The 2011 Florida Legislature established a new opportunity for insurers to inform policyholders of changes in their policies. Case law in Florida previously suggested that insurers seeking to continue coverage with material changes in terms should nonrenew existing policies and offer replacement policies with the new terms. This process could be confusing for policyholders, who might not understand why their policies were being nonrenewed or how they could accept the renewal offer. The legislature decided the process would be simpler if insurers could simply provide a notice to insureds letting them know of policy changes. This led to the creation of section 627.43141, Florida Statutes, allowing a “Notice of Change in Policy Terms.”
The Notice of Change in Policy Terms has two primary roles in insurers’ regulatory processes. First, insurers can use the notice for the purpose mentioned above– informing insureds how their policies are changing from year-to-year without having to do so through a potentially confusing nonrenewal notice. Second, an insurer seeking to certify the compliance of its product forms with Florida law often will be required to submit any notice of change with the certification filing in order for the filing to be considered complete.
For purposes of the statute, a “change in policy terms” means the modification, addition, or deletion of any term, coverage, duty, or condition from the previous policy. Not every revision to the policy constitutes a change– the correction of typographical or scrivener’s errors or the application of mandated legislative changes is not a change in policy terms. However, aside from these limited exceptions, the legislature’s view of what is considered a change is broad and encompasses most substantive changes.
If an insurer should provide notice of a policy change, the timing and format of the notice are important. By statute, the notice must be entitled, “Notice of Change in Policy Terms” and the notice must be enclosed with the notice of renewal premium. This means the notice of change is sent with less advance notice than a nonrenewal notice would be sent for residential insurance policies. Of course, this is because the policyholder has the opportunity to renew coverage rather than facing the certain need to seek alternative coverage as is the case with nonrenewal notices. For lines of business other than the residential lines, the renewal premium notice is sent with about the same lead time as a nonrenewal notice.
The statute allows an insurer to demonstrate proof of mailing through a United States Postal Service proof or by using registered mail. However, the statute does not required an insurer to use these methods. An insurer will want to be able to demonstrate it sends the notices because failure to provide the notice means the affected coverages remain intact until a proper notice is given. Insurers have discretion in how they demonstrate the notices are sent.
Because the notice of change is sent with the renewal premium notice, the law specifies that an insurer’s receipt of the insured’s premium payment for the renewal policy constitutes the insured’s acceptance of the new policy terms. This makes the renewal process easy to administer for both the insurer and insured.
The Office of Insurance Regulation is allowing property and casualty insurers in all lines of business except workers’ compensation to certify their form filings’ compliance with Florida law as an alternative to seeking prior approval. The OIR’s order creating this opportunity (Order 126368-12) specifies that when an insurer seeking to certify a form that involves a change in terms to which section 627.43141 would apply, the insurer must submit a completed version of the Notice of Change in Policy Terms inthe certification filing. Certification filings are submitted 30 days prior to the forms’ anticipated use and typically result in the OIR’s marking them filed for informational purposes (subject to any concerns with the content of the certification or filing).
The Florida legislature created the Notice of Change in Policy Terms as a more efficient way of allowing insurers to communicate with policyholders than was implied by case law. This has led to a new form and process in the renewal cycle for Florida business. In light of the importance of the form in signifying product changes and in the form certification process, it looks like these notices will play an important continuing role in Florida going forward.
