HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/HB 7065 PCB COM 23-04 Insurer Accountability
SPONSOR(S): Appropriations Committee, Commerce Committee, Duggan
TIED BILLS: IDEN./SIM. BILLS: SB 7052
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
Orig. Comm.: Commerce Committee 21 Y, 0 N Fortenberry Hamon
1) Appropriations Committee 26 Y, 0 N, As CS Willson Pridgeon
SUMMARY ANALYSIS
The bill makes various changes designed to increase insurer accountability in the following ways:
Agent Licensing: allows the Department of Financial Services (DFS) to deny licensure to an applicant
who has committed a misdemeanor that is a violation of the Florida Insurance Code (Insurance Code).
Examination of Insurers: requires a risk-based assessment for scheduling Office of Insurance Regulation
(OIR) financial examinations and of market conduct examinations of insurers following a hurricane.
Hazardous Financial Condition: codifies portions of the National Association of Insurance
Commissioners hazardous financial condition model act.
Insurance Policy/Claims Handling: identifies two new acts that constitute unfair methods of competition
or unfair or deceptive acts by an insurer or agent; prohibits Citizens Property Insurance Corporation from
declaring a property ineligible if the property has unrepaired damage that is the subject of a claim being
serviced by the Florida Insurance Guaranty Association; requires residential property insurers to report to
OIR any temporary suspension of writing policies, for certain reasons; limits OIR’s authority to exempt an
insurer from forms review for 36 months following a violation of the Insurance Code; requires residential
property insurers to create and use claims-handling manuals that meet certain criteria and to provide them
to OIR upon request; provides that an authorized insurer may not cancel or nonrenew a residential property
insurance policy for 90 days after a property has been repaired from damage due to a hurricane or wind
loss, or until the earlier of one year after the insurer issues final payment or the property has been repaired,
if the damage was not due to a hurricane; clarifies that if a roof deductible is applied to a loss under a
residential property insurance policy, no other deductible may be applied; provides a tolling of time
applicable to a servicemember who is deployed to a combat zone or combat support posting; clarifies that
nothing in the Bill SB 2A (2022A) impairs insurance contract rights in existence when the bill became law.
Fines: increases the maximum fines for failure to timely respond to consumer complaints; increases the
maximum fines that OIR may assess if an insurer violates the Insurance Code; creates fines for insurer
violations of the Insurance Code related to a declared state of emergency; increases the maximum fines
that may be assessed for unfair methods of competition or unfair or deceptive acts or practices by any
individual or company engaged in the transaction of insurance.
Reporting: requires OIR to create annual and quarterly reports of its actions to enforce insurer compliance
with the Insurance Code; requires DFS Division of Investigative and Forensic Services to create an annual
report regarding investigations and prosecutions of insurance fraud.
Rates/Premiums: provides OIR with funding to contract with an outside vendor to develop a methodology
and data to assist in determining the impact of recent bills on motor vehicle and residential property
insurance rate filings; requires residential property insurers to post hurricane mitigation discount
information on their websites; requires OIR to reevaluate fixtures or construction techniques demonstrated
to reduce windstorm losses, and associated insurance premium discounts every five years.
Agency Staffing: appropriates positions to DFS and OIR to implement the bill.
The bill has no impact on local government revenues and expenditures. It may have a positive impact on state
revenues and a negative impact on state expenditures. It has an indeterminate negative direct economic
impact on the private sector.
The bill has an effective date of July 1, 2023.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
STORAGE NAME: h7065a.APC
DATE: 4/24/2023
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Insurance Agent Licensing
Background
The Department of Financial Services (DFS) has broad duties, including licensure and regulation of
insurance agents, agencies, and adjusters; insurance consumer assistance and protection; and holding
and attempting to return unclaimed property to its rightful owner. 1 DFS has a number of regulatory
responsibilities over the Florida insurance market. DFS regulates insurance adjusters, which includes
public adjusters, independent adjusters, and company employee adjusters and conducts insurance-
related consumer outreach through its Division of Consumer Services (Consumer Services). The
Division of Workers’ Compensation within DFS administers the workers’ compensation system through
enforcement of coverage requirements,2 administration of workers’ compensation health care delivery
system,3 data collection,4 and assisting injured workers, employers, insurers, and providers in fulfilling
their responsibilities.5 DFS also administers the rehabilitation and liquidation of insolvent insurers.
Effect of the Bill – Licensure
The bill provides that DFS may deny licensure to an applicant who, within seven years of application,
has been found guilty of, or pleaded guilty or nolo contendere to a misdemeanor that is also a violation
of the Florida Insurance Code (Insurance Code).
Examination of Insurers
Background
The Office of Insurance Regulation (OIR) provides oversight for specified insurance products, insurers
and other risk bearing entities in Florida.6 The Financial Services Commission (FSC), composed of the
Governor, the Attorney General, the Chief Financial Officer, and the Commissioner of Agriculture,
serves as agency head of the Office of Insurance Regulation for purposes of rulemaking. Further, the
FSC appoints the commissioner of the Florida Office of Insurance Regulation.
As part of their regulatory oversight, OIR may suspend or revoke an insurer’s certificate of authority
under certain conditions.7 OIR is responsible for examining the affairs, transactions, accounts, records,
and assets of each insurer that holds a certificate of authority to transact insurance business in Florida. 8
As part of the examination process, all persons being examined must make available to OIR the
accounts, records, documents, files, information, assets, and matters in their possession or control that
relate to the subject of the examination.9 OIR is also authorized to conduct market conduct
examinations to determine compliance with applicable provisions of the Insurance Code. 10
1 See, e.g., Florida Department of Financial Services, What is the Purpose of the Department, https://oppaga.fl.gov/ (last
visited Apr. 2, 2023).
