This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h0505e.COM
DATE: 4/22/2023
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/CS/HB 505 Insurance
SPONSOR(S): Commerce Committee, Insurance & Banking Subcommittee, Berfield
TIED BILLS: IDEN./SIM. BILLS: CS/CS/CS/SB 418
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY
CHIEF
1) Insurance & Banking Subcommittee 18 Y, 0 N, As CS Fortenberry Lloyd
2) State Administration & Technology
Appropriations Subcommittee
14 Y, 0 N Perez Topp
3) Commerce Committee 18 Y, 0 N, As CS Fortenberry Hamon
SUMMARY ANALYSIS
The bill makes the following changes regarding insurance:
Livery Vessels: changes the circumstances under which a renter or lessee must be provided insurance.
Group Self-Insurance Funds: establishes that, where a local governmental entity is a member of a group
self-insurance fund, only an elected official of the entity may be the entity’s representative on the self-
insurer’s governing body.
Hurricane Modeling: provides that a property insurer may use a weighted or straight average of two or
more approved hurricane models in a rate filing.
Commission on Hurricane Loss Projection Methodology (Commission): provides that designees of
the Executive Director of Citizens Property Insurance Corporation and the Director of the Division of
Emergency Management may be members of the Commission in lieu of the directors.
Mitigation Credits in Residential Property Insurance Rate Filings: allows residential property insurers
to give mitigation credit for compliance with building code-plus standards developed by an independent,
not-for-profit, scientific research organization.
Automatic Withdrawal of Premium:
o modifies the notice requirement for a change in the amount of premium by automatic bank withdrawal
from an increase of any amount to increases greater than $10; and
o changes the number of days’ notice that must be given from 15 days to 10 days to match federal law.
Deductibles: changes property insurance deductible requirements for policies providing dwelling limits
over $1 million.
Policy Documents:
o allows the electronic delivery of health insurance policy documents;
o removes requirements regarding paper insurance policy documents; and
o revises notice requirements for certain limited-coverage automobile insurance policies.
Foreign Pure Captive Insurance Companies: allows a foreign pure captive insurance company to
provide liability insurance under certain circumstances.
Declination of Wind and Contents Coverage: allows policyholders to type their intent to decline wind
and contents coverage in their property insurance policies, rather than requiring them to handwrite it, as is
currently required.
Service Agreement Companies: provides an additional exception to unearned premium reserve
requirements for service agreement companies.
The bill has no impact on state or local government revenues or expenditures. It has an unknown direct
economic impact on the private sector.
The bill has an effective date of July 1, 2023. STORAGE NAME: h0505e.COM PAGE: 2
DATE: 4/22/2023
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Livery Vessels
A livery is a person who advertises and offers a livery vessel
1
for use by another in exchange for any
type of consideration when such person does not also provide the lessee or renter with a captain, a
crew, or any type of staff or personnel to operate, oversee, maintain, or manage the vessel.
2
A livery may not lease or rent, or offer to lease or rent, any livery vessel unless:
3
The livery first obtains a policy from a licensed insurance carrier in the state which insures the
livery and the renter against any accident, loss, injury, property damage, or other casualty
caused by or resulting from the operation of the livery vessel;
The livery’s insurance policy provides coverage of at least $500,000 per person and $1 million
per event; and
The livery has proof of such insurance available for inspection at the location where livery
vessels are leased or rented, or offered for lease or rent, and must provide to each renter the
insurance carrier’s name and address and the insurance policy number.
Effect of the Bill
The bill allows a livery to either facilitate a renter’s or lessee’s purchase of compliant insurance or
obtain their waiver of insurance requirements, rather than only providing direct coverage purchased by
the livery.
The bill adds additional requirements that a livery must meet before leasing or renting, or offering to
lease or rent, a livery vessel. Specifically, the bill requires that, in addition to the above requirements, a
livery must:
Obtain a policy from a licensed insurance carrier in the state which insures the renter in the
same manner and amounts of the policy required to be obtained by the livery, and provide to
each renter the insurance carrier’s name and address and the insurance policy number; or
Present the renter with the opportunity to purchase coverage that insures the renter against any
accident, loss, injury, property damage, or other casualty caused by the operation of the vessel
of at least $500,000 per person and $1 million per event.
