This document does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h7065z1.DOCX
DATE: 6/1/2023
HOUSE OF REPRESENTATIVES STAFF FINAL BILL ANALYSIS
BILL #: CS/HB 7065 PCB COM 23-04 Insurer Accountability
SPONSOR(S): Appropriations Committee and Commerce Committee, Duggan
TIED BILLS: IDEN./SIM. BILLS: CS/SB 7052
FINAL HOUSE FLOOR ACTION: 113 Y’s
0 N’s GOVERNOR’S ACTION: Approved
SUMMARY ANALYSIS
CS/HB 7065 passed the House on May 3, 2023, as CS/SB 7052, as amended.
The bill makes various changes designed to increase insurer accountability in the following ways:
Criminal Violations: requires the Office of Insurance Regulation (OIR) to refer records and information to
the Division of Investigative and Forensic Services (DIFS) or other appropriate law enforcement agency or
prosecutor when OIR has reason to believe a crime has occurred.
Agent Licensing: allows the Department of Financial Services (DFS) to deny licensure to an applicant
who has committed certain misdemeanors.
Examination of Insurers: requires a risk-based assessment for scheduling insurer financial examinations
and post-hurricane market conduct examinations; provides for enhanced penalties for poor claims-handling
identified during any market conduct examination.
Hazardous Financial Condition: codifies portions of the National Association of Insurance
Commissioners hazardous financial condition model act.
Insurance Policy/Claims Handling: identifies two new acts that constitute unfair methods of competition
or unfair or deceptive acts by an insurer or agent; prohibits Citizens Property Insurance Corporation from
declaring a property ineligible if there is unrepaired damage being serviced by the Florida Insurance
Guaranty Association; requires reporting of temporary suspension policy writing in certain circumstances;
limits form review exemptions for 36 months following an Insurance Code violation; requires creation, use,
and reporting of claims-handling manuals in certain circumstances; limits cancellation or nonrenewal of
residential property insurance policies in certain situations following damage repair (the period varies
depending on source of the damage); clarifies applicability of other deductibles when a roof deductible is
applied; gives servicemembers deployed to combat zones/combat support postings more time to file
property claims; clarifies applicability of SB 2A (2022A).
Fines: increases certain fines; creates fines for insurer violations of the Insurance Code related to a
declared state of emergency; increases the maximum fines that may be assessed for unfair methods of
competition or unfair or deceptive acts or practices by any individual or company transacting insurance.
Reporting: requires OIR to create annual and quarterly reports of compliance enforcement actions
against insurers; requires DIFS to create an annual report regarding investigations and prosecutions of
insurance fraud.
Rates/Premiums: provides OIR with funding to engage a vendor to develop methodology and data to
assist in determining the impact of recent bills on motor vehicle and residential property insurance rate
filings; requires residential property insurers to post hurricane mitigation discount information on their
websites; requires OIR to reevaluate fixtures or construction techniques demonstrated to reduce windstorm
losses, and associated insurance premium discounts every five years.
Agency Staffing: appropriates positions to DFS and OIR to implement the bill.
The bill was approved by the Governor on May 31, 2023, ch. 2023-172, L.O.F., and will become effective on
July 1, 2023.
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I. SUBSTANTIVE INFORMATION
A. EFFECT OF CHANGES:
Insurance Agent Licensing
Background
The Department of Financial Services (DFS) has broad duties, including licensure and regulation of
insurance agents, agencies, and adjusters; insurance consumer assistance and protection; and holding
and attempting to return unclaimed property to its rightful owner.
1
DFS has a number of regulatory
responsibilities over the Florida insurance market. DFS regulates insurance adjusters, which includes
public adjusters, independent adjusters, and company employee adjusters and conducts insurance-
related consumer outreach through its Division of Consumer Services (Consumer Services). The
Division of Workers’ Compensation within DFS administers the workers’ compensation system through
enforcement of coverage requirements,
2
administration of workers’ compensation health care delivery
system,
3
data collection,
4
and assisting injured workers, employers, insurers, and providers in fulfilling
their responsibilities.
5
DFS also administers the rehabilitation and liquidation of insolvent insurers.
Effect of the Bill – Licensure
The bill provides that DFS may deny licensure to an applicant who, within seven years of application,
has been found guilty of, or pleaded guilty or nolo contendere to a misdemeanor that is also a violation
of the Florida Insurance Code (Insurance Code).
Examination of Insurers
Background
The Office of Insurance Regulation (OIR) provides oversight for specified insurance products, insurers
and other risk bearing entities in Florida.
6
The Financial Services Commission (FSC), composed of the
Governor, the Attorney General, the Chief Financial Officer, and the Commissioner of Agriculture,
serves as agency head of the Office of Insurance Regulation for purposes of rulemaking. Further, the
FSC appoints the commissioner of the Florida Office of Insurance Regulation.
As part of their regulatory oversight, OIR may suspend or revoke an insurer’s certificate of authority
under certain conditions.
7
OIR is responsible for examining the affairs, transactions, accounts, records,
and assets of each insurer that holds a certificate of authority to transact insurance business in Florida.
8
As part of the examination process, all persons being examined must make available to OIR the
accounts, records, documents, files, information, assets, and matters in their possession or control that
relate to the subject of the examination.
9
OIR is also authorized to conduct market conduct
examinations to determine compliance with applicable provisions of the Insurance Code.
10
1
See, e.g., Florida Department of Financial Services, What is the Purpose of the Department, https://oppaga.fl.gov/ (last
visited Apr. 2, 2023).
2
S. 440.107(3), F.S.
3
S. 440.13, F.S.
4
Ss. 440.185 and 440.593, F.S.
5
S. 440.191, F.S.
6
S. 20.121(3)(a), F.S.
7
S. 624.418, F.S.
8
S. 624.316(1)(a), F.S.
9
S. 624.318(2), F.S.
10
S. 624.3161, F.S.
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Financial Examinations
OIR is responsible for all activities concerning insurers and other risk-bearing entities such as licensing,
solvency, rates, and policy forms. The law requires OIR to conduct financial examinations of insurers.