2 S. 440.107(3), F.S.
3 S. 440.13, F.S.
4 Ss. 440.185 and 440.593, F.S.
5 S. 440.191, F.S.
6 S. 20.121(3)(a), F.S.
7 S. 624.418, F.S.
8 S. 624.316(1)(a), F.S.
9 S. 624.318(2), F.S.
10 S. 624.3161, F.S.
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Financial Examinations
OIR is responsible for all activities concerning insurers and other risk-bearing entities such as licensing,
solvency, rates, and policy forms. The law requires OIR to conduct financial examinations of insurers.
The scope of the financial examination includes a review of the affairs, records, transactions,
accounting procedures and financial condition of an insurer. 11 OIR is charged with conducting an exam
once every five years, with the exception of domestic insurers that have held a certificate of authority
for less than three years, which are required to be examined on an annual basis.12 OIR is required to
examine an insurer applying for an initial certificate of authority prior to issuing the certificate of
authority.13
Effect of the Bill – Financial Examinations
The bill changes OIR’s mandatory financial examination schedule to the following risk-based schedule:
High-risk insurers must be examined at least once every three years.
Average-risk insurers and low-risk insurers must be examined at least once every five years.
Financial examinations must cover the preceding fiscal years since the last examination, except for
examinations of low-risk insurers, in which case the examination must cover the preceding three fiscal
years. The bill requires that OIR create, and that FSC must adopt by rule, a risk-based selection
methodology for scheduling and conducting financial exams, which much include:
Use of required risk-focused analysis to prioritize financial examinations of insurers when
reporting indicated that the insurer’s financial condition has declined.
Consideration of the following:
o Level of capitalization and identification of unfavorable trends;
o Negative trends in profitability or cash flow or operations;
o National Association of Insurance Commissioners Insurance Regulatory Information
System ratio results;
o Risk-based capital and risk-based trend test results;14
o The structure and complexity of the insurer;
o Changes in the insurer’s officers or board of directors;
o Changes in the insurer’s business strategy or operations;
o Findings and recommendations from a financial or market conduct examination;
o Current or pending regulatory actions by OIR or DFS;
o Information obtained from other regulatory agencies or independent organization ratings
and reports;
o The impact of an insurer’s insolvency on the insurer’s policyholders and the public.
Prioritization of property insurers for which OIR identifies significant solvency concerns.
Any other conditions OIR deems necessary for the protection of the public.
In addition to the methodology, the rule must include a plan to implement the risk-based examination
schedule. OIR must present the proposed rule to the FSC no later than October 1, 2023.
11 S. 624.316, F.S.
12 Id.
13 Id.
14 Risk-based capital is a statutory minimum level of capital that is based on tan insurance company’s size and the
inherent riskiness of its financial assets and operations. NAIC, Risk -based Capital, https://content.naic.org/cipr-topics/risk-
based-capital (last visited Apr. 7, 2023).
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Market Conduct Exams
OIR is authorized to perform a market conduct examination of insurers and other related entities.15 The
purpose of the examination is to determine the entity’s compliance with Florida law. 16 The costs of the
examination are paid by the subject entity.17 OIR is may conduct a market conduct of any authorized
insurer after a hurricane, if the insurer:
Is among the top 20 percent of insurers based upon the ratio of hurricane-related claims to the
property insurance policies in force;
Is among the top 20 percent of insurers based upon of the ratio of consumer complaints to
hurricane-related claims;
Has made significant payments to its managing general agent since the hurricane; or
As determined by OIR for any other reason.
During a market conduct examination, OIR may examine the affairs, records, transactions, accounting
procedures and financial condition of an insurer as relevant to the actions that gave rise to the
examination.18 The market conduct examination, when conducted post hurricane, must be started
within 18 months after the storm’s landfall. The insurer’s managing general agent must be included in
the market conduct examination, as if it were the insurer.
If a market conduct examination reveals that the “insurer has exhibited a pattern or practice of willful
violations of an unfair insurance trade practice related to claims-handling which caused harm to
policyholders,” OIR may order the insurer to file its claims-handling practices and procedures with OIR
for review and inspection.19 The practices and procedures are to be held by OIR for 36 months and are
considered public records, not trade secrets, during such period.20 The term “claims-handling practices
and procedures” is defined as “any policies, guidelines, rules, protocols, standard operating
procedures, instructions, or directives that govern or guide how and the manner in which an insured’s
claims for benefits under any policy will be processed.” 21
Effect of the Bill – Market Conduct Examinations
The bill removes some of OIR’s discretion to conduct post-hurricane market conduct examinations that
was established in SB 2A (2022A) and makes such examinations mandatory in certain circumstances.
It narrows the post-hurricane examination authority to apply only to residential property insurers. The
bill specifies that OIR may conduct a post-hurricane market conduct examination, if at any time more
than 90 days after the end of a hurricane, an insurer is among the top 20 percent of insurers based
upon the ratio of hurricane-related property insurance claims filed to the number of property insurance
policies in force. However, OIR must conduct a post-hurricane market conduct exam if the insurer:
Is among the top 20 percent of insurers based upon the ratio of hurricane claim-related
consumer complaints about the insurer to DFS to the insurer’s total number of hurricane claims;
Is among the top 20 percent of