Fla. Sets Unique Insurance Regulation Plan

By Daniel Hays

NU Online News Service, May 7, 11:22 a.m.EST?Insurance trade group representatives said they expectRepublican Gov. Jeb Bush of Florida to shortly sign a measure thatwill give the state an unusual format for insurance regulation nextyear.

The bill's provisions, which would take effect Jan. 7, 2003,were given final approval Friday by the state Senate. A compromisemeasure, it divides the current department's functions between anelected chief financial officer and agovernor-and-cabinet-appointed director.

"They sort of split the baby," said Jim Taylor southeasternregional manager for the National Association of Independentinsurers.

Trade groups responded favorably to the portion of the bill,which gives rate regulation to an appointed official.

Florida's insurance reorganization was drawn up in response tovoters' 1998 approval of a constitutional change cutting the numberof cabinet officers from six to three.

Without spelling out his duties, the amendment created a chieffinancial officer, due to be elected this November. The bill thatwas approved spells out that he will have some insurance functionswithin his Department of Financial Services.

Under the bill that passed, however, rulemaking and rateapprovals, is placed in the hands of an insurance director, whowill be appointed by the governor and cabinet.

The CFO retains responsibilities for agent licensing,administration of the workers' compensation system, consumerservices and insurance fraud. The CFO will also supervise statefire marshals.

Sam Miller spokesman for the Florida Insurance Council saidcompromise legislation was hammered out by Governor Bush,legislative leaders, Insurance Commissioner Tom Gallagher andComptroller Robert Milligan.

Mr. Miller said the issue was deadlocked for quite some timebecause Mr. Gallagher, who is a leading candidate for CFO, hadsought to bring all the insurance functions within that office andwhile the Senate supported him the House thought otherwise.

The compromise bill was applauded by the Washington-basedAmerican Insurance Association.

"Approval of the Cabinet reorganization plan, giving keyresponsibilities to an appointed official, is a positivedevelopment for the insurance regulatory environment in Florida,"said Cecil D. "Dick" Dorsey, AIA vice president, southeastregion.

"AIA's experience in other states has convinced us that with anappointed regulator, regulation is more likely to be fair,consistent and predictable. Appointed regulators are more likely todeal with issues promptly and in a straightforward manner, whichbenefits both policyholders and insurers," said Mr. Dorsey.

AIA noted the Florida split regulatory scheme would leave only11 other states with elected insurance commissioners.

In addition to an appointed director for the Office of InsuranceRegulation, there will be a second appointed director to regulatethe banking and securities industries under the Office of FinancialInstitutions and Securities Regulation.

Once the governor receives the bill he will have 15 days tostudy it.

Under the bill, regulation of the residual market will be split.The CFO will appoint its board and staff, but the appointeddirector will establish its rates and its forms.

Mr. Miller noted with approval that requirements for theinsurance director list a minimum of five years of private sectorexperience or five years with a state or federal agency thatregulates insurance.

He said he expected transition activity on the reorganizationwill begin as soon as the bill is signed.