October 16, 2019
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       Florida Senate - 2010                                    SB 2176
       
       
       
       By Senator Peaden
       
       
       
       
       2-01441A-10                                           20102176__
    1                        A bill to be entitled                      
    2         An act relating to commercial insurance rates;
    3         amending s. 627.062, F.S.; exempting specified types
    4         of insurance and commercial lines risks from certain
    5         requirements of state law relating to the filing and
    6         review of rates; requiring that an insurer notify the
    7         Office of Insurance Regulation following a change to
    8         certain rates; requiring that an insurer maintain
    9         certain information regarding underwriting files,
   10         premiums, and loss and expense statistics, which
   11         information is subject to review by the office;
   12         amending s. 627.0651, F.S.; limiting the applicability
   13         of certain provisions governing the establishment and
   14         use of rates and rating schedules to private passenger
   15         automobile insurance rates; providing an effective
   16         date.
   17  
   18  Be It Enacted by the Legislature of the State of Florida:
   19  
   20         Section 1. Paragraph (d) is added to subsection (3) of
   21  section 627.062, Florida Statutes, to read:
   22         627.062 Rate standards.—
   23         (3)
   24         (d) The following categories or types of insurance and
   25  commercial lines risks are not subject to the filing and review
   26  requirements of subsection (2):
   27         1. Excess or umbrella;
   28         2. Surety and fidelity;
   29         3. Boiler and machinery, as well as leakage and fire
   30  extinguishing equipment;
   31         4. Commercial motor vehicle;
   32         5. Errors and omissions;
   33         6. Professional liability, except medical malpractice
   34  coverage;
   35         7. Directors and officers, employment practices and
   36  management liability;
   37         8. Intellectual property and patent infringement liability;
   38         9. Advertising injury and Internet liability;
   39         10. Environmental liability;
   40         11. Property risks rated under a highly protected risks
   41  rating plan;
   42         12. Unique or unusual risks or portions of risks not rated
   43  according to manuals, rating plans, or rate schedules, including
   44  “A” rates;
   45         13. Commercial lines insurance risks, excluding property
   46  and medical malpractice coverage, producing an annual premium of
   47  $25,000 or more; and
   48         14. Any other commercial lines categories of insurance or
   49  commercial lines risks that the office determines should not be
   50  subject to the filing and review requirements of subsection (2)
   51  because of the existence of a competitive market for such
   52  insurance, similarity of such insurance to other categories or
   53  kinds of insurance not subject to filing and review requirements
   54  of subsection (2), or potential improvement of the general
   55  operational efficiency of the office.
   56  
   57  An insurer must notify the office of any changes to rates for
   58  types of insurance described in this paragraph which are not
   59  subject to subsection (2) no later than 30 days after the
   60  effective date of the change. The notice must include the name
   61  of the insurer; the type or kind of insurance subject to rate
   62  change; total premium written during the immediately preceding
   63  year by the insurer for the type or kind of insurance subject to
   64  the rate change; and the average statewide percentage change in
   65  rates. Underwriting files, premiums, and loss and expense
   66  statistics with regard to risks written by an insurer not
   67  subject to the filing and review requirements of subsection (2)
   68  shall be maintained by the insurer and are subject to
   69  examination by the office.
   70         Section 2. Subsections (1), (2), (3), and (4), paragraph
   71  (a) of subsection (5), and subsections (6), (7), (8), and (9) of
   72  section 627.0651, Florida Statutes, are amended to read:
   73         627.0651 Making and use of rates for motor vehicle
   74  insurance.—
   75         (1) Insurers shall establish and use rates, rating
   76  schedules, or rating manuals to allow the insurer a reasonable
   77  rate of return on motor vehicle insurance written in this state.
   78  A copy of private passenger automobile insurance rates, rating
   79  schedules, and rating manuals, and changes therein, shall be
   80  filed with the office under one of the following procedures:
   81         (a) If the filing is made at least 60 days before the
   82  proposed effective date and the filing is not implemented during
   83  the office’s review of the filing and any proceeding and
   84  judicial review, such filing shall be considered a “file and
   85  use” filing. In such case, the office shall initiate proceedings
   86  to disapprove the rate and so notify the insurer or shall
   87  finalize its review within 60 days after receipt of the filing.
   88  Notification to the insurer by the office of its preliminary
   89  findings shall toll the 60-day period during any such
   90  proceedings and subsequent judicial review. The rate shall be
   91  deemed approved if the office does not issue notice to the
   92  insurer of its preliminary findings within 60 days after the
   93  filing.
   94         (b) If the filing is not made in accordance with the
   95  provisions of paragraph (a), such filing shall be made as soon
