Insurance regulators’ backlog delaying effects of sinkhole law

Jun 22, 2012

The following article was published in The Florida Current on June 22, 2012:

Insurance regulators backlog delaying affect of sinkhole law

By Gray Rohrer

State insurance regulators have a large backlog of property insurance coverage forms, delaying companies from taking advantage of a law passed last year aimed at reducing sinkhole claims.

Nearly one-fifth of sinkhole form filings submitted to the Office of Insurance Regulation through March for SB 408 are still pending. The form filings are changes in policy coverage terms sought by property insurance companies that require approval by state regulators. For the 122 homeowner coverage forms waiting to be processed by OIR, including those seeking changes in coverage unrelated to SB 408 and those submitted as recently as last month, the average wait time is more than 110 days and counting — about four months.  

Regulators repeatedly ask companies for extensions —  originally designed to benefit insurers by offering them the opportunity to correct errors on their forms — because of the backup in processing forms. In April, analysts were working on forms filed seven months earlier, according to an email from an OIR analyst.

“As you probably know, we have an extreme backlog of filings. I am currently working on September filings,” reads an April 19 email from OIR analyst Casey Naylor to an insurance executive inquiring about a SB 408 filing.

Insurers are not pleased.

“They’ve created a substantial backlog. We are in a significant holding pattern,” said one insurance executive who asked not to be identified for fear of retribution on future filings from OIR.

SB 408 was passed in 2011 over the strenuous objections of consumer advocates who opposed provisions that uncapped rate increases for Citizens Property Insurance Corp.’s sinkhole coverage, required structural damage for sinkhole claims, and reduced the time to seek windstorm loss claims from five years to three years. The law took effect when Gov. Rick Scott signed it on May 17, 2011.

The law was at the center of an uproar last summer when Citizens initially filed a rate increase of 447 percent statewide. Sen. Mike Fasano, R-New Port Richey, who fought vehemently against the law during the 2011 legislative session, held rallies in the Tampa area with constituents and fellow lawmakers, some of who voted for the law. OIR eventually approved a 33 percent increase.

Now, after much political wrangling and fighting over the law, the benefits as envisioned by SB 408’s proponents are not reaching a large segment of the market.

Several large insurers are awaiting approval for their coverage terms more than a year later. In the most egregious case, Insurance Services Office, an analytics company that files coverage changes on behalf of several companies, is still waiting for 35 filings related to SB 408 that were submitted in July 2011.

Monte Stevens, governmental affairs director for OIR, says the office takes responsibility for the problem and is working to fix it, but pointed to budget cuts, an increase in filings and deficient filings from insurance companies as sources of the problem.

“I think the companies should have to take their share of the responsibility as well. Quite frankly, the quality of the filings we’ve received over the years has gone down,” Stevens said.

Budget cuts in recent years slashed 10 percent of the OIR workforce, but management directed many of the staff reductions on analysts of property and casualty forms. There are currently 12 positions in forms analysis division, three of them vacant. Of the remaining nine positions, five have been reviewing property insurance forms for less than one year.

Stevens said it takes at least one year of experience for an analyst to get acclimated to the process. The gutting of the staff combined with an anticipated 22 percent increase in total filings — which includes filings for rate changes as well as coverage changes — this year after three straight years of decreases has contributed to the backlog.

Sen. Garrett Richter, R-Naples, who sponsored SB 408, wants to see OIR speed up the processing of forms. He acknowledged that OIR has seen budget cuts but wants property insurers to be able to take advantage of the provisions in his law as soon as possible.

“I have no problem asking the question and in fact I will phone (OIR) and let them know they need to accelerate a sense of urgency and get these forms approved,” Richter said.

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