2012 Saw its Share of Insurance Issues
By some standards, there were fewer blockbuster issues in the Florida insurance market in 2012 than in some prior years. After all, this was not a year in which the legislature needed to tackle workers’ compensation or medical malpractice reform, and efforts at bad faith reform stalled fairly early in the legislative session. Florida thankfully did not experience significant catastrophe losses this year, and in the property market rates continued to rebound from the efforts to artificially suppress them a few years ago. That’s not to say, however, that Florida didn’t have its share of significant events affecting the market. From start to finish 2012 was an active year.
Early Start to the Legislative Session– The year got off to a quick start when the Florida legislature convened earlier than usual. Every ten years the legislature must tackle redistricting, which requires an early start to the session. The session always seems to come around quickly after the holidays, but in 2012 this really was the case. On the bright side, the legislature was done by early spring and insurers had more time to evaluate and implement the changes. This is particularly helpful in the property market, where annual legislative changes typically are made on the eve of hurricane season and leave insurers and regulators scrambling to implement them. For better or for worse, we return to the typical cycle in 2013 with the session starting March 5.
Forms Certifications– A byproduct of the annual changes to the insurance code is the volume of product filings that must be submitted by insurers and processed by the Office of Insurance Regulation. Over the last couple of years, the filing volume became overwhelming and greatly increased the length of the OIR’s review period. At the same time, and perhaps sometimes as a result, the OIR lost key forms analysts that only compounded the problem. The OIR began to address this in the spring by allowing insurers to certify the compliance of commercial forms with requirements of the insurance code. The OIR later expanded this opportunity to all property and casualty forms except workers’ compensation. Insurers initially had to warm up to the new opportunity to develop procedures allowing them to justify making the certifications. However, upon putting these procedures in place, and with subsequent clarifications from the OIR, insurers have been able to get their products and revisions into the market in a more timely manner than over the last couple of years.
Citizens Property Insurance Corporation– Public policy relating to Citizens tends to swing from making it a true noncompetitive residual market to establishing it as a lower-cost provider of competitive homeowners insurance. In 2012, the pendulum shifted back toward the residual market role. Policymakers expressed increasing concern with the massive tax that would be levied on all Floridians if Citizens were to incur deficits. Citizens began to reduce coverages and consider incentive programs to reduce its size. Although Citizens more recently abandoned its proposed surplus note incentive program, it did see renewed interested in private market assumptions at the end of 2012. Unfortunately, as long as its rates remain below market in many areas, new policies will come in as fast as policies go out.
PIP Filings– The legislature enacted reforms designed to curtail escalating Personal Injury Protection (PIP) rates. A study commissioned by the Office of Insurance Regulation indicated the magnitude of the anticipated savings. However, individual insurers might not have experienced those savings due to prior efforts to moderate the PIP portion of their rates. The Office of Insurance Regulation and legislature will continue to monitor the PIP reforms to determine whether they are having their intended effect.
Affordable Care Act– Florida policymakers did nothing to implement the Affordable Care Act for healthcare as they awaited the outcome of the 2012 presidential election. Policymakers did not opt for Florida to operate its own exchange under the original or extended deadlines. The Florida Senate and House of Representatives have dedicated teams to working on implementation issues. This will be a key issue heading into 2013.
As 2012 comes to a close, many of these same issues will continue to dominate the insurance headlines in 2013. The legislature will weigh options for reducing the size of Citizens and Florida policymakers will look to make up lost time relating to the Affordable Care Act. All of this will come to the forefront quickly as the 2013 legislative session begins March 5.