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: CS/SB 418
INTRODUCER: Banking and Insurance Committee and Senator Perry
SUBJECT: Insurance
DATE: February 22, 2023
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Thomas Knudson BI Fav/CS
2. MS
3. RC
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/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, in lieu of themselves, the Executive Director of the Citizens Property
Insurance Corporation and the Director of the Division of Emergency Management,
respectively, may appoint a designee to be a member of the Commission on Hurricane Loss
Projection Methodology.
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 result in an
increase in the automatic withdrawal of more than $10 from the previous withdrawal amount.
Revises provisions regarding the delivery of a policy to a policyholder by expanding the type
of policies authorized to be delivered by electronic transmission to include individual and
group health insurance policies.
Revises the mandated deductibles that must be offered for hurricane loss when issuing a
personal lines residential property insurance policy. For policies with a dwelling limit of at
REVISED: BILL: CS/SB 418 Page 2
least $1 million, the bill no longer requires the offer of the current mandated deductibles of 2
percent, 5 percent, and ten percent of the dwelling limit. Instead, the bill provides that an
insurer may offer deductibles of up to:
o Ten percent, for a policy covering a risk with dwelling limits of at least $1 million, but
less than $3 million;
o Fifteen percent, for a policy covering a risk with dwelling limits greater than $3 million.
Revises the requirement that the waiver by a policyholder of windstorm coverage or contents
coverage, must be in the policy holder's own handwriting, by also allowing the waiver to be
typed.
Eliminates the requirement that a notice be stamped on the declarations page of limited
coverage automobile policies. Such policies generally cover antique motor vehicles.
The bill has no fiscal impact on state or local government.
The bill takes effect July 1, 2023.
II. Present Situation:
Regulation of Property Insurance Rates
Part I of ch. 627, F.S., the Rating Law,
1
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;
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. BILL: CS/SB 418 Page 3
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
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
6
Section 627.062(2)(b), F.S.
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. BILL: CS/SB 418 Page 4
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
Delivery of Insurance Policies and Claims Communications
Section 627.421, F.S., requires most insurers
16
to deliver, mail, or electronically transmit the
insurance policy to the policyholder within 60 days of such coverage taking effect. Policyholders
of personal lines policies may elect electronic transmission of policy documents; however, for
commercial lines policies, policy documents are sent via electronic transmission unless the
policyholder declines electronic transmission by written or electronic communication to the
insurer. The policyholder is further entitled to a paper copy of the policy upon request.
17
An
insurer that electronically transmits policy documents must include notice of the right to receive
a paper copy of the policy via United States mail.
18
Property Insurance Deductibles and Coverages
A hurricane deductible is the amount paid by the policyholder before the insurer issues any
payment for damaged caused by a hurricane.
19
With certain exceptions, prior to issuing a
personal lines residential property insurance policy, the 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.
20
If the policy covers a risk with dwelling limits of $250,000 or more, the
insurer is not required to offer the $500 hurricane deductible.
21
Under Florida law, the hurricane deductible is capped at 10 percent of the policy dwelling limits
for a covered risk valued at less than $500,000, unless the policyholder affirmatively rejects the
13
Section 627.0665, F.S.
14
Id.
15
12 CFR 1005.10(d).
16
Part II of ch. 627, F.S., exempts reinsurers, wet marine and transportation, title, and credit life or credit disability insurers
from the delivery provisions of s. 627.421, F.S.
17
Section 627.421(1), F.S.
18
Id.
19
Department of Financial Services, Florida’s Hurricane Deductible https://myfloridacfo.com/docs-sf/consumer-services-
libraries/consumerservices-documents/understanding-coverage/consumer-guides/english---florida's-hurricane-
deductible.pdf?sfvrsn=28cdcf12_4 (last accessed February 22, 2023).
20
Section 627.701(3)(a), F.S.
21
Section 627.701(3)(d), F.S. BILL: CS/SB 418 Page 5
statutory hurricane deductible limit.
22
In order to do so, the policyholder must provide the insurer
the following statement: “I do not want the insurance on my home to pay for the first (specify
dollar value) of damage from hurricanes. I will pay those costs. My insurance will not.” The
policyholder and each named insured on the policy must sign and date the statement.
23
Florida law also requires a residential property insurance policy to include windstorm
coverage
24
, unless the policyholder affirmatively rejects the coverage.
25
If the policyholder is a
natural person, the policyholder must personally write and provide the insurer the following
statement in his or her own handwriting: “I do not want the insurance on my home (home/mobile
home/condominium unit) to pay for damage from windstorms. I will pay those costs. My
insurance will not.” The policyholder and each named insured on the policy must sign and date
the statement.
26
A similar provision exists for exclusion of contents coverage under a residential property
insurance policy, except for a condominium unit owner policy or a tenant policy.
27
If the policy
holder chooses such an exclusion, the policyholder must personally write and provide the insurer
the following statement in his or her own handwriting: “I do not want the insurance on my home
(home/mobile) to pay for costs to repair or replace any contents that are damaged. I will pay
those costs. My insurance will not.”
28
The policyholder and each named insured on the policy
must sign and date the statement.
Notice of Limited Coverage for Antique Vehicles
Some insurers
29
offer motor vehicle insurance coverage for antique vehicles
30
which does not
include mandatory personal injury protection
31
and property damage liability
32
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.
33
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.