The scope of the financial examination includes a review of the affairs, records, transactions,
accounting procedures and financial condition of an insurer.
11
OIR is charged with conducting an exam
once every five years, with the exception of domestic insurers that have held a certificate of authority
for less than three years, which are required to be examined on an annual basis.
12
OIR is required to
examine an insurer applying for an initial certificate of authority prior to issuing the certificate of
authority.
13
Effect of the Bill – Financial Examinations
The bill changes OIR’s mandatory financial examination schedule to the following risk-based schedule:
High-risk insurers must be examined at least once every three years.
Average-risk insurers and low-risk insurers must be examined at least once every five years.
Financial examinations must cover the preceding fiscal years since the last examination, except for
examinations of low-risk insurers, in which case the examination must cover the preceding three fiscal
years. The bill requires that OIR create, and that FSC must adopt by rule, a risk-based selection
methodology for scheduling and conducting financial exams, which much include:
Use of required risk-focused analysis to prioritize financial examinations of insurers when
reporting indicated that the insurer’s financial condition has declined.
Consideration of the following:
o Level of capitalization and identification of unfavorable trends;
o Negative trends in profitability or cash flow or operations;
o National Association of Insurance Commissioners Insurance Regulatory Information
System ratio results;
o Risk-based capital and risk-based trend test results;
14
o The structure and complexity of the insurer;
o Changes in the insurer’s officers or board of directors;
o Changes in the insurer’s business strategy or operations;
o Findings and recommendations from a financial or market conduct examination;
o Current or pending regulatory actions by OIR or DFS;
o Information obtained from other regulatory agencies or independent organization ratings
and reports;
o The impact of an insurer’s insolvency on the insurer’s policyholders and the public.
Prioritization of property insurers for which OIR identifies significant solvency concerns.
Any other conditions OIR deems necessary for the protection of the public.
In addition to the methodology, the rule must include a plan to implement the risk-based examination
schedule. OIR must present the proposed rule to the FSC no later than October 1, 2023.
11
S. 624.316, F.S.
12
Id.
13
Id.
14
Risk-based capital is a statutory minimum level of capital that is based on tan insurance company’s size and the
inherent riskiness of its financial assets and operations. NAIC, Risk-based Capital, https://content.naic.org/cipr-topics/risk-
based-capital (last visited Apr. 7, 2023).
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Market Conduct Exams
OIR is authorized to perform a market conduct examination of insurers and other related entities.
15
The
purpose of the examination is to determine the entity’s compliance with Florida law.
16
The costs of the
examination are paid by the subject entity.
17
OIR is may conduct a market conduct of any authorized
insurer after a hurricane, if the insurer:
Is among the top 20 percent of insurers based upon the ratio of hurricane-related claims to the
property insurance policies in force;
Is among the top 20 percent of insurers based upon of the ratio of consumer complaints to
hurricane-related claims;
Has made significant payments to its managing general agent since the hurricane; or
As determined by OIR for any other reason.
During a market conduct examination, OIR may examine the affairs, records, transactions, accounting
procedures and financial condition of an insurer as relevant to the actions that gave rise to the
examination.
18
The market conduct examination, when conducted post hurricane, must be started
within 18 months after the storm’s landfall. The insurer’s managing general agent must be included in
the market conduct examination, as if it were the insurer.
If a market conduct examination reveals that the “insurer has exhibited a pattern or practice of willful
violations of an unfair insurance trade practice related to claims-handling which caused harm to
policyholders,” OIR may order the insurer to file its claims-handling practices and procedures with OIR
for review and inspection.
19
The practices and procedures are to be held by OIR for 36 months and are
considered public records, not trade secrets, during such period.
20
The term “claims-handling practices
and procedures” is defined as “any policies, guidelines, rules, protocols, standard operating
procedures, instructions, or directives that govern or guide how and the manner in which an insured’s
claims for benefits under any policy will be processed.”
21
Effect of the Bill – Market Conduct Examinations
The bill removes some of OIR’s discretion to conduct post-hurricane market conduct examinations that
was established in SB 2A (2022A) and makes such examinations mandatory in certain circumstances.
It narrows the post-hurricane examination authority to apply only to residential property insurers. The
bill specifies that OIR may conduct a post-hurricane market conduct examination, if at any time more
than 90 days after the end of a hurricane, an insurer is among the top 20 percent of insurers based
upon the ratio of hurricane-related property insurance claims filed to the number of property insurance
policies in force. However, OIR must conduct a post-hurricane market conduct exam if the insurer:
Is among the top 20 percent of insurers based upon the ratio of hurricane claim-related
consumer complaints about the insurer to DFS to the insurer’s total number of hurricane claims;
Is among the top 20 percent of insurers based upon the ratio of hurricane claims closed without
payment to the insurer’s total number of hurricane claims on policies providing wind or
windstorm coverage;
15
S. 624.3161(1), F.S.
16
Id.
17
S. 624.3161(4), F.S.
18
See ss. 624.316 and 624.3161, F.S.
19
S. 624.3161(6), F.S.
20
Id.
21
Id.
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Has made significant payments to its managing general agent since the hurricane; or
As determined by OIR for any other reason.
The office must create, and FSC must adopt by rule, a risk-based selection methodology for scheduling
and conducting market conduct examinations. Under this methodology, OIR must initiate a market
conduct examination against an insurer if the following conditions exist:
An insurance regulator in another state has initiated or taken regulatory action against the
insurer or entity regarding an act or omission that would constitute a violation of the Insurance
Code.
DFS and OIR have received a disproportionate number of certain claims-handling complaints
against the insurer based on its market share.
The results of a NAIC Market Conduct Annual Statement indicate the insurer is a negative
outlier with regard to particular metrics.
22
There is evidence the insurer is engaged in a pattern or practice of violations of the Unfair
Insurance Trade Practices Act.
Any other conditions that OIR deems necessary for the protection of the public.
