Florida Cabinet Hears Updates on Personal Injury Protection Working Group Findings, Citizens Property Insurance Corporation Current Status; Appoints Florida Hurricane Catastrophe Fund Advisory Council Members
Nov 1, 2011
Today, November 1, 2011, the Florida Cabinet (Governor Rick Scott, Attorney General Pam Bondi, Chief Financial Officer Jeff Atwater, Agriculture Commissioner Adam Putnam) met in Tallahassee and discussed several insurance-related matters. The Cabinet members engaged in significant discussions regarding personal injury protection (“PIP”) insurance and Citizens Property Insurance Corporation (“Citizens”). The following is a brief summary of the actions and discussions that occurred during the three hour meeting.
Financial Services Commission – PIP and Citizens Presentations
CFO Atwater recognized Robin Westcott, Florida Insurance Consumer Advocate, for a presentation on Florida’s No-Fault Insurance System and an update on the findings and recommendations of the PIP Working Group. The Working Group completed a series of three hearings on October 10, 2011. During his opening comments, CFO Atwater stated that, while originally well-intended, the PIP system is in need of bold and significant change. He further noted consumers are “getting taken to the cleaners” as a result of the fraud and abuse. He also commented that reduced insurance rates should follow the bold changes.
Ms. Westcott provided a legislative history of the PIP system and discussed the findings of the Working Group. The PIP losses have significantly increased recently even though the number of drivers and automobile accidents has declined. For every $1 in PIP premiums collected, insurers are paying out $1.15. The system is unsustainable. Governor Scott jumped into the discussions, clearly recognizing the need for reform. He concluded the PIP system is a $900 million tax on Floridians. During the discussion, CFO Atwater called on the insurance industry to be more helpful with providing data, particularly in regards to attorney fee costs and the use of the attorney fee multiplier.
Scott Wallace, President of Citizens, gave an update on the current state of Citizens. Citizens insures over 1.4 million properties and has grown 43 percent in the last 21 months. Citizens generally insures older, lower priced homes. Mr. Wallace provided a summary of the Citizens’ assessment procedure in the event of a catastrophic event. First, they would assess only Citizens’ policyholders up to 15 percent. Next, they would assess all insurance policies (with limited exceptions) six percent for each account for a potential total of 18 percent. Finally, they would levy an emergency assessment on all insurance policies up 10 percent per policy per year. Today, a 1-in-100 year event would exhaust the first two assessment levels and trigger a 19 percent emergency assessment (10 percent in the first year and 9 percent in the second year).
Governor Scott expressed serious concerns that the plan is not workable in Florida. He noted many Floridians would not have the cash on hand to cover their assessments. He said one would never “organize your life” the way Citizens is presently structured. The current statutory framework encourages Citizens growth, and there are significant barriers to depopulation efforts. Governor Scott concluded that Citizens is vulnerable. As a result, he requested a presentation to the Cabinet at their meeting on December 6. He expects the Citizens Board to discuss real solutions that will reduce the size of Citizens and that they be prepared to make tough decisions. He also expects a solution to the problem by June 2012. Mr. Wallace noted the Citizens Board is committed to returning Citizens back to a market of last resort.
Florida Office of Insurance Regulation
The Cabinet, acting in the capacity of the Financial Services Commission, considered one item presented by Insurance Commissioner Kevin McCarty. The Commission approved an item recommended by the Florida Office of Insurance Regulation to accept the Technical Proposal received by Examinations Resources, LLC to perform a Workers’ Compensation Peer Review as annually required by the Florida Statutes.
State Board of Administration
The State Board of Administration (Governor, Attorney General, and Chief Financial Officer) also took action during the meeting. They appointed Jeffrey D. Evans, as insurance agent representative, and Donald D. Brown, as a representative of reinsurers, to the Advisory Council of the Florida Hurricane Catastrophe Fund.
The next Cabinet meeting is scheduled for November 15, 2011.
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