The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Banking and Insurance
BILL: SB 418
INTRODUCER: Senator Perry
SUBJECT: Insurance
DATE: February 20, 2023
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Thomas Knudson BI Pre-meeting
2. MS
3. RC
I. Summary:
SB 418 amends several insurance-related statutes. Specifically, the bill:
Allows a residential property insurer’s rate filing to estimate projected hurricane losses by
using a weighted or straight average of two or more models approved by the Florida
Commission on Hurricane Loss Projection Methodology;
Provides that a designee of the Director of the Division of Emergency Management may be a
member of the Commission on Hurricane Loss Projection Methodology in lieu of the
Director;
Authorizes an insurer to file a personal lines residential property insurance rating plan that
provides premium discounts, credits, and other rate differentials based on windstorm
construction standards developed by an independent, not-for-profit, scientific research
organization;
Limits the requirement that an insurer provide a policyholder who has an automatic bank
withdrawal agreement with the insurer with 15 days advance written notice of any increase in
policy premiums. Instead, notice will only be required for premium increases that will result
in an increase in the automatic withdrawal of more than $10 from the previous withdrawal
amount;
Requires an assignee provide the notice of intent to initiate litigation to the name and mailing
address designated by the insurer in the policy forms if notice is sent by certified mail, return
receipt requested, or to the e-mail address designated by the insurer in the policy forms if
notice is sent by electronic delivery; and
Requires an automobile policy that does not provide coverage for bodily injury liability and
property damage liability include notice accompanying the declarations page that the policy
does not provide such coverages and does not comply with any financial responsibility laws.
Such policies generally cover antique motor vehicles.
The bill has no impact to state funds or expenditures.
REVISED: BILL: SB 418 Page 2
The bill takes effect July 1, 2023.
II. Present Situation:
Regulation of Property Insurance Rates
Part I of ch. 627, F.S., is the Rating Law,
1
which governs property, casualty, and surety insurance
covering the subjects of insurance resident, located, or to be performed in this state.
2
The rating
law provides that the rates for all classes of insurance it governs may not be excessive,
inadequate, or unfairly discriminatory.
3
Though the terms “rate” and “premium” are often used
interchangeably, the rating law specifies that “rate” is the unit charge that is multiplied by the
measure of exposure or amount of insurance specified in the policy to determine the premium,
which is the consideration paid by the consumer.
4
All insurers or rating organizations must file rates with the Office of Insurance Regulation (OIR)
either 90 days before the proposed effective date of a new rate, which is considered a “file and
use” rate filing, or 30 days after the effective date of a new rate, which is considered a “use and
file” rate filing.
5
Upon receiving a rate filing, the OIR reviews the filing to determine if the rate is excessive,
inadequate, or unfairly discriminatory. The OIR makes that determination in accordance with
generally acceptable actuarial techniques and considers the following:
Past and prospective loss experience;
Past and prospective expenses;
The degree of competition among insurers for the risk insured;
Investment income reasonably expected by the insurer;
The reasonableness of the judgment reflected in the rate filing;
Dividends, savings, or unabsorbed premium deposits returned to policyholders;
The adequacy of loss reserves;
The cost of reinsurance;
Trend factors, including trends in actual losses per insured unit for the insurer;
Conflagration and catastrophe hazards;
Projected hurricane losses;
Projected flood losses, if the policy covers the risk of flood;
The cost of medical services, if applicable;
A reasonable margin for underwriting profit and contingencies; and
Other relevant factors that affect the frequency or severity of claims or expenses.
6
1
Section 627.011, F.S.
2
Section 627.021(1), F.S.
3
Section 627.062(1), F.S.
4
Section 627.041, F.S.
5
Section 627.062, F.S.
6
Section 627.062(2)(b), F.S. BILL: SB 418 Page 3
Florida Commission on Hurricane Loss Projection Methodology
Projected hurricane losses in a rate filing must be estimated using a model or method found to be
acceptable or reliable by the Florida Commission on Hurricane Loss Projection Methodology
(Commission).
7
The Commission consists of 12 members with expertise in the elements used to
develop computer models to estimate hurricane and flood loss. Members of the Commission
include State University System faculty experts in insurance finance, statistics, computer system
design, meteorology, and structural engineering; three actuaries; the insurance consumer
advocate; the Director of the Florida Hurricane Catastrophe Fund; the Executive Director of
Citizens Property Insurance Corporation; and the Director of the Division of Emergency
Management.
8
Residential Property Insurance Mitigation Credits, Discounts, or Other Rate Differentials
Residential property insurance rate filings must account for mitigation measures undertaken by
policyholders to reduce hurricane losses.
9
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.