In addition to the methodology, the rule must provide criteria for how OIR will determine that it has
received a disproportionate number of claims-handling complaints. OIR must present the proposed
rules to FSC no later than October 1, 2023.
The bill provides for enhanced penalties for poor claims-handling practices that OIR identifies during
any market conduct examination, including, but not limited to those following a hurricane. If a pattern or
practice of certain behaviors is found, the insurer’s claims-handling practices must be reviewed to
determine whether enhanced penalties apply. Up to a 2.0 multiplier on the normal administrative fines
is permitted and the fine assessed against an insurer may exceed normal aggregate fine caps.
In reviewing the claims-handling practices, it is relevant whether the insured, claimant, or representative
thereof were acting reasonably or unreasonably toward the insurer.
The bill specifies that the provisions regarding enhanced penalties do not create a civil cause of action,
a civil remedy, or an unfair trade practice.
Hazardous Financial Condition of Insurers
Background
NAIC has issued the Model Regulation to Define Standards and Commissioner’s Authority for
Companies Deemed to be in Hazardous Financial Condition (Hazardous Financial Condition Model
Act).
23
Current law provides the authority for FSC to adopt rules to define standards of hazardous
financial condition and corrective action similar to those contained in the Hazardous Financial Condition
Model Act.
24
However, OIR has expressed concern regarding its authority to effectively deal with
insurers in a hazardous financial condition.
25
22
See drafting comment in Part III. of this analysis.
23
National Association of Insurance Commissioners, Model Regulation to Define Standards and Commissioner’s
Authority for Companies Deemed to be in Hazardous Financial Condition,
https://content.naic.org/sites/default/files/MO385.pdf (last visited Apr. 23, 2023).
24
S. 624.81, F.S. See R. 69O-193.033, F.A.C.
25
Senate Committee on Banking and Insurance, Presentation by Mike Yaworsky of OIR,
https://www.flsenate.gov/media/videoplayer?EventID=1_nty0d3lq-202303290830&Redirect=true (last visited Apr. 8,
2023).
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Effect of the Bill – Hazardous Financial Condition
The bill codifies portions of the Hazardous Financial Condition Model Act. In determining whether the
continued operation of any authorized insurer selling insurance in Florida is hazardous to policyholders,
creditors, or the general public, OIR may consider:
Adverse findings reported in financial or market conduct examination reports, audits, or actuarial
opinions, reports, or summaries.
NAIC Regulatory Information System financial analysis solvency tools and reports.
Whether the insurer has made adequate provisions for cash flows necessary to cover its
contractual obligations and expenses.
The ability of an assuming reinsurer to perform and whether the insurer’s reinsurance program
is sufficient.
Whether the insurer’s operating loss in the last 12-month period exceeds a certain amount of its
surplus in excess of its required minimum surplus.
Whether an entity within the insurer’s holding company is insolvent, threatened with insolvency,
or delinquent in obligations.
Contingent liabilities, pledges, or quantities that may affect the solvency of the insurer.
Whether an affiliate is delinquent in paying premiums to the insurer.
The age and collectability of the insurer’s receivables.
Whether the insurer meets statutory requirements applicable to management.
Whether the insurer’s management has failed to respond to questions from OIR.
Whether the insurer has failed to meet financial and holding comp[any filing requirements
without good reason.
Whether the insurer or its management has filed any false or misleading financial reports or
made false entries on the insurer’s books.
Whether the insurer has grown so rapidly that it lacks adequate capacity to timely meet its
obligations
Whether the insurer has experienced, or will experience, cash flow or liquidity problems.
Whether management has established reserves that do not comply with minimum standards.
Whether management routinely engaged in material under-reserving.
Whether transactions for which the insurer received assets or capital gains do not provide
sufficient value to ensure the insurer’s ability to meet its outstanding obligations.
The ratio of annual premium volume to surplus or liabilities to surplus in relation to loss
experience, kinds or risks insured, or both.
Whether the insurer’s asset portfolio is sufficient to insure the company’s ability to meet its
outstanding obligations.
As to a residential property insurer, whether it has sufficient capital, surplus, and reinsurance to
withstand significant weather events, including hurricanes.
Whether the insurer’s required surplus, capital, or capital stock is impaired to an extent
prohibited by law.
Whether the insurer continues to write new business when it has not maintained the required
surplus or capital.
Whether the insurer moves to dissolve or liquidate without first making provisions with OIR for
liabilities arising from policies it has issued.
Whether the insurer has incurred substantial new debt, has had to rely on frequent or
substantial capital infusions, or has a highly leveraged balance sheet.
Whether the insurer relies increasingly on other entities.
Whether the insurer meets one or more of the grounds for the appointment of DFS as a
receiver.
Any other finding by OIR determined to be hazardous to the insurer’s policyholders, creditors, or
the general public.
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If OIR determines that an insurer’s continued operations may be hazardous, it may issue an order
requiring the insurer to do any of the following:
Reduce the total amount of present and potential liability for policy benefits by purchasing
additional reinsurance.
Reduce, suspend, or limit the volume of business being accepted or renewed.
Reduce expenses.
Increase its capital and surplus.
Suspend or limit the declaration and payment of dividends.
File reports with OIR concerning the market value of its assets.
Limit or withdraw from certain investments or discontinue certain investment practices.
Document the adequacy of premium rates in relation to the risks insured.
File interim financial reports.
Correct corporate governance practice deficiencies.
Provide a business plan to OIR in order to continue to transact insurance business in Florida.
Adjust rates for any non-life product written that OIR considered necessary to improve the
insurer’s financial condition.
The bill authorizes OIR to issue an immediate final order to any insurer requiring these actions. It
provides OIR with rulemaking authority to implement the bill.
Insurance Policy/Claims Handling
Background
Florida law prohibits a person from engaging in an unfair or deceptive act or practice involving the
business of insurance.