Where the livery chooses to present the renter with the opportunity to purchase coverage, and the
renter chooses not to purchase the coverage, the livery must obtain a signed acknowledgement from
the renter, which contains specific information about the insurance coverage being declined by the
renter.
Group Self-Insurance Funds
A group self-insurance fund if formed by two or more employers to pool specified risk.
4
These funds
must comply with administrative rules adopted by the Financial Services Commission
5
relating to
1
A livery vessel is a vessel chartered, leased, or rented to another for consideration. S. 327.02(24), F.S.
2
S. 327.54(1)(c), F.S.
3
S. 327.54(7), F.S.
4
General group self-insurance funds may be formed to pool workers’ compensation liabilities. S. 624.4621, F.S. Local
government entities may form group self-insurance funds to pool workers’ compensation and property liabilities. S.
624.4622, F.S.
5
The Financial Services Commission is comprised of the Governor, Attorney General, Chief Financial Officer, and
Commissioner of Agriculture. See Florida Office of Financial Regulation, Financial Services Commission,
https://flofr.gov/sitepages/financialservicescommission.htm (last visited Apr. 20, 2023). STORAGE NAME: h0505e.COM PAGE: 3
DATE: 4/22/2023
reserve requirements, organization, and operation.
6
The rules relating to reserve requirements are to
be maintained by such self-insurers to insure their financial solvency.
7
A governmental entity may participate in a group self-insurance fund under one of two statutes.
8
For
those governmental entities that are organized under the statute specific to local government entities,
the representative of the governmental entity on the group’s governing body must be an elected official.
For those governmental entities that are organized under the statute that allows any employer to
organize as a group self-insurance fund, the statute is silent on who may serve on the group’s
governing body on behalf of the government member.
Effect of the Bill
The bill provides that, where a local governmental entity is a member of a group self-insurance fund,
only an elected official of the local governmental entity may be the entity’s representative on the group’s
governing body.
Commission on Hurricane Loss Projection Methodology
The Florida Commission on Hurricane Loss Projection Methodology (Commission) is a panel of experts
created to provide “actuarially sophisticated guidelines as standards for projection of hurricane losses
possible, given the current state of actuarial science.”
9
The Commission consists of 12 members
including the Executive Director of Citizens Property Insurance Corporation (Citizens Director) and the
Director of the Division of Emergency Management (Emergency Management Director).
10
However, the
Emergency Management Director has indicated that he is sometimes unavailable to attend the
Commission’s meetings and would like the discretion to send a designee to those meetings. The
Citizens Director has indicated that he would like to be able to send a member of his senior
management team or someone with actuarial experience to attend those meetings.
Effect of the Bill
The bill allows the Emergency Management Director to designate a full-time employee of the Division
of Emergency Management to be a member of the Commission. It also allows the Citizens Director to
designate a full-time employee with either actuarial science experience or senior operations
management experience to be a member of the Commission.
Use of Hurricane Models in Residential Property Insurance Rate Filings
The law regarding OIR’s review and approval of residential property insurance rate filings requires that
a rate filing consider mitigation measures that policyholders undertake to reduce hurricane losses.
11
It
sets forth the criteria under which OIR may disprove rate filings, including disproval of rates that it
determines to be excessive, inadequate, or unfairly discriminatory.
12
The law also establishes criteria
for the Commission’s consideration, and approval, of hurricane loss models and prescribes how those
models affect OIR’s approval of property insurance rate filings.
13
Effect of the Bill
The bill amends the parameters for OIR’s approval or disapproval of rate filings by providing that, with
respect to residential property insurance rate filings, the rate filing may use a modeling indication that is
6
S. 624.4621(2), F.S.
7
S. 624.4621(2)(a), F.S.
8
Ss. 624.4621 and 624.4622, F.S.
9
S. 627.0628(1)(c), F.S.
10
S. 627.0628(2)(b), F.S.
11
S. 627.062(2)(j), F.S.
12
S. 627.062(2)(b), F.S.
13
Ss. 627.0628-627.06281, F.S. STORAGE NAME: h0505e.COM PAGE: 4
DATE: 4/22/2023
the weighted or straight average of two or more hurricane loss models found to be accurate or reliable
by the Commission.
