Are Florida’s insurance regulators stretched too thin?
South Florida Sun Sentinel (FL)
As insurers project how a pile of new laws will affect profits and losses, regulators in Tallahassee are falling behind in their efforts to review and approve rate hike requests.
Though the shortcomings are not immediately affecting consumers, if not repaired, policyholders could find themselves paying more than they should for insurance coverage or, if they move or buy insurance from another company, difficult to be tracked down if regulators determine they are owed refunds.
The backlog means the Florida Office of Insurance Regulation is sending more notices like this to insurance companies:
“As you are aware, the residential property market in Florida is under stress and the number of filings being made has increased. Due to this increased workload, we have been unable to complete the review of your filing and we respectfully request that you waive the deemer on the filing. Please respond to this email within the next two days stating your willingness to waive the deemer either for an unlimited period of time or provide a revised deemer date that is at least one month from the current deemer date.”
A deemer period is a length of time that rates must be approved. According to state law, regulators have 90 days after an insurer files a rate change request. To entice state insurance regulators to work quicker, the change automatically takes effect on the “deemer date,” unless it’s waived.
One company, Tower Hill Insurance Exchange, waived its deemer dates eight times on a July 8, 2022 request to approve new roof age underwriting provisions.
Additionally, numerous filings accessible in FLOIR’s public-facing database include rate-hike requests that remain open after nearly a year or more. The requests are from top insurers like Security First, Kin, People’s Trust, ASI Preferred, Florida Peninsula, Cypress P&C, Liberty Mutual and Tower Hill.
Locke Burt, president and CEO of Security First Insurance, said that there’s a simple reason for the delays. “OIR is understaffed,” he said. “They’ve had difficulty replacing some of the actuaries who have left.”
Another reason is the number and complexity of filings that insurers have made in response to all of the new laws enacted since May 2022. Last year, there were two special legislative sessions to enact insurance reform proposals, and another set of proposals was enacted in the regular session that ended last month.
While desired by the industry, the legal revisions required companies to rewrite vast sections of their policyholder rules and regulations. For example, last year saw the elimination of assignment of benefits, a century-old law that allowed policyholders to assign benefits of their claims to contractors, who would then file suit against insurers.
Insurers argued for replacement of the law, saying contractors and their attorneys were using it as a cash cow by filing multiple lawsuits over the same claim.
Insurers also convinced lawmakers to eliminate so-called one-way attorney fees in all but special situations. That fee incentivized attorneys to file suit because legal fees from insurers often dwarfed the disputed costs of settling claims.
Samantha Bequer, spokeswoman for the Office of Insurance Regulation, said Friday that changes to state laws are followed by increases in filings by insurers who have to revise their manuals.
“OIR has taken steps to reduce the number of open filings, including hiring actuarial contract staff to assist with the review process,” Bequer said. “However, the filing review process can be extensive even without an increase in filings.”
Bequer added, “OIR’s staff has been working diligently to review outstanding filings in coordination with companies. Ultimately, OIR remains committed to reviewing each filing thoroughly against applicable Florida Statutes and ensuring consumers have insurance products which are available, reliable and affordable.”
There are two ways for insurers to file for rate hikes: “file and use,” which requires approval before setting new rates, and “use and file,” which enables insurers to begin collecting new rates before approval — but also opens the possibility of having to refund excessive rate hikes if regulators decide the insurer’s rate hike was too high.
If the office’s delays are lengthened, that poses questions about whether actuaries might begin to take the least objectionable routes — like allowing the enlarged rate to take effect even if it should be decreased?
Paul Handerhan, spokesman for the Federal Association of Insurance Reform, a consumer-focused watchdog group, says he hasn’t heard of any such effort by the office to cut corners.
He says insurers will take “a conservative approach” with rate filings to prevent the need to refund overages with interest later. That means they will request smaller increases than their projections might otherwise call for to ensure their requests will be satisfied, he said.
Florida Insurance Commissioner Michael Yaworksy on Friday rejected any notion that the office would fail to properly analyze rate requests, regardless of how long they’ve been delayed.
Lately, finding a company that requested a higher-than-justified increase has been “very rare,” as costs have been rising among virtually all insurers as a result of excessive litigation, reinsurance cost increases and natural disasters Yaworsky said.
But, he says, the office has been working with a lower-than-desired number of actuaries who evaluate rate hike requests, he said. Today, the company employs six actuaries but has eight positions, he said.
Another longtime actuary who retired has come back and is working part time, while two other workers are in training but have not yet committed to longterm contracts, he said.
Advertisements for two positions are currently circulating, but private sector employers can offer $200,000 to $300,000, easily beating the $131,725 offered by the state, Yaworsky said.
Actuaries are “already in a limited space, and in the insurance space, with its unique requirements and rules, they’re generally in high demand,” he said.
Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at [email protected].