26
The definition of unfair or deceptive acts or practices includes, in part, the
following unfair claim settlement practices:
Attempting to settle claims on the basis of a document that was altered without knowledge or
consent of the insured;
A material misrepresentation made to an insured for the purpose and with the intent of effecting
settlement on less favorable terms than provided under the contract or policy;
Committing or performing with such frequency as to indicate a general business practice certain
acts, such as failing to adopt and implement standards for the proper investigation of claims;
Failing to pay undisputed amounts of partial or full benefits owed under first-party property
insurance policies within 90 days after an insurer received notice of a residential property
insurance claim, determines the amounts of partial or full benefits, and agrees to coverage,
unless payment of the undisputed benefits is prevented by “an act of God, prevented by the
impossibility of performance, or due to actions by the insured or claimant that constitute fraud,
lack of cooperation, or intentional misrepresentation regarding the claim for which benefits are
owed.”
27
Currently nothing in Florida law requires that an insurer notify OIR before it temporarily suspends
writing policies. There is a concern that OIR is not finding out about insurers that have stopped
residential property insurance policies with sufficient time to assist policyholders who may be left
without insurance coverage due to nonrenewals or limited options due to carriers that have stopped
issuing new business.
Citizens Property Insurance Corporation (Citizens) is a state-created, not-for-profit, tax-exempt
governmental entity whose public purpose is to provide property insurance coverage to those unable to
find affordable coverage in the voluntary admitted market.
28
Citizens is not a private insurance
26
S. 626.9521(1), F.S.
27
S. 626.9541(1)(i), F.S.
28
The term “admitted market” means insurance companies licensed to transact insurance in Florida.
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company.
29
It was statutorily created in 2002 when the Florida Legislature combined the state’s two
property insurers of last resort, the Florida Residential Property and Casualty Joint Underwriting
Association (RPCJUA) and the Florida Windstorm Underwriting Association (FWUA).
30
Citizens offers
property insurance through three different accounts: a personal lines account, a commercial lines
account, and a coastal account.
Citizens operates in accordance with the provisions in s. 627.351(6), F.S., and is governed by a nine-
member Board of Governors (Board) that administers its Plan of Operations. The Plan of Operations is
reviewed and approved by the Financial Services Commission.
31
The Governor, President of the
Senate, Speaker of the House of Representatives, and Chief Financial Officer each appoint two
members to the Board.
32
Citizens is subject to regulation by OIR in the same fashion as other insurers.
Under federal law, insurance companies cannot file for bankruptcy.
33
Instead, they are either
rehabilitated or liquidated by their state of domicile. Florida law establishes the system for the treatment
of impaired or insolvent insurers
34
in Florida and sets up guaranty payments where necessary.
35
Florida law provides for guaranty associations to ensure policyholders of insolvent insurers are
protected with respect to insurance premiums paid and settlement of outstanding claims, up to limits
provided by law.
36
A guaranty association is a not-for-profit corporation created by law and directed to protect
policyholders from financial losses and delays in claims payment and settlements due to the insolvency
of an insurer.
37
Insurers are required to participate in the guaranty associations as a condition of
transacting insurance business in Florida. Florida operates four guaranty associations including the
Florida Insurance Guaranty Association (FIGA)
38
and the Florida Workers’ Compensation Insurance
Guaranty Association (FWCIGA).
39
FIGA provides a “mechanism for the payment of covered claims under certain insurance policies to
avoid” delay and financial loss due to the financial insolvency of an insurer.
40
It issues guaranty fund
payments and provides related services for all lines of property and casualty insurance with certain
exceptions.
41
When a Florida property and casualty insurer becomes insolvent, FIGA takes over the
claims of that insurer and pays the claims of its policyholders, ensuring that policyholders are not left
with unpaid claims. FIGA obtains funds to pay the claims of insolvent insurers located in Florida from
the liquidation of the assets of insolvent insurers by the Division of Rehabilitation and Liquidation within
DFS and from the liquidation of assets of insolvent insurers located outside Florida that transact
insurance business in Florida.
42
If an insurer’s assets are insufficient to pay all claims, FIGA can also
issue post-insolvency assessments against property and casualty insurers to obtain funds to pay the
remaining claims.
43
29
S. 627.351(6)(a)1., F.S.
30
S. 2, ch. 2002-240, Laws of Fla.
31
S. 627.351(6)(a)2., F.S.
32
S. 627.351(6)(c)4.a., F.S.
33
11 U.S.C. § 109(b)(2).
34
An “insolvent insurer” means an insurer that was authorized to transact insurance in this state, either at the time the
policy was issued or when the insured event occurred, and against which an order of liquidation with a finding of
insolvency has been entered by a court of competent jurisdiction if such order has become final by the exhaustion of
appellate review. S. 631.904(4), F.S.
35
Ch. 631, F.S.
36
Id.
37
See e.g., ss. 631.51 and 631.902, F.S.
38
Ch. 631, part II, F.S.
39
Ch. 631, part V, F.S.
40
S. 631.51, F.S.
41
S. 631.52, F.S.
42
See s. 631.061, F.S. for grounds for liquidation. See s. 631.025, F.S., for an overview of persons subject to
proceedings initiated by the Division.
43
S. 631.57, F.S.
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OIR generally has authority to review and approve insurer’s policy forms, either before they are used
(file and use) or afterwards (use and file).
44
Personal lines residential property insurers are required to
file their policy forms with OIR and have them approved before using them to issue policies.
45
OIR may,
for cause, withdraw previous approval of forms.
46
If OIR issues an order withdrawing its approval of
previously approved forms, an insurer may no longer use those forms to issue policies.
47
Florida insurers are not required to maintain or use claims-handling manuals to adjust and close claims.
Concerns have arisen, particularly based on insurers’ handling of claims following hurricanes, that
insurers may not be following the Insurance Code and usual and customary insurance practices when
handling claims.
48
Some insurers have indicated that they do not have claims handling manuals, but
only informal guidelines, while others have comprehensive claims-handling practices set forth in
sophisticated computer programs.
