Florida Senate Banking and Insurance Committee Discusses Citizens, Personal Injury Protection (PIP)

Nov 5, 2013


The Florida Senate Banking and Insurance Committee (“Committee”) met today, November 5, 2013, to hear presentations related to Citizens Property Insurance Corporation (“Citizens”) takeouts and the implementation of the Citizens Clearinghouse.  Additionally, the Committee held a discussion related to Personal Injury Protection (“PIP”) insurance. 

At the beginning of the meeting, Chairman David Simmons announced that the Committee Staff Director, Steve Burgess, has been named as Florida’s new Insurance Consumer Advocate.

To begin the agenda, Citizens’ Chief Risk Officer John Rollins discussed Citizens’ storm risk in its Commercial Lines Accounts, explaining that the State-run insurer holds nearly 40 percent of the commercial market share.  Citizens’ probable maximum loss (“PML”) for commercial residential insurance is just over $4 billion, representing over 20 percent of its overall PML.  Commercial non-residential policies represent just over $1 billion to Citizens’ PML.

Citizens’ commercial residential multi-peril policies have fairly actuarially sound rates, he explained.  Policyholders are typically condominium owners, representing approximately $40 billion in exposure.  Citizens’ commercial residential wind-only policies account for approximately $44 billion in exposure, however, the rates are not actuarially sound, and policies can be up to 90 percent under-rated.   Private carriers account for 53 percent of Florida’s commercial residential wind-only market–all of which charge actuarially sound rates.

Mr. Rollins discussed the occupancy types of Personal Lines policies written by Citizens, of which owner-occupied properties account for approximately 60 percent.  The remaining 40 percent is composed primarily of rental properties and includes some second homes.  Currently, 84 percent of Citizens policyholders have mailing addresses inside Florida.  Approximately 73 percent of the Florida mailing addresses correspond to the address of the covered property.  Almost 14 percent of Citizens’ policyholder mailing addresses are outside of Florida and 2 percent of the mailing addresses are outside of the United States, he said.  The total number of policies held by non-Floridians is approximately 190,000. 

Senator Alan Hays made a suggestion that rates for non-Floridians should be actuarially sound.  Chairman Simmons suggested using homestead exemption applications and voter registration records to audit the residency status of Citizens’ policyholders.  Mr. Rollins indicated that a rate increase of 19 percent would be necessary to make the policies held by non-Florida residents actuarially and an increase of 13 percent on policies held by non-United States residents.

Next on the agenda, the Committee discussed a draft proposal that would repeal the requirement for Floridians to purchase PIP insurance and replace it with mandatory bodily injury (“BI”) coverage.  If enacted, the new law would require Floridians to purchase BI coverage, with a coverage limit of $25,000 for a single individual injured in an accident and a $50,000 limit for two or more people injured in an accident.  The new mandatory coverage would also include mandatory personal property coverage of $10,000.

Sandra Starnes from the Florida Office of Insurance Regulation (“OIR”) made a presentation related to Florida’s current auto insurance market, relating that the OIR had submitted a data call to the top 20 auto insurance carriers in the state in an effort to determine what types of coverages Floridians are currently purchasing.  The OIR indicated that only about 4 percent of Floridians are buying the minimum coverage required by law. 

BI coverage is purchased by 92 percent of Floridians, while 25 percent of Floridians purchase medical payments coverage and approximately 22 percent of Floridians purchase “full coverage.”  The OIR’s data call and analysis indicated that the elimination of mandatory PIP coverage and replacement with mandatory BI coverage would lead to rate reductions throughout the vast majority of the state.  

Michael Carlson, Executive Director of the Personal Insurance Federation of Florida (“PIFF”), stated that his organization is committed to PIP insurance revisions as introduced by the passage of HB 119, and that those reforms have not had an opportunity to work.

Gerald Wester representing the American Insurance Association (“AIA”) stated that the reforms introduced by HB 119 have not had an opportunity to work due to litigation.  He indicated that AIA believes Florida’s PIP system deserves further attention, and third-party bad faith reform should be a part of that conversation.

Paul Jess of the Florida Justice Association (“FJA”) stated that the FJA supports the repeal of PIP and the implementation of mandatory BI coverage.

Paul Sanford, representing Florida Blue, testified that if the Florida Legislature chooses to replace PIP with a mandatory BI coverage, then a medical payments provision should be included.  Mr. Sanford indicated that he does not believe the Affordable Care Act will appropriately replace the need for PIP, because many Americans will pay the penalty instead of purchasing coverage or they will purchase the minimum amount of coverage possible.

Paul Lambert representing the Florida Chiropractic Association (“FCA”) indicated that his organization supports a move to mandatory BI.  Mr. Lambert stated that any mandatory BI coverage should include a medical payments provision.

Donovan Brown of the Property Casualty Insurers Association of America (“PCI”) testified that PCI members are cautiously optimistic that the reforms implemented by HB 119 will improve the auto insurance marketplace if given time.  Mr. Brown also stated that PCI opposes the inclusions of a medical payments provision, if the Legislature chooses to adopt mandatory BI. PCI believes medical payment provisions are as subject to fraud as PIP policies.

To view today’s meeting packet, click here.


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