Insurer Report Card Rule Presses Forward; Industry Impacts Remain Uncertain
By statute, the OIR is to adopt an administrative rule that creates a “report card” for personal residential property insurers. This is to include a letter-grade scale which grades each insurer on the number and nature of consumer complaints received by the Department of Financial Services against the insurer, the disposition of complaints, the average length of time for claims payment, and “any other factors” the Commission identifies as assisting consumers “in making informed choices about homeowner’s insurance.” Boiling this broad mandate into a fair, workable, and effective rule is not an enviable task to be certain. On February 9, 2010, the OIR held a workshop on the current version of the rule, which poses as many questions as answers for both the industry and consumers. The current proposed rule calls for insurers to be graded on a curve – given a letter grade from A to E – based on the insurer’s market share of premium related complaints, loss related complaints, valid complaints, and average number of months to pay claims.
Several industry concerns were voiced at the workshop. The letter-grade is in part determined by all complaints made to the Department, regardless of whether they are valid or invalid. Because companies are graded on a curve, a company can be in full compliance with the Insurance Code and still receive a low grade. The grade is retrospective – that is, companies will be graded now by using criteria developed now based on data from the last five years. Of primary concern, the criteria may well discriminate against companies with certain business models. For example, companies actively writing new business or assuming business from Citizens are the companies most likely to be receiving consumer requests because their customers are going to be going through underwriting for the first time and otherwise getting established with the company. A consumer who has been with the same company for many years (which company may not be writing new business) is less likely to have complaints. In short, the companies trying to bring private market capacity to Florida might come out on the lower end of this new scale.
For a copy of the current draft of the rule or additional information, please contact us.