An insurer may not cancel or nonrenew a personal residential or commercial residential property
insurance policy covering a dwelling or residential property, including but not limited to, any
homeowner, mobile home owner, farmowner, condominium association, condominium unit owner,
apartment building, or other policy covering a residential structure or its contents:
49
Upon the declaration of an emergency and the filing of an order by the Insurance
Commissioner;
For property located in Florida; and
Which has been damaged as a result of a hurricane or wind loss that is the subject of the
declaration of emergency.
If an insurer elects to nonrenew a policy covering a property that has been damaged, the insurer must
provide at least 90-days’ notice that the insurer intends to nonrenew the policy 90 days after the
property has been repaired.
50
Because of these existing statutory provisions, insurers are unable to
cancel or nonrenew personal residential or commercial residential policies when the policyholder never
repairs the property.
An insurer issuing a personal lines residential property insurance policy may include in such policy a
separate roof deductible that meets all of the following requirements:
51
Allows property insurers to include in the policy a separate roof deductible of up to two percent
of the Coverage A limit of the policy or 50 percent of the cost to replace the roof. The
policyholder must also be offered the option to decline the roof deductible by signing a form
approved by OIR. If a roof deductible is added to the policy at renewal, the insurer must provide
a notice of change in policy terms and allow the policyholder to decline the separate roof
deductible.
Requires that policyholders that select a roof deductible must receive an actuarially sound
premium credit or discount.
Provides that the roof deductible does not apply to:
o A total loss to the primary structure in accordance with the valued policy law,
52
which is
caused by a covered peril.
o A loss caused by a hurricane.
44
S. 627.410, F.S.
45
S. 627.410(1), F.S.
46
S. 627.210(3), F.S.
47
Id.
48
See, e.g., Washington Post¸ Insurers Slashed Hurricane Ian Payouts far Below Damages Estimates, Documents and
Insiders Reveal, https://www.washingtonpost.com/climate-environment/2023/03/11/florida-insurance-claims-hurricane-ian/
(last visited Apr. 23, 2023).
49
S. 627.4133(2)(d)1. F.S.
50
Id.
51
S. 672.701(10), F.S.
52
S. 627.702, F.S.
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DATE: 6/1/2023
o A roof loss resulting from a tree fall or other hazard that damages the roof and punctures
the roof deck.
o A roof loss requiring the repair of less than 50 percent of the roof.
Specifies that when a roof deductible is applied, no other deductibles under the policy may be
applied.
Specifies that a roof deductible only applies to a claim adjusted on a replacement cost basis.
Authorizes an insurer to limit the claim payment for a roof to the actual cash value of the loss to
the roof until the insurer receives reasonable proof of payment by the policyholder of the roof
deductible.
Requires a roof deductible provision to be clear and unambiguous.
Requires the inclusion of the following disclosures:
o On the page immediately behind the declarations page, notice that a roof deductible may
result in high out-of-pocket expenses to the policyholder.
o On the policy declarations page, prominent display of the actual dollar value of the roof
deductible at issuance and renewal.
Allows an insurer to limit payment on a roof claim to actual cash value until the policyholder
pays the roof deductible.
Law requires insureds to notify an insurer of a claim or reopened claim,
53
within 1 year after the date of
loss.
54
Notice of a supplemental claim
55
must be given to the insurer within 18 months of the date of
loss or such claim is barred. Insureds are also required to notify an insurer of a claim, supplemental
claim, or reopened sinkhole claim within 2 years after the insured knew or reasonably should have
known about the loss.
56
The law does not currently contain any tolling of these time limits for military
service members.
Effect of the Bill – Insurance Policy/Claims Handling
The bill adds two new acts that constitute unfair methods of competition or unfair or deceptive acts by
an insurer or agent. They are:
Altering or amending an insurance adjuster’s report without including:
o A detailed list of all changes made to the report.
o The identity of the person who ordered each change.
o A detailed explanation of why a change was made if the change reduces an estimate of
a loss.
Authorizing or permitting an insurer to pay a bonus to an officer or director of an insurer while
the insurer is impaired or insolvent, regardless of whether delinquency proceedings have been,
or will be, initiated.
The bill requires that, before an insurer temporarily suspends writing new residential property insurance
policies, it must notify OIR of:
Its proposed reasons for suspension of writing;
The effective dates of the suspension;
The proposed communication to its agents.
The insurer must notify OIR by the earlier of:
53
S. 627.70132(1)(a), F.S., defines “reopened claim” as a claim that an insurer has previously closed, but that has been
reopened upon an insured’s request for additional costs for loss or damage previously disclosed to the insurer.
54
S. 627.702(3), F.S., provides that the date of loss for claims resulting from specified and other weather-related events,
such as hurricanes and tornadoes, is the date that the hurricane made landfall or the other weather-related event is
verified by the National Oceanic and Atmospheric Administration.
55
S. 627.70132(1)(b), F.S., defines “supplemental claim” as a claim for additional loss or damage from the same peril
which the insured has previously adjusted or for which costs have been incurred while completing repairs or replacement
pursuant to an open claim for which timely notice was previously provided to the insurer.
56
S. 627.706(5), F.S.
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20 business days before the effective date of the suspension; or
Five business days before notifying its agents of the suspension.
However, the insurer need not notify OIR of the suspension if it is due to an approaching hurricane or
another natural emergency impacting more than one county, including a storm, flood, severe wave,
drought, or earthquake. Additionally, an insurer’s temporary suspension of writing is not subject to
OIR’s approval.
The bill prohibits Citizens from determining that a property risk is ineligible for coverage solely because
the property risk has unrepaired damage that is the subject of a claim being serviced by the Florida
Insurance Guaranty Association (FIGA). This prohibition applies to a property until the earlier of 24
months from the date FIGA starting servicing the claim or the date that FIGA closes the claim.
The bill prohibits OIR from exempting an insurer from the forms review requirements for 36 months
following a violation of the Insurance Code.