Mitigation Credits in Residential Property Insurance Rate Filings
Current law requires residential property insurers to include “positive and negative rate factors that
reflect the manner in which building code enforcement in a particular jurisdiction addresses the risk of
wind damage” in their rate filings filed with, and approved by, OIR.
14
Insurers utilize factors that
statewide organizations develop to indicate how building code enforcement units evaluate risk in
particular geographical areas.
15
However, these factors are often are flawed and not an accurate
depiction of actual building code enforcement activity in a jurisdiction.
Since 2003, residential property insurers have been required to provide credits, discounts, and other
rate differentials to reduce insurance premiums for properties with mitigation features.
16
Mitigation
features are construction techniques used or items installed to protect a structure against windstorm
damage or loss.
17
Examples of mitigation features include hurricane shutters, a hip roof, or a specific
type of roof covering.
Code-plus programs help property owners avoid or reduce damage caused by natural hazards and
other risks by implementing additional levels of resilience to hazards beyond those required by building
codes.
18
Presently, insurers are unable to submit rating plans for review and approval by OIR that
include mitigation credits for those insureds who comply with code-plus standards established by
independent, not-for-profit, scientific research organizations.
19
Effect of the Bill
The bill allows insurers to file a rating plan (plan) with OIR in which the insurer offers additional
windstorm mitigation credits based on standards established by an independent, not-for-profit, scientific
research organization that meets the requirements of the rate filing statute.
Notification of Automatic Withdrawal of Insurance Premiums
Insurers issuing personal lines residential and commercial property policies are required to provide
premium payment options for quarterly and semiannual payments. They may, but are not required to,
offer monthly payment plans.
20
Insurers and policyholders may enter into automatic bank withdrawal
agreements for paying insurance premiums.
21
Current law requires insurers to provide the policyholder
with 15 days’ advance written notice prior to any automatic bank withdrawal if the premium payment
increases from the previous withdrawal period by any amount.
Federal law gives consumers the option of receiving notice of a change in an automatic bank
withdrawal only when the withdrawal differs from the most recent withdrawal by more than an agreed-
upon amount.
22
Federal law also only requires that a policyholder receive 10 days’ notice as opposed
to 15 days’ notice before a change in the amount withdrawn.
23
Effect of the Bill
14
S. 627.0629(2)(b), F.S.
15
See, e.g., ISO Mitigation, ISO’s Building Code Effectiveness Grading Schedule (BCEGS),
https://www.isomitigation.com/bcegs/ (last visited Mar. 1, 2023). BCEGS is a program that provides these rating factors.
16
See s. 627.0629, F.S.
17
See id.
18
Whole Building Design Guide, Code-Plus Program for Disaster Resistance, https://www.wbdg.org/resources/code-plus-
programs-disaster-resistance (last visited Mar. 1, 2023).
19
See, e.g., Insurance Institute of Business & Home Safety, https://ibhs.org/ (last visited Mar. 1, 2023).
20
S. 627.4035(1)(a), F.S.
21
S. 627.0665, F.S.
22
12 CFR 1005(10)(d).
23
Id. STORAGE NAME: h0505e.COM PAGE: 5
DATE: 4/22/2023
The bill changes the written notice requirement of any increase in policy premiums to require the notice
only if the increase in policy premiums results in the next automatic withdrawal being increased by
more than $10. The bill also reduces the number of days’ notice required before a change in a
withdrawal from 15 days to 10 days to match federal law.
Deductible Amounts Applicable to Hurricane Losses
Generally, prior to issuing a personal lines residential property insurance policy, an insurer must offer
alternative deductible amounts applicable to hurricane losses equal to $500, 2 percent, 5 percent, and
10 percent of the policy dwelling limits, unless the specific percentage deductible is less than $500.
24
The following requirements must also be met:
25
The written notice of the offer must specify the hurricane deductible to be applied in the event
that the applicant or policyholder fails to affirmatively choose a hurricane deductible.