34
The stamping requirement is antiquated
and prevents these types of policies from being delivered electronically.
22
Section 627.701(4)(d), F.S.
23
Id.
24
This requirement does not apply to a risk that is eligible for wind-only coverage from Citizens Property Insurance
Corporation. Nor does the requirement apply to a risk that is ineligible for Citizens coverage because the risk: (1) is a
structure that has a dwelling replacement cost of $700,000 or more; (2) is a single condominium unit with a combined
dwelling and contents replacement cost of $700,000 or more; or (3) is located in the “wind-borne” debris region and has an
insured value on the structure of $750,000 or more. See s. 627.351(6)(a)3.d. and 5.a, F.S.
25
Section 627.712, F.S.
26
Section 627.712(2)(a)1, F.S.
27
Section 627.712(3), F.S.
28
Id.
29
https://www.statefarm.com/insurance/auto/antique-classic-cars (last accessed February 22, 2023, 2023).
30
See section 320.086, F.S.
31
Section 627.733, F.S.
32
Section 324.022, F.S.
33
Section 627.7276(1), F.S.
34
Section 627.7276(2), F.S. BILL: CS/SB 418 Page 6
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, in lieu of themselves, the Executive Director
of the Citizens Property Insurance Corporation and the Director of the Division of Emergency
Management, respectively, may appoint a designee to be a member of the Commission on
Hurricane Loss Projection Methodology.
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 OIR 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
required for premium increases that will result in an increase of the automatic withdrawal of
more than $10 from the previous withdrawal amount.
Delivery of Insurance Policies and Claims Communications
Section 5 amends s. 627.421, F.S., to revise provisions regarding the delivery of a policy to a
policyholder by expanding the type of policies authorized to be delivered by electronic
transmission to include individual and group health insurance policies. The bill removes the
requirement that electronic transmission must include notice of the right to receive the policy via
U.S. mail rather than by electronic transmission.
Property Insurance Deductibles and Coverages
Section 6 amends s. 627.701, F.S., to revise the mandated deductibles that must be offered for
hurricane loss when issuing a personal lines residential property insurance policy. For policies
with a dwelling limit of at least $1 million, the bill no longer requires the offer of the current
mandated deductibles of 2 percent, 5 percent, and ten percent of the dwelling limit. Instead, the
bill provides that an insurer may offer deductibles of up to:
Ten percent for a policy covering a risk with dwelling limits of at least $1 million, but less
than $3 million;
Fifteen percent for a policy covering a risk with dwelling limits greater than $3 million. BILL: CS/SB 418 Page 7
The bill authorizes an insurer, between July 1, 2023, and July 1, 2024, to make an additional
filing with the OIR to implement changes made to s. 627.701, F.S., by the bill.
Section 7 amends s. 627.712, F.S., to the waiver by a policyholder of windstorm coverage, or of
coverage to pay for the costs to repair or replace any contents that are damaged, to be typed by
the policyholder or in the policyholder's own handwriting.
Notice of Limited Coverage for Antique Vehicles
Section 8 amends s. 627.7276, F.S., eliminates the requirement that a notice be stamped on the
declarations page of limited coverage automobile policies. Such policies generally cover antique
motor vehicles. 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. The stamping requirement is
antiquated and prevents these types of policies from being 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. BILL: CS/SB 418 Page 8
B. Private Sector Impact:
The bill may lead to the expansion of premium discounts, credits, and other rate
differentials based on windstorm construction standards.
C. Government Sector Impact:
The bill is not anticipated to have any significant fiscal impact on state or local
government.
VI. Technical Deficiencies:
Section 6 of the bill amends s. 627.701, F.S., authorizing an insurer, when issuing a personal
lines residential property insurance policy for hurricane loss, to offer deductibles of up to:
Ten percent for a policy covering a risk with dwelling limits of at least $1 million, but less
than $3 million;
Fifteen percent for a policy covering a risk with dwelling limits greater than $3 million.
The language does not cover a policy covering a risk with dwelling limits of exactly $3 million.
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, 627.421, 627.701, 627.712 and 627.7276.
IX. Additional Information:
A. Committee Substitute – Statement of Substantial Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
CS by Banking and Insurance Committee on February 21, 2023:
The committee substitute makes the following changes:
Revises provisions regarding the delivery of a policy to a policyholder by expanding
the type of policies authorized to be delivered by electronic transmission to include
individual and group health insurance policies; removes the requirement that
electronic transmission must include notice of the right to receive the policy via U.S.
mail rather than by electronic transmission.
Revises the mandated deductibles that must be offered for hurricane loss when
issuing a personal lines residential property insurance policy. Insurers need no longer
offer the current mandated deductibles of 2 percent, 5 percent, and ten percent, and
instead may offer deductibles of up to:
o Ten percent for a policy covering a risk with dwelling limits of at least $1 million,
but less than $3 million; or BILL: CS/SB 418 Page 9
o Fifteen percent for a policy covering a risk with dwelling limits greater than $3
million.
Removes the requirement that the waiver by a policyholder of windstorm coverage,
or of coverage to pay for the costs to repair or replace any contents that are damaged,
must be in the policy holder's own handwriting, allowing the waiver to be typed.
Provides that the Executive Director of the Citizens Property Insurance Corporation
may designate a full-time employee of the Corporation as the Director’s designee to
the Commission on Hurricane Loss Projection Methodology.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.