The bill requires all authorized residential property insurers writing policies in Florida to create and use
claims-handling manuals that provide guidelines and procedures that comply with the Insurance Code
and usual and customary insurance claims-handling practices. Each claims-handling manual must
include guidelines and procedures for:
Receiving and acknowledging initial receipt of claims, and reviewing and evaluating those
claims.
Communicating with policyholders.
Setting the claim reserves.
Investigating the claim, including conducting inspections of the property that is the subject of the
claim.
Making preliminary estimates of the covered damages to the insured property and
communicating them to the policyholder.
The payment, partial payment, or denial of the claim and communicating such decisions to the
policyholder.
Closing the claim.
Other aspects of the claims-handling process as determined by OIR.
OIR may request that a residential property insurer submit a copy of its claims-handling manual at any
time, and the insurer must submit it to OIR within five business days of the request. Additionally, on an
annual basis, the insurer must submit to OIR an attestation that its current claims-handling manuals
meet the requirements of the Insurance Code and usual and customary insurance claims-handling
practices and that it maintains adequate resources to meet the requirements of the manuals at all
times, including during natural disasters and catastrophic events. The bill provides OIR with rulemaking
authority to implement the claims-handling manual requirements.
The bill provides that an authorized insurer may not cancel or nonrenew a personal residential or
commercial residential property insurance policy on a dwelling or residential property located Florida:
For 90 days after the dwelling or residential property has been repaired, if the property was
damaged by a hurricane that resulted in the declaration of a state of emergency; or
Until the earlier of when the dwelling or residential property has been repaired or one year after
the insurer issues a final claim payment, if the property was damaged by a peril other than a
hurricane.
The bill establishes that a structure is considered repaired when substantially completed and restored
to the extent that it is insurable by another authorized insurer writing policies in Florida.
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The bill clarifies that if a roof deductible is applied to a loss that is the subject of a claim under a
residential property insurance policy, no other deductible may be applied to any other loss to the
property caused by the same covered peril.
The bill provides tolling of the time limitations for providing notice of a property insurance claim to an
insurer during any term of deployment to a combat zone or combat support posting which materially
affects the ability of a servicemember
57
to file a claim.
The bill clarifies that nothing in SB 2A (2022A) shall be construed to impair any right under any
insurance contract in effect on or before that bill became law.
58
Fines Against Insurers, Agencies, and Agents
Background
DFS provides education, information, and assistance to consumers for all products or services
regulated by DFS or FSC.
59
DFS’ duties specifically include:
Receiving consumer questions and complaints;
Educating the public about insurance-related topics;
Providing mediation of consumer and insurance company disputes; and
Serving as a conduit for referrals for further legal action by DFS.
60
DFS may impose an administrative penalty on a person who holds a license or certificate of authority
from DFS if that person fails to respond to DFS’ request for information within 20 days.
61
A licensed
individual must produce any requested documents not subject to attorney-client or work product
privilege.
OIR, through its ongoing oversight and examination process, determines whether insurance companies
are operating in compliance with the Insurance Code. OIR is authorized to impose administrative fines
in lieu of suspension or revocation if it finds that one or more grounds exist for the discretionary
revocation or suspension of the certificate of authority.
62
OIR may impose an administrative fine as
follows:
A maximum of $5,000, per non-willful violation, with an aggregate limit of $20,000 for all non-
willful violations arising out of the same action.
A maximum of $40,000 per violation, with a $200,000 aggregate limit for all willful violations
arising out of the same action.
If an insurer owes restitution due to a violation, the insurer must provide the restitution and
include 12 percent interest from the date of the violation or the inception of the insured’s policy.
The Insurance Code also authorizes fines for engaging in an unfair or deceptive act or practice
involving the business of insurance.
63
An insurer that commits such violations is subject to a fine of:
57
A servicemember is defined in s. 250.01(19), F.S., as a member of the United States Armed Forces on active duty or
state active duty and all members of the Florida National Guard and United States Reserve Forces.
58
SB 2A was the property insurance bill that was passed during the 2022A Special Session. It became ch. 2022-271,
Laws of Fla. This provision applies to SB 2A from the date it became law.
59
Florida Department of Financial Services, Department of Financial Services Long Range Program Plan: Fiscal Years
2023-24 through 2027-28, p. 12 (Oct. 17, 2022),
http://floridafiscalportal.state.fl.us/Document.aspx?ID=24407&DocType=PDF (last visited Apr. 2, 2023). See also Florida
Department of Financial Services, Consumer Guides,
https://www.myfloridacfo.com/Division/Consumers/understandingCoverage/Guides/Default.htm (last visited Apr. 2, 2023).
60
S. 624.307(10)(a), F.S.
61
S. 624.307(10)(b), F.S.
62
S. 624.4211, F.S.
63
S. 626.9521, F.S.
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DATE: 6/1/2023
A maximum of $5,000 for each non-willful violation, not to exceed an aggregate amount of
$20,000.
A maximum of $40,000 for each willful violation arising from the same action, not to exceed an
aggregate amount of $200,000.
64
Effect of the Bill – Fines
Consumer Services – Fines
The bill reduces the time that insurers and agents have to respond to Consumer Services regarding
consumer complaints from 20 days to 14 days, but allows them to respond electronically instead of
solely in writing. It also increases the fines for an insurer’s failure to respond to such complaints from
$2,500 per violation to $5,000 per violation.
OIR – Fines
The bill creates the following fines for violations of the Insurance Code by an insurer related to a
covered loss or claim related to a declared a state of emergency:
$25,000 per violation, up to an aggregate amount of $100,000 for all nonwillful violations arising
out of the same action.
$200,000 per violation, up to an aggregate amount of $1,000,000 for all willful violations arising
out of the same action.
The bill increases the current maximum fines for all other violations of the Insurance Code by an
insurer, as follows:
Type of
Violation
Current Fine
Individual
Violation
Increased Fine
Individual
Violation
Current Fine
Aggregate
Violations
Increased Fine
Aggregate
Violations
Non-willful $5,000 $12,500 $20,000 $50,000
Willful $40,000 $100,000 $200,000 $500,000
Unfair Methods of Competition or Unfair or Deceptive Acts or Practices – Fines
The bill establishes that anyone who engages in an unfair method of competition or unfair or deceptive
act or practice related to a covered loss or claim caused by a declared state of emergency is subject to
the following fines:
For any person,
65
up to $25,000 for each nonwillful violation and $200,000 for each willful
violation.