10
Upon their filing by an insurer or rating organization, the OIR determines the discounts, credits,
other rate differentials and appropriate reductions in deductibles that reflect the full actuarial
value of such revaluation,
11
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.
12
Automatic Bank Withdrawal Agreements in the Insurance Context
Florida law allows insurers and policyholders to enter into automatic bank withdrawal
agreements for the purpose of paying insurance premiums.
13
Policyholders generally have the
option of selecting between payment plans that divide the premium into two or four separate
payments or in monthly installments. Under current law, insurers must 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.
14
By contrast, federal law requires financial institutions to provide 10 days advance written notice
prior to any automatic bank withdrawal either when the amount varies from the previous
withdrawal amount, when the amount varies outside a specified range of amounts, or when the
amount varies from the previous withdrawal amount by an agreed-upon amount.
15
7
Section 627.062(2)(b)11., F.S.
8
Section 627.0628(2)(b), F.S.
9
Section 627.062(2)(j), F.S.
10
Section 627.0629(1), F.S.
11
Id.
12
Id.
13
Section 627.0665, F.S.
14
Id.
15
12 CFR 1005.10(d). BILL: SB 418 Page 4
Notice of Limited Coverage for Antique Vehicles
Some insurers
16
offer motor vehicle insurance coverage for antique vehicles
17
which does not
include mandatory personal injury protection
18
and property damage liability
19
coverages. In
those cases, Florida law requires the automobile policy to provide notice to the policyholder of
the limited coverage and its noncompliance with any financial responsibility law.
20
This
coverage is generally appropriate for antique vehicles that are stored in a private collection or as
part of a public display and are not driven on the roadways of this state. The notice must be
stamped or printed in contrasting color from the color used on the policy and placed on the
policy declaration page and on the back of the policy.
21
The stamping requirement is antiquated
and prevents these types of policies from being delivered electronically.
III. Effect of Proposed Changes:
Hurricane Model Averaging and Weighting
Section 1 amends s. 627.062, F.S., to provide that a residential property insurer’s rate filing may
estimate projected hurricane losses by using a weighted or straight average of two or more
methods or models approved by the Commission on Hurricane Loss Projection Methodology.
Florida Commission on Hurricane Loss Projection Methodology
Section 2 amends s. 627.0628, F.S., to provide that the Director of the Division of Emergency
Management may designate a full-time employee of the Division to be a member of the
Commission in lieu of the Director.
Residential Property Insurance Mitigation Credits, Discounts, or Other Rate Differentials
Section 3 amends. s. 627.0629, F.S., to provide that an insurer may file with the Office of
Insurance Regulation a personal lines residential rating plan that provides premium discounts,
credits, and other rate differentials based on windstorm construction standards developed by an
independent, not-for-profit, scientific research organization, if such standards meet statutory
requirements.
Required Notifications of Automatic Bank Withdrawals
Section 4 amends s. 627.0665, F.S., governing automatic bank withdrawal agreements between
insurers and policyholders, to limit the requirement that an insurer provide a policyholder 15
days advance written notice of any increase in policy premiums. Instead, notice will only be
16
https://www.statefarm.com/insurance/auto/antique-classic-cars (last visited Feb. 13, 2023).
17
See section 320.086, F.S.
18
Section 627.733, F.S.
19
Section 324.022, F.S.
20
Section 627.7276(1), F.S.
21
Section 627.7276(2), F.S. BILL: SB 418 Page 5
required for premium increases that will result in an increase of the automatic withdrawal of
more than $10 from the previous withdrawal amount.
Notice of Limited Coverage for Antique Vehicles
Section 5 amends s. 627.7276, F.S., to require that an automobile policy that does not provide
coverage for bodily injury liability and property damage liability include notice accompanying
the declarations page that the policy does not provide such coverages and does not comply with
any financial responsibility laws. Such policies generally cover antique motor vehicles. 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
must be typed in a font at least as large as the font used in the declarations page. This change will
allow these types of policies to be delivered electronically.
The bill is effective July 1, 2023.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
None.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
None.
E. Other Constitutional Issues:
None.
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
None.
B. Private Sector Impact:
The bill may lead to the expansion of premium discounts, credits, and other rate
differentials based on windstorm construction standards. BILL: SB 418 Page 6
C. Government Sector Impact:
The bill is not anticipated to have any significant impact on state or local government.
VI. Technical Deficiencies:
None.
VII. Related Issues:
None.
VIII. Statutes Affected:
This bill substantially amends the following sections of the Florida Statutes: 627.062, 627.0628,
627.0629, 627.0665, and 627.7276.
IX. Additional Information:
A. Committee Substitute – Statement of Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
None.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.