NU Online News Service, May 3, 3:17 p.m. EDT
Insurance groups are praising the Florida Legislature's passage of a commercial-lines rate-deregulation bill and are indicating that they may push to expand such a regulatory structure to personal lines in the future.
The bill, HB99, passed unanimously in the House and with one vote against in the Senate. It now goes to the governor.
It expands upon legislation passed last year that exempted certain sophisticated commercial lines from the rate filing and approval process. Lines exempted in last year's bill included excess or umbrella; surety and fidelity; boiler and machinery and leakage and fire-extinguishing equipment; errors and omissions; directors and officers; employment-practices and management liability; intellectual property and patent-infringement liability; advertising-injury and Internet-liability insurance; and property risks rated under a highly protected risks rating plan.
The current bill adds commercial property, excess property and general liability. It also includes commercial-auto risks with fleets under 20 vehicles. Fleets with over 20 vehicles were included in last year's bill.
Gerald Wester, Florida counsel for the American Insurance Association (AIA), says the state has historically been difficult with respect to regulation. He says Charlie Crist, the previous governor, had a "strong bias" against easing regulations on insurance companies, and he adds that the state in general had taken an approach of heavy regulation in previous years.
Wester says the deregulation bill passed last year was "fairly modest" but significant in that it built the deregulation structure into current law and helped pave the way for this year's bill. Because deregulation was already on the books from the previous year, Wester says it allowed the industry to approach legislators and say, "We're expanding current law."
Dave Snyder, vice president and associate general counsel for AIA, says HB99 will modernize the regulatory system in Florida and make it more efficient, but he notes that it does not eliminate the role for regulation. Companies will still have to comply with statutory standards, and a process is in place for regulators to enforce those standards.
Wester notes that to comply with state laws, rates cannot be excessive, inadequate or unfairly discriminatory.
He says he believes the new commercial-lines regulatory structure will drive more competition. He adds that companies may not be as reluctant to reduce rates, pointing out that the current approval process is "so difficult."
He says if the industry can demonstrate that the new structure works for commercial lines, insurer groups may try to push for a similar structure for personal lines in the future.
Liz Reynolds, state-affairs manager, Southeast region for the National Association of Mutual Insurance Companies (NAMIC), echoes that sentiment in a statement: "Florida lawmakers understand that rate modernization can and does work to regulate rates in an open marketplace for commercial insurance. Perhaps they soon will transfer that thinking to personal lines."
She adds, "A bill to implement flex rating for homeowners property was introduced this session, but it fell by the wayside early on. NAMIC will continue to promote risk-based pricing, actuarially sound rates and loss mitigation as the core of any solutions in markets troubled by catastrophe threats."
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