For an insurer, an aggregate maximum of $100,000 for all nonwillful violations and $1,000,000
for all willful violations arising out of the same action.
The maximum fine for engaging in twisting,
66
churning,
67
or willfully submitting fraudulent signatures on
an application or policy-related document are increased from $5,000 to $12,500 for each nonwillful
64
S. 626.9521(2), F.S.
65
Person in connection with unfair methods of competition and unfair or deceptive acts or practices means any individual,
corporation, association, partnership, reciprocal exchange, interinsurer, Lloyds insurer, fraternal benefit society, or
business trust or any entity involved in the business of insurance. S. 626.9511(1), F.S.
66
“Twisting” is defined as knowingly making any misleading representations or incomplete or fraudulent comparisons or
fraudulent material omissions of or with respect to any insurance policies or insurers for the purpose of inducing, or
tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert any
insurance policy or to take out a policy of insurance in another insurer. S. 626.9541(1)(l), F.S.
67
"Churning” is a practice whereby policy values in an existing life insurance policy or annuity contract, including, but not
limited to, cash, loan values, or dividend values, and in any riders to that policy or contract, are directly or indirectly used
STORAGE NAME: h7065z1.DOCX PAGE: 14
DATE: 6/1/2023
violation and from $75,000 to $187,500 for each willful violation. The aggregate maximum fines for this
conduct are increased from $50,000 to $125,000 for all nonwillful violations and from $250,000 to
$625,000 for all willful violations arising out of the same actions.
The bill increases the maximum fines for all other instances of unfair methods of competition or unfair
or deceptive acts or practices by a person as follows:
Type of Violation Current Fine
Individual
Violation
Increased Fine
Individual
Violation
Current Fine
Aggregate
Violations by an
Insurer
Increased Fine
Aggregate
Violations by an
Insurer
Non-willful $5,000 $12,500 $20,000 $50,000
Willful $40,000 $100,000 $200,000 $500,000
Reporting Requirements
Background
OIR is required to submit an annual report to the Speaker and Minority Leader of the House of
Representatives, the President and Minority Leader of the Senate, the chairs of the legislative
committees with jurisdiction over matters of insurance, and the Governor.
68
The report is to cover the
following information from the preceding calendar year:
Names of the authorized insurers transacting insurance in this state, with abstracts of their
financial statements including assets, liabilities, and net worth.
Names of insurers whose business was closed during the year, the cause thereof, and amounts
of assets and liabilities as ascertainable.
Names of insurers against which delinquency or similar proceedings were instituted and related
information.
The receipts and estimated expenses of OIR.
Other pertinent information as OIR deems to be in the public interest.
A compilation of the laws passed by the Legislature relating to insurance.
An analysis and summary report of the state of the insurance industry in Florida.
The Division of Investigative and Forensic Services (DIFS) investigates various types of insurance
fraud including Personal Injury Protection fraud, workers' compensation fraud, vehicle fraud, application
fraud, licensee fraud, homeowner's insurance fraud, and healthcare fraud.
69
DIFS is directed by statute
to investigate fraudulent insurance acts, violations of the Unfair Insurance Trade Practices Act,
70
false
and fraudulent insurance claims,
71
and willful violations of the Florida Insurance Code and rules
adopted pursuant to the code.
72
DIFS includes a Bureau of Insurance Fraud (Bureau) and employs
sworn law enforcement officers to investigate insurance fraud.
Effect of the Bill – Reporting
The bill requires that OIR provide quarterly and annual reports to the Governor, President of the
Senate, Speaker of the House, FSC, and legislative committees with jurisdiction over insurance matters
on its actions to enforce insurer compliance with the Insurance Code (compliance report). OIR must
to purchase another insurance policy or annuity contract with that same insurer for the purpose of earning additional
premiums, fees, commissions, or other compensation. S. 626.9541(1)(aa), F.S.
68
S. 624.315, F.S. As of the date of this analysis, OIR has not provided its annual report to the Legislature since its 2021
Annual Report, which contained data from calendar year 2020.
69
See https://myfloridacfo.com/Division/DIFS/ (last visited Apr. 2, 2023).
70
S. 626.9541, F.S.
71
S. 817.234, F.S.
72
S. 624.15, F.S.
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DATE: 6/1/2023
also publish the compliance reports on its website. The compliance reports must contain information
regarding:
Revocation, denial, or suspension of any license or registration issued by OIR.
Fines imposed by OIR for violations of the Insurance Code.
Consent orders entered into by OIR.
Examinations and investigations conducted and completed for which OIR found violations of law
or rule, but did not take enforcement action.
The annual compliance report must be submitted by January 31 each year and cover the previous
calendar year. The quarterly compliance reports must be submitted on or before April 30, July 31,
October 31, and January 31, and cover the immediately preceding quarter.
The bill requires that the Bureau submit a performance report to the President of the Senate and
Speaker of the House by September 1 each year, which includes at least the following information:
Total number of initial referrals received, cases opened, cases presented for prosecution, cases
closed, and convictions resulting from cases presented for prosecution by the Bureau.
Number of referrals received from insurers, OIR, and Consumer Services, and the outcome of
those referrals.
Number of investigations undertaken by the Bureau which were not the result of a referral from
an insurer and the outcome of those investigations.
Number of investigations that resulted in a referral to a regulatory agency and the disposition of
those referrals.
Number of cases presented by the Bureau which local or statewide prosecutors declined to
prosecute with the reasons why they declined.
A summary of the annual report containing the data collected from fraud prosecutors.
73
The total number of employees assigned to the Bureau, broken down by location.
Average caseload and turnaround time for each investigator.
