rules utilizing
15 reasonable techniques of actuarial science and economics to
16 specify the manner in which insurers shall calculate
17 investment income attributable to such classes of insurance
18 written in this state and the manner in which such investment
19 income shall be used in the calculation of insurance rates.
20 Such manner shall contemplate allowances for an underwriting
21 profit factor and full consideration of investment income
22 which produce a reasonable rate of return; however, investment
23 income from invested surplus shall not be considered.
24 5. The reasonableness of the judgment reflected in the
25 filing.
26 6. Dividends, savings, or unabsorbed premium deposits
27 allowed or returned to Florida policyholders, members, or
28 subscribers.
29 7. The adequacy of loss reserves.
30 8. The cost of reinsurance.
31 9. Trend factors, including trends in actual losses
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Florida Senate - 2007 COMMITTEE AMENDMENT
Bill No. SB 4-A
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1 per insured unit for the insurer making the filing.
2 10. Conflagration and catastrophe hazards, if
3 applicable.
4 11. A reasonable margin for underwriting profit and
5 contingencies. For that portion of the rate covering the risk
6 of hurricanes and other catastrophic losses for which the
7 insurer has not purchased reinsurance and has exposed its
8 capital and surplus to such risk, the office must approve a
9 rating factor that provides the insurer a reasonable rate of
10 return that is commensurate with such risk.
11 12. The cost of medical services, if applicable.
12 13. Other relevant factors which impact upon the
13 frequency or severity of claims or upon expenses.
14 (c) In the case of fire insurance rates, consideration
15 shall be given to the availability of water supplies and the
16 experience of the fire insurance business during a period of
17 not less than the most recent 5-year period for which such
18 experience is available.
19 (d) If conflagration or catastrophe hazards are given
20 consideration by an insurer in its rates or rating plan,
21 including surcharges and discounts, the insurer shall
22 establish a reserve for that portion of the premium allocated
23 to such hazard and shall maintain the premium in a catastrophe
24 reserve. Any removal of such premiums from the reserve for
25 purposes other than paying claims associated with a
26 catastrophe or purchasing reinsurance for catastrophes shall
27 be subject to approval of the office. Any ceding commission
28 received by an insurer purchasing reinsurance for catastrophes
29 shall be placed in the catastrophe reserve.
30 (e) After consideration of the rate factors provided
31 in paragraphs (b), (c), and (d), a rate may be found by the
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Florida Senate - 2007 COMMITTEE AMENDMENT
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1 office to be excessive, inadequate, or unfairly discriminatory
2 based upon the following standards:
3 1. Rates shall be deemed excessive if they are likely
4 to produce a profit from Florida business that is unreasonably
5 high in relation to the risk involved in the class of business
6 or if expenses are unreasonably high in relation to services
7 rendered.
8 2. Rates shall be deemed excessive if, among other
9 things, the rate structure established by a stock insurance
10 company provides for replenishment of surpluses from premiums,
11 when the replenishment is attributable to investment losses.
12 3. Rates shall be deemed inadequate if they are
13 clearly insufficient, together with the investment income
14 attributable to them, to sustain projected losses and expenses
15 in the class of business to which they apply.
16 4. A rating plan, including discounts, credits, or
17 surcharges, shall be deemed unfairly discriminatory if it
18 fails to clearly and equitably reflect consideration of the
19 policyholder's participation in a risk management program
20 adopted pursuant to s. 627.0625.
21 5. A rate shall be deemed inadequate as to the premium
22 charged to a risk or group of risks if discounts or credits
23 are allowed which exceed a reasonable reflection of expense
24 savings and reasonably expected loss experience from the risk
25 or group of risks.
26 6. A rate shall be deemed unfairly discriminatory as
27 to a risk or group of risks if the application of premium
28 discounts, credits, or surcharges among such risks does not
29 bear a reasonable relationship to the expected loss and
30 expense experience among the various risks.
31 (f) In reviewing a rate filing, the office may require
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1 the insurer to provide at the insurer's expense all
2 information necessary to evaluate the condition of the company
3 and the reasonableness of the filing according to the criteria
4 enumerated in this section.
5 (g) The office may at any time review a rate, rating
6 schedule, rating manual, or rate change; the pertinent records
7 of the insurer; and market conditions. If the office finds on
8 a preliminary basis that a rate may be excessive, inadequate,
9 or unfairly discriminatory, the office shall initiate
10 proceedings to disapprove the rate and shall so notify the
11 insurer. However, the office may not disapprove as excessive
12 any rate for which it has given final approval or which has
13 been deemed approved for a period of 1 year after the
14 effective date of the filing unless the office finds that a
15 material misrepresentation or material error was made by the
16 insurer or was contained in the filing. Upon being so
17 notified, the insurer or rating organization shall, within 60
18 days, file with the office all information which, in the
19 belief of the insurer or organization, proves the
20 reasonableness, adequacy, and fairness of the rate or rate
21 change. The office shall issue a notice of intent to approve
22 or a notice of intent to disapprove pursuant to the procedures
23 of paragraph (a) within 90 days after receipt of the insurer's
24 initial response. In such instances and in any administrative
25 proceeding relating to the legality of the rate, the insurer
26 or rating organization shall carry the burden of proof by a
27 preponderance of the evidence to show that the rate is not
28 excessive, inadequate, or unfairly discriminatory. After the
29 office notifies an insurer that a rate may be excessive,
30 inadequate, or unfairly discriminatory, unless the office
31 withdraws the notification, the insurer shall not alter the
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Florida Senate - 2007 COMMITTEE AMENDMENT
Bill No. SB 4-A
Barcode 650864
1 rate except to conform with the office's notice until the
2 earlier of 120 days after the date the notification was
3 provided or 180 days after the date of the implementation of
4 the rate. The office may, subject to chapter 120, disapprove
5 without the 60-day notification any rate increase filed by an
6 insurer within the prohibited time period or during the time
7 that the legality of the increased rate is being contested.
8 (h) In the event the office finds that a rate or rate
9 change is excessive, inadequate, or unfairly discriminatory,
10 the office shall issue an order of disapproval specifying that
11 a new rate or rate schedule which responds to the findings of
12 the office be filed by the insurer. The office shall further
13 order, for any "use and file" filing made in accordance with
14 subparagraph (a)2., that premiums charged each policyholder
15 constituting the portion of the rate above that which was
16 actuarially justified be returned to such policyholder in the
17 form of a credit or refund. If the office finds that an
18 insurer's rate or rate change is inadequate, the new rate or
19 rate schedule filed with the office in response to such a
20 finding shall be applicable only to new or renewal business of
21 the insurer written on or after the effective date of the
22 responsive filing.
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25 ================ T I T L E A M E N D M E N T ===============
26 And the title is amended as follows:
27 On page 6, line 7, after the second semicolon,
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29 insert:
30 deleting provisions allowing property and
31 casualty insurers to use and file rates;
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