The insurer must provide such policyholder with notice of the availability of the deductible
amounts offered in a form approved by OIR in conjunction with each renewal of the policy (and
failure to provide such notice constitutes a violation of the Florida Insurance Code but does not
affect the coverage provided under the policy).
The above requirements do not apply to a deductible program lawfully in effect on June 14, 1995, or to
any similar deductible program, provided the deductible program requires a minimum deductible
amount of no less than 2 percent of the policy limits.
26
Additional exceptions apply to a policy covering a
risk with dwelling limits of at least $100,000 but less than $250,000.
27
Under those circumstances, the
insurer may, in lieu of offering a policy with a $500 hurricane deductible, offer a policy that the insurer
guarantees it will not nonrenew for reasons of reducing hurricane loss for one renewal period and that
contains up to a 2 percent hurricane deductible as required above.
28
Current law also provides an exception for a policy covering a risk with dwelling limits of $250,000 or
more.
29
The insurer need not offer the $500 hurricane deductible, but must offer the other required
hurricane deductibles.
30
Effect of the Bill
The bill authorizes the following alternative deductible amounts for the following policies, in addition to
the current authorization for a policy covering a risk with dwelling limits of $250,000 or more:
With respect to a policy covering a risk with dwelling limits of $1 million or more, but less than
$3 million, the insurer may, in lieu of offering the 2 percent deductible, offer a deductible amount
applicable to hurricane losses equal to 3 percent of the policy dwelling limits.
With respect to a policy covering a risk with dwelling limits of $3 million or more, the insurer
need not offer the 2 percent deductible but must offer the other hurricane deductibles required
by law unless another exception applies.
Electronic Transmission of Policy Documents
The law requires that an insurance policy be mailed, delivered, or electronically transmitted to an
insured or other person entitled to receive the policy (designated person) within 60 days of the policy
taking effect.
31
An insurer may allow a personal lines policyholder to elect delivery of policy documents
by electronic means instead of by mail.
32
Electronic delivery of commercial risks constitutes delivery to
24
S. 627.701(3)(a), F.S.
25
Id.
26
S. 627.701(3)(b), F.S.
27
S. 627.701(3)(c), F.S.
28
Id.
29
S. 627.701(3)(d), F.S.
30
Id.
31
S. 627.421(1), F.S.
32
Id. STORAGE NAME: h0505e.COM PAGE: 6
DATE: 4/22/2023
the insured or designated person, unless the insured or designated person notifies the insurer that he
or she does not agree to electronic delivery.
33
Current law does not include health insurance policies in
the list of policies that may be delivered electronically.
If a policy is delivered electronically, the insurer must include with the policy a notice of the right to
receive the policy by mail rather than electronically.
34
Additionally, an insurer must provide a paper copy
of an insurance policy to an insured or designated person upon his or her request.
35
Effect of the Bill
The bill adds health insurance policies, and related documents, to the list of policies for which electronic
delivery is permitted. It also removes requirements regarding the delivery of paper insurance policy
documents.
Foreign Captive Insurance Companies
A captive insurance company is a domestic insurer licensed under Part V of Chapter 628, F.S.
36
A pure
captive insurance company is defined as a company that insures risks of its parent, affiliated
companies, controlled unaffiliated businesses, or a combination of such entities.
37
To conduct business
in the state, a captive insurance company must:
38
Obtain from OIR a license authorizing it to conduct insurance business in the state;
Hold at least one board of directors’ meeting each year in the state;
Maintain its principal place of business in the state; and
Appoint a resident registered agent to accept service of process and to otherwise act on its
behalf in the state.
Upon approval from OIR, a foreign captive insurance company may become a domestic captive
insurance company by complying with all the legal requirements related to the organization and
licensing of a domestic captive insurance company of the same type in the state and by filing with the
Secretary of State its organizational documents and a certificate of good standing issued by OIR.
39
Such foreign captive insurance company is then entitled to the necessary or appropriate certificates
and licenses to continue transacting business in, and is subject to the authority and jurisdiction of, the
state.
