Kevin McCarty began his career in public service in 1988 when he joined the Florida Department of Labor & Employment Security, quickly becoming an expert on workers' compensation issues. In 1991, he moved to the Department of Insurance, and in 2003 became the first appointed commissioner of the newly formed Office of Insurance Regulation. McCarty received his law degree in 1986 and his undergraduate degree in political science in 1982 from the University of Florida. He recently responded to a number of questions from Florida Underwriter about insurance matters, both state and national.
Q. Over the past few years it has seemed like open season on insurance companies from some Florida officials. Is there anything on the horizon that will signal to carriers that Florida is willing to work harder to find middle ground, or at least not work so hard to make insurance companies the fall guys?
A. The majority of insurers comply with the laws of this state and we work very well together. However, those companies that do not comply with the law — for example, those that refuse to turn over subpoenaed documents or submit rate filings that do not indicate an actual rate need — may feel the brunt of our enforcement authority. Keep in mind that the Office of Insurance Regulation (OIR) has licensed almost 40 new residential and commercial property writers in Florida since January 2006. That follows the eight back-to-back hurricanes of 2004 and 2005 — hardly evidence of an "open season" on insurance companies.
Q. Critics have said that the regulatory environment in Florida is unduly burdensome. If you were an insurance company executive today, how would you rate Florida as a place to transact business for homeowners, health care and commercial property coverages? Is there anything your office can do to make the regulatory process more efficient while maintaining necessary controls and safeguards?
A. "Unduly burdensome" is a relative phrase. Do the critics mean they would like insurers to receive less oversight of rates and finances in Florida? If so, I do not subscribe to the "lowest common denominator" theory of regulation. I am charged with protecting the insurance consumers of this state by carrying out the laws passed by our Legislature. Florida has rigorous licensing requirements for all lines of insurance, which were written to protect consumers. The benefit to companies is that once licensed in Florida, they have little trouble getting licensed in many other states.
Q. What's the latest on State Farm? Can you comment on the homeowners' market in general and how expected rate increases in Citizens Property Insurance Corp. will affect costs in the voluntary market?
A. I cannot comment on the State Farm matter at this time, as OIR is still engaged in legal and administrative proceedings with the company. Whether or not Citizens' rates will rise will depend upon what the Legislature and governor decide during our current legislative session.
Q. When you presented your legislative priorities to the Cabinet in March, you listed the banning of credit scoring in determining insurance premiums as a top issue. You noted that your office also supports legislation dealing with title insurance rates, stranger-originated life insurance, and wind-only coverage for homes in Citizens. Your list did not include any recommendations on whether other changes should be made to Citizens or whether the size of the Florida Hurricane Catastrophe Fund should be scaled back. Why not?
A. As much as OIR has an interest in ensuring that Citizens and the Cat Fund can pay claims if necessary, it was not appropriate for us to submit such an item as one of our legislative priorities, simply because the OIR does not directly oversee their business operations.
Although current law states I must sign off on Citizens' plan of operation and review its rate filings, the corporation operates subject to the supervision and approval of a board of governors consisting of eight individuals who are appointed by the governor, the chief financial officer, the president of the Senate, and the speaker of the House of Representatives.
The Cat Fund reports to the State Board of Administration, which is overseen by a three-member board of trustees: the governor, as chairman; the chief financial officer, as treasurer; and the attorney general, as secretary.
Q. Your official biography cites the Cover Florida Health Care Access Program as a major accomplishment of your office. But the plan has received scathing reviews for its limited coverage, and people have been slow to sign up. Do you think the program can and should be improved, and if so, how?
A. The Cover Florida program may not yet have a large number of enrollees, but the fact that it is available to help Florida's nearly four million uninsured individuals makes it a very significant accomplishment for our governor and everyone who has been involved in its development and implementation. Cover Florida is intended to provide limited benefits at a limited cost in the hope that it will draw more participants and in the long-term help to increase the overall health of Floridians by giving them access to health-care services that they otherwise would not receive.
Q. You have served as chairperson on several high-profile committees at the National Association of Insurance Commissioners (NAIC), where you have been an advocate of federally mandated and funded "cat reinsurance" plans. Do you think it is inevitable that all states will eventually share in subsidizing losses from natural disaster such as floods, hurricanes, earthquakes? If so, will it be in your lifetime?
A. First and foremost, any characterizations of any ideas I have regarding a national catastrophe plan as being a "subsidy program" are absolutely mistaken. It is important that we utilize the private sector to its fullest and that areas with catastrophic risk fund their risk. I do think, however, that a comprehensive plan for financing the cost of loss, a plan that is negotiated before a disaster, can go a long way to smooth the pricing and availability of this coverage. The only subsidized plan in the market is the NFIP, and I have been a vocal critic of that program for years; consider that Floridians have been, by a magnitude of size, the largest subsidizers of the program for the last 30 years. I am cautiously optimistic that we will see movement on a national catastrophe plan soon.
Q. Four years after Florida Underwriter began publishing, you began your public service career in Florida. You've held your current position as the first appointed insurance commissioner since 2003. Can you share your thoughts on significant regulatory changes over the past two decades and their importance to today's market?
A. I think there have been many significant regulatory changes in Florida in the past two decades. In health care, Florida's Small Employer Health Insurance Act provided important access to health insurance policies — on a guarantee issue basis — to the significant population of small businesses in our state. In workers' compensation, the significant reforms inaugurated in 2003 have meant meaningful rate reductions and premium cost savings for Florida's employers. In auto insurance, Florida's PIP insurance reforms have helped reduce insurance fraud and kept rates affordable. In financial oversight, obtaining and maintaining NAIC accreditation standards has served to provide important financial protection to our Florida policyholders, and Florida's pioneering creation of the technology that supports the multi-state form filing system has been an affirmation of Florida's regulatory leadership.
Finally, while your earlier questions implied that Florida has a "perception" problem with regulation of the state's property insurance market, I must remind you that Florida is the only state that has moved to finance catastrophic risk within the state. In the devastating and unprecedented storm series in 2004-2005, I would suggest that no other state could have "weathered" those storms without a rash of insurer insolvencies. The responsibility of our state in creating the Florida Hurricane Catastrophe Fund, in funding the development and evolution of a state hurricane model, and continuing to assure access to coverage for Florida's homeowners remains, I believe, one of the major success stories of the past two decades.
Q. Thoughts on the next 20-plus years?
A. If anyone says they can answer that question with any degree of certainty, they would be lying to you.
Q. Congratulations on being named Regulator of the Year by the Lexis/Nexis Insurance Law Center's Advisory Board for 2008. You also were recently elected secretary-treasurer for the NAIC. You are developing quite a national profile. Does this foretell any career changes for you?
A. I am honored by the recognition from the Advisory Board, and humbled by my NAIC colleagues' votes to be elected secretary-treasurer. I do not think these actions "foretell" anything, except that as long as I remain appointed as Florida's insurance commissioner, I will continue to fight to protect the insurance-buying public by carrying out the laws of this state.
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