   96  as practicable, but no later than 30 days after the effective
   97  date, and shall be considered a “use and file” filing. An
   98  insurer making a “use and file” filing is potentially subject to
   99  an order by the office to return to policyholders portions of
  100  rates found to be excessive, as provided in subsection (11).
  101         (2) Upon receiving notice of a private passenger automobile
  102  insurance rate filing or rate change, the office shall review
  103  the rate or rate change to determine if the rate is excessive,
  104  inadequate, or unfairly discriminatory. In making that
  105  determination, the office shall in accordance with generally
  106  accepted and reasonable actuarial techniques consider the
  107  following factors:
  108         (a) Past and prospective loss experience within and outside
  109  this state.
  110         (b) The past and prospective expenses.
  111         (c) The degree of competition among insurers for the risk
  112  insured.
  113         (d) Investment income reasonably expected by the insurer,
  114  consistent with the insurer’s investment practices, from
  115  investable premiums anticipated in the filing, plus any other
  116  expected income from currently invested assets representing the
  117  amount expected on unearned premium reserves and loss reserves.
  118  Such investment income shall not include income from invested
  119  surplus. The commission may adopt rules utilizing reasonable
  120  techniques of actuarial science and economics to specify the
  121  manner in which insurers shall calculate investment income
  122  attributable to motor vehicle insurance policies written in this
  123  state and the manner in which such investment income is used in
  124  the calculation of insurance rates. Such manner shall
  125  contemplate the use of a positive underwriting profit allowance
  126  in the rates that will be compatible with a reasonable rate of
  127  return plus provisions for contingencies. The total of the
  128  profit and contingency factor as specified in the filing shall
  129  be utilized in computing excess profits in conjunction with s.
  130  627.066. In adopting such rules, the commission shall in all
  131  instances adhere to and implement the provisions of this
  132  paragraph.
  133         (e) The reasonableness of the judgment reflected in the
  134  filing.
  135         (f) Dividends, savings, or unabsorbed premium deposits
  136  allowed or returned to Florida policyholders, members, or
  137  subscribers.
  138         (g) The cost of repairs to motor vehicles.
  139         (h) The cost of medical services, if applicable.
  140         (i) The adequacy of loss reserves.
  141         (j) The cost of reinsurance.
  142         (k) Trend factors, including trends in actual losses per
  143  insured unit for the insurer making the filing.
  144         (l) Other relevant factors which impact upon the frequency
  145  or severity of claims or upon expenses.
  146         (3) Private passenger automobile insurance rates shall be
  147  deemed excessive if they are likely to produce a profit from
  148  Florida business that is unreasonably high in relation to the
  149  risk involved in the class of business or if expenses are
  150  unreasonably high in relation to services rendered.
  151         (4) Private passenger automobile insurance rates shall be
  152  deemed excessive if, among other things, the rate structure
  153  established by a stock insurance company provides for
  154  replenishment of surpluses from premiums, when such
  155  replenishment is attributable to investment losses.
  156         (5)(a) Private passenger automobile insurance rates shall
  157  be deemed inadequate if they are clearly insufficient, together
  158  with the investment income attributable to them, to sustain
  159  projected losses and expenses in the class of business to which
  160  they apply.
  161         (6) One private passenger automobile insurance rate shall
  162  be deemed unfairly discriminatory in relation to another in the
  163  same class if it clearly fails to reflect equitably the
  164  difference in expected losses and expenses.
  165         (7) Private passenger automobile insurance rates are not
  166  unfairly discriminatory because different premiums result for
  167  policyholders with like loss exposures but different expense
  168  factors, or like expense factors but different loss exposures,
  169  so long as rates reflect the differences with reasonable
  170  accuracy.
  171         (8) Private passenger automobile insurance rates are not
  172  unfairly discriminatory if averaged broadly among members of a
  173  group; nor are rates unfairly discriminatory even though they
  174  are lower than rates for nonmembers of the group. However, such
  175  rates are unfairly discriminatory if they are not actuarially
  176  measurable and credible and sufficiently related to actual or
  177  expected loss and expense experience of the group so as to
  178  assure that nonmembers of the group are not unfairly
  179  discriminated against. Use of a single United States Postal
  180  Service zip code as a rating territory shall be deemed unfairly
  181  discriminatory.
  182         (9) In reviewing the private passenger automobile insurance
  183  rate or rate change filed, the office may require the insurer to
  184  provide at the insurer’s expense all information necessary to
  185  evaluate the condition of the company and the reasonableness of
  186  the filing according to the criteria enumerated herein.
  187         Section 3. This act shall take effect January 1, 2011.

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