40
Effect of the Bill
The bill authorizes a foreign pure captive insurance company that is organized under the laws of a U.S.
jurisdiction as of January 1, 2023, and operating in compliance with the laws of such jurisdiction, to
issue policies of insurance to its parent or affiliated companies covering environmental liability and
financial responsibility requirements associated with underground storage tanks located in Florida.
Before commencing such business in Florida, however, the foreign pure captive insurance company
must provide the following to OIR:
A certified copy of its license or certificate of authority issued by its state of domicile indicating
that it is licensed to write property and casualty lines of business;
A certificate from its domiciliary regulator indicating that it is in good standing with such
regulator and complies with all applicable laws.
An executed Form OIR-C1-144, Service of Process Consent and Agreement; and
33
Id.
34
Id.
35
Id.
36
S. 628.901(2), F.S.
37
S. 628.901(12), F.S.
38
S. 628.905(2), F.S.
39
S. 628.905(6), F.S.
40
Id. STORAGE NAME: h0505e.COM PAGE: 7
DATE: 4/22/2023
Evidence that it complies with the capital and surplus requirements of its state of domicile.
The bill allows OIR to request any documents submitted to the domiciliary regulator that OIR deems
necessary to determine the company's compliance under this paragraph. Additionally, the bill provides
that a foreign pure captive insurance company writing business in Florida, as authorized by the bill, is
not subject to any other provisions of the Florida Insurance Code.
Declination of Windstorm and Contents Coverage
Under current law, a policyholder may decline windstorm or contents coverage as part of a property
insurance policy.
41
However, when a policyholder declines such coverage, the policyholder is required
to write the intent to decline windstorm and contents coverage in his or her own hand.
42
This
requirement is particularly antiquated when a policyholder elects to receive policy documents
electronically.
Effect of the Bill
The bill allows policyholders to decline windstorm and contents coverage in their property insurance
policies by typing it, rather than requiring them to handwrite it.
Limited Coverage Notice Requirements
Automobile insurance policies that do not contain coverage for bodily injury and property damage
43
must be stamped on the policy declarations page with the following language in a font larger than the
largest font otherwise used in the declarations page (notice):
THIS POLICY DOES NOT PROVIDE BODILY INJURY AND PROPERTY DAMAGE
LIABILITY INSURANCE OR ANY OTHER COVERAGE FOR WHICH A SPECIFIC
PREMIUM CHARGE IS NOT MADE, AND DOES NOT COMPLY WITH ANY
FINANCIAL RESPONSIBILITY LAW.
The stamping requirement is antiquated and prevents these types of policies from being
delivered electronically.
Effect of the Bill
The bill eliminates the requirement that the notice be stamped on the declarations page of limited
coverage automobile policies. Instead, the notice must accompany the declarations page and be
printed in bold type. This change will allow these types of policies to be delivered electronically.
Service Agreement Companies
Warranty associations and companies in Florida, including those associations selling home and service
warranties, and those companies selling motor vehicle service agreements, are regulated by the OIR.
44
A motor vehicle service agreement (or service agreement) is any agreement indemnifying the service
agreement holder for the motor vehicle listed on the service agreement and arising out of the
ownership, operation, and use of the motor vehicle against loss caused by failure of any mechanical or
other component part, or any mechanical or other component part that does not function as it was
originally intended.
45
A service agreement includes any contract or agreement that provides costs
associated with a covered loss, road hazard damage, minor cosmetic repair, and loss of electronic key
fobs.
46
41
See s. 627.712, F.S.
42
Id.
43
S. 627.7276, F.S. These limited policies are typically issued to certain antique cars.
44
See ch. 634, F.S.
45
S. 634.011(8), F.S.
46
Id. STORAGE NAME: h0505e.COM PAGE: 8
DATE: 4/22/2023
Companies that sell such agreements are regulated by OIR, and must currently establish and maintain
an unearned premium reserve equal to a minimum of 50 percent of the unearned gross written
premium on each service agreement.
47
These companies must maintain net assets of at least
$500,000.
48
In lieu of maintaining an unearned premium reserve, the company may secure and
maintain a contractual liability insurance policy (CLIP),
49
which protects business owners against the
financial consequences of liabilities assumed from entering a contract.
