On January 10, 2008, Florida Senate President Ken Pruitt announced the creation of the Select Committee on Property Insurance Accountability (Select Committee). The announced purpose of the Select Committee is “to take testimony, under oath, from property and casualty insurance executives about their pricing practices and their increased profits associated with escalating rates.”
The Select Committee plans to hold hearings February 4 – 5, 2008. It intends to issue invitations, “and, if necessary, subpoenas,” to selected insurance company executives during the week of January 14, 2008.
The Select Committee will be chaired jointly by Senator Jeffrey H. Atwater, a Republican from Palm Beach County, who has been designated as the majority party choice for Senate President for the 2008 – 2010 biennium, and Senator Steven A. Geller, a Democrat from Broward County, who is currently the Senate Minority Leader. The membership of the committee will consist of all of the members of the Banking & Insurance Committee and of the Judiciary Committee.
The impetus for creation of the Select Committee is the failure of House Bill 1-A, enacted January 2007, to produce dramatic property insurance rate reductions for many consumers.
House Bill 1-A, among other things, expanded the amount of low-priced reinsurance coverage available from the Florida Hurricane Catastrophe Fund (Cat Fund). It required insurers to file rates that reflected their savings from the additional Cat Fund coverage, and it also required filings to include a statement under oath from the insurer’s chief actuary and CEO or CFO to the effect that the filing reflected all premium savings that are expected to result from legislative enactments. Most insurers chose to comply by implementing a rate reduction that incorporated the “presumed factor” calculated by the Office of Insurance Regulation (OIR), typically a statewide average rate reduction of 24 percent on the entire property policy, to be followed with a later “true-up” filing reflecting the insurer’s actual savings. Many true-up filings from large insurers called for rate increases over the rate that resulted from implementation of the presumed factor. As of January 8, 2008, the OIR had disapproved or announced its intent to disapprove true-up filings from 31 insurers, which constitute 32.5 percent of the voluntary market.
At a press conference announcing the creation of the Select Committee, Senator Geller stated that during legislative deliberations on House Bill 1-A, “We were told [by insurers] that if you take this action, our rates will go down by X amount….Some insurers appear to have lied to the Florida Legislature.”
Senator Geller said that the decisions as to which insurers to invite or subpoena had not yet been made. His tentative plan is for the testimony to be broken into three segments: testimony from insurers whose true-up filings incorporated further rate reductions, testimony from insurers whose true-up filings proposed rate increases, and testimony from experts.
Governor Charlie Crist commended the Senate action, stating, “Sometimes, big business can be just as bad as big government, and I applaud the Senate for taking action today to unravel the mystery of why insurance rates have not come down as we understood they would. For too long, the industry has profiteered on the backs of our people.”