The bill clarifies that, in addition to reporting to other agencies, DIFS may report alleged insurance-
related crimes that impact two or more Florida judicial circuits to the statewide prosecutor.
The bill also requires OIR to refer records and information to DIFS or other appropriate law
enforcement agency or prosecutor when OIR has reason to believe a crime has occurred.
Rates/Premiums
Background
In general, insurers must file a copy of rates, rating schedules, rating manuals, premium credits or
discount schedules, and surcharge schedules, and changes to these documents, for approval by OIR.
74
OIR must review insurers’ rate filings to determine whether rates are excessive, inadequate, or unfairly
discriminatory.
75
In doing so, OIR must consider factors including, but not limited to, the following:
Past and prospective loss experience both inside and outside of Florida.
Past and prospective expenses.
Degree of competition among insurers for particular risk to be insured.
Investment income reasonably expected by the insurer.
Reasonableness of the judgment reflected in the filing.
Dividends, savings, or unabsorbed premium deposits allowed or returns to policyholders,
members or subscribers in Florida.
73
S. 626.9896, F.S. requires such a report be prepared annually by the Bureau and presented to the Governor, President
of the Senate, and Speaker of the House of Representatives.
74
S. 627.062(2)(a), F.S.
75
S. 627.062(1), F.S.
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Adequacy of loss reserves.
Cost of reinsurance.
Trend factors.
Conflagration and catastrophe hazards, if applicable.
Projected hurricane losses.
Projected flood losses.
Reasonable margin for underwriting profit and contingencies.
Residential property insurance rate filings must account for mitigation measures undertaken by
policyholders to reduce hurricane losses.
76
Specifically, the rate filings must include actuarially
reasonable discounts, credits, or other rate differentials or appropriate reductions in deductibles to
consumers who implement windstorm damage mitigation techniques to their properties.
77
Upon their
filing by an insurer or rating organization, OIR determines the discounts, credits, other rate differentials
and appropriate reductions in deductibles that reflect the full actuarial value of such revaluation,
78
which
in turn may be used in rate filings under the rating law. Windstorm mitigation measures that must be
evaluated for purposes of mitigation discounts include fixtures or construction techniques that enhance
roof strength, roof covering performance, roof-to-wall strength, wall-to-floor-to-foundation strength,
opening protection, and window, door, and skylight strength.
79
In recent sessions, the Legislature has passed several bills intended to reduce litigation and address
other practices related to motor vehicle and property insurance in an effort to reduce the rates charged
for these types of insurance policies.
80
Effect of the Bill – Rates/Premiums
The bill establishes that each residential property insurer and motor vehicle insurer rate filing made, or
pending, with OIR on after July 1, 2023, must reflect projected savings or reduction in claim frequency
and severity, and loss adjustment expenses, including for attorney fees, payment of attorney fees to
claimants, and any other reduction actuarially indicated due to the combined effect of certain bills
passed in 2021 and 2022.
81
In reviewing these rate filings, OIR must consider the effect of these bills. It
may develop methodology and data that incorporate generally accepted actuarial techniques and
standards to be used in reviewing the filings. To assist with the development of the methodology and
data, OIR may contract with an appropriate vendor and $500,000 in nonrecurring funds is appropriated
for the contract.
The methodology and data are not intended to create a mandatory minimum rate decrease for all
property and motor vehicle insurers, but to ensure that the rates meet the rating standards set forth in
Florida law.
The bill also requires all residential property insurers to provide information on their websites describing
hurricane mitigation premium discounts available to policyholders. Additionally, beginning on January 1,
2025, and every five years thereafter, OIR must reevaluate the fixtures or construction techniques
demonstrated to reduce windstorm losses, and the discounts, credits, other rate differentials, and
reductions in deductibles that correspond to these fixtures and techniques.
76
S. 627.062(2)(j), F.S.
77
S. 627.0629(1), F.S.
78
Id.
79
Id.
80
These bills include those enacted in chs. 2021-77, 2022-268, 2022-271, and 2023-15, Laws of Fla., which correspond
to insurance bills passed during the 2021 and 2022 regular legislative sessions and special sessions 2022D and 2022A.
81
Id.
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DATE: 6/1/2023
Agency Staffing
Background
DFS and OIR have both expressed to the Legislature that they have difficulty recruiting and retaining
qualified staff due to their inability to compete with the salaries paid by the private sector for similar
work. During a presentation to the Senate Banking and Insurance Committee on March 29, 2023, the
Director of DFS Consumer Services explained that there is currently a 55 percent vacancy rate in the
positions for the telephone helpline.
82
Effect of the Bill – Agency Staffing
The bill appropriates recurring and nonrecurring funds from the Insurance Regulatory Trust Fund to
create the following full-time positions to implement this bill:
7 positions within DFS.
18 positions within OIR.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
If the bill results in DFS and OIR assessing newly created or increased fine amounts against
insurers, insurance agents and agencies, or others, it may result in additional revenues for the
state.
2. Expenditures:
The bill provides for appropriation of funds from the Insurance Regulatory Trust Fund:
$574,036 in recurring funds and $33,467 in nonrecurring funds for seven additional full-time
positions within DFS.
$1,879,129 in recurring funds and $185,086 in nonrecurring funds for 18 additional full-time
positions within OIR.
$500,000 in nonrecurring funds for OIR to develop a methodology and data to review the
impact of certain chapters of law on residential property insurance and motor vehicle
insurance rate filings.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
82
Senate Committee on Banking and Insurance, Presentation by Greg Thomas from DFS,
https://www.flsenate.gov/media/videoplayer?EventID=1_nty0d3lq-202303290830&Redirect=true (last visited Apr. 8,
2023).
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DATE: 6/1/2023
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
The bill may result in a negative economic impact on insurers if they are assessed new or increased
fine amounts and if they have to expend additional funds to pay for more frequent examinations by
OIR.
83
D. FISCAL COMMENTS:
None.
83
Insurers are responsible for paying OIR for the cost of their examinations. S. 624.320, F.S.