50
Effect of the Bill
The bill provides an additional exception to unearned premium reserve requirements for service
agreement companies, namely, a CLIP which pays either 100 percent of claims as they are
incurred or 100 percent of claims due in the event of failure of the service agreement company
to pay such claims when due.
B. SECTION DIRECTORY:
Section 1. Amends s. 327.54, F.S., relating to liveries; safety regulations; penalty.
Section 2. Amends s. 624.4621, F.S., relating to group self-insurance funds.
Section 3. Amends s. 626.8477, F.S., relating to application of Florida Insurance Code provisions to
title insurance agents or agencies.
Section 4. Amends s. 627.062, F.S, relating to rate standards.
Section 5. Amends s. 627.0628, F.S., relating to Florida Commission on Hurricane Loss Projection
Methodology; public records exemption; public meetings exemption.
Section 6. Amends s. 627.0629, F.S., relating to residential property insurance; rate filings.
Section 7. Amends s. 627.0665, F.S., relating to automatic bank withdrawal agreements;
notification required.
Section 8. Amends s. 627.421, F.S., relating to delivery of policy.
Section 9. Amends s. 627.701, F.S., relating to liability of insureds; coinsurance; deductibles.
Section 10. Amends s. 627.712, F.S., relating to residential windstorm coverage required; availability
of exclusions for windstorm or contents.
Section 11. Amends s. 627.7276, F.S., relating to notice of limited coverage.
Section 12. Amends s. 628.905, F.S., relating to licensing; authority.
Section 13. Amends s. 634.041, F.S., relating to qualifications for license.
Section 14. Provides an effective date of July 1, 2023.
47
S. 634.041, F.S.
48
Id.
49
Id.
50
The Hartford, Contractual Liability Insurance, https://www.thehartford.com/general-liability-insurance/contractual-
liability-
insurance#:~:text=Contractual%20liability%20insurance%20helps%20cover,with%20contracts%2C%20such%20as%20c
ontractors (last visited Mar. 20, 2023). STORAGE NAME: h0505e.COM PAGE: 9
DATE: 4/22/2023
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
None.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
The bill may have an unknown positive direct economic impact on the private sector through the
application of mitigation credits to residential property insurance policies.
D. FISCAL COMMENTS:
None.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
Not applicable. The bill does not appear to affect county or municipal governments.
2. Other:
None.
B. RULE-MAKING AUTHORITY:
The bill neither authorizes nor requires administrative rulemaking.
C. DRAFTING ISSUES OR OTHER COMMENTS:
None.
IV. AMENDMENTS/COM MITTEE SUBSTITUTE CHANGES
On March 9, 2023, the Insurance & Banking Subcommittee considered the bill, adopted one amendment,
and reported the bill favorably as a committee substitute. The amendment made the following changes to
the bill: STORAGE NAME: h0505e.COM PAGE: 10
DATE: 4/22/2023
Allows Citizens’ Executive Director to designate a person to serve on the Commission in the
Director’s place and requires such designee to be full-time employee with either actuarial science
experience or senior operations management experience;
Allows the electronic delivery of health insurance policy documents and removes requirements
regarding paper insurance policy documents;
Allows policyholders to decline windstorm and contents coverage in their property insurance
policies by typing it, rather than requiring them to handwrite it, as is currently required; and
Corrects a technical error made in a bill last year.
On April 17, 2023, the Commerce Committee considered the bill, adopted amendments, and reported it
favorably as a committee substitute. The amendments made the following changes to the bill:
Revised limited motor vehicle insurance notice requirements to conform the bill to its Senate
counterpart;
Changed the circumstances under which a livery must provide insurance covering a renter;
Establishes that, when a local governmental entity is a member of a group self-insurance fund, only
an elected official of the entity may be the entity’s representative on the self-insurer’s governing
body;
Changed property insurance deductible requirements for policies providing dwelling limits over $1
million;
Provided an additional exception to unearned premium reserve requirements for service agreement
companies;
Established that a renter who declines to purchase insurance on a livery must sign a specified
acknowledgement statement; and
Allowed a foreign pure captive insurance company to provide liability insurance under certain
circumstances.
The analysis is drafted to the committee substitute as passed by the Commerce Committee.