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This year’s Florida Chamber of Commerce Insurance Summit was well attended by insurance professionals from across the country, Florida legislators and numerous stakeholders. Key discussion topics included reforms in Workers’ Compensation (WC), assignment of benefits (AOB), Personal Injury Protection (PIP) and the Florida Hurricane Catastrophe Fund (FHCF). Another important subject of discussion was the need to better educate Floridians living in flood zones about the importance of purchasing coverage. Art Randolph, Principal and Consulting Actuary with Pinnacle Actuarial Resources, Inc., was a panel member and spoke to Summit attendees about the determination of actuarially sound rates.
Florida legislators were particularly focused on the far-reaching negative implications of recent court decisions on Florida businesses. If legislative reforms to the WC statutes are not achieved during the coming Florida legislative session, businesses and consumers will continue to suffer the consequences. Businesses may be forced to increase product prices, implement employee layoffs and take other cost-saving measures which will negatively impact both employees and consumers.
The AOB issue emanating primarily from South Florida received its fair share of attention in light of its adverse impact to insureds and insurers writing in Florida. The assignment of benefits issue relates to a provision in insurance contracts that allows policyholders to assign their insurance benefits to a contractor. The majority of these benefits are being assigned by South Florida policyholders to roofers with whom they contract to service their water, wind or hail damage claims. The problem is that some South Florida contractors use the policyholder’s assignment of his or her benefits in order to fraudulently inflate repair costs and claim damages that may not have actually occurred. If the insurer denies the claim or does not pay the contractor’s full repair costs, the contractor’s attorney generally files a lawsuit to recover the full amount of such (inflated) repair costs.
Legislators understand how this fraud negatively impacts insureds, but they also recognize that AOB can be advantageous to consumers. Moreover, legislators understand the necessity of rate increases resulting from the inflated repair costs imposed by contractors on private insurers and Citizens Property Insurance Corporation (CPIC, the non-profit insurer of last resort, providing windstorm coverage and general property insurance for Florida homeowners). However, rate indications are too high to pass
along to insureds. Without the proper rate relief, legislators must consider the risk of insurer insolvency and the impact of higher costs on thinly capitalized insurers writing in Florida. Insolvency will result in insurers not fulfilling policyholder obligations, which also impacts the constituents of legislators. So legislators are left to answer the daunting question: What is the proper balance to achieve meaningful AOB reform?
The Summit was an informative conference that addressed a variety of very important topics and issues. Whether the much-needed aspects of Florida PIP and FHCF reforms will even be considered during the next Florida legislative session given the WC and AOB reform issues is uncertain. The legislators have an eventful session ahead of them, to say the least! Hopefully, they will address all areas needing prompt attention. Their deliberations will affect Florida insurers, businesses and consumers.
Terrence Wright, ACAS, MAAA, is a Consulting Actuary with Pinnacle Actuarial Resources, Inc. in the firm’s Atlanta, Georgia office. He has been in the insurance industry since 1998 and has 14 years of consulting experience. His consulting and insurance career has focused on medical professional liability, workers’ compensation, commercial automobile, general liability, products liability, personal automobile, and management liability. Terrence is an Associate of the Casualty Actuarial Society and a Member of the American Academy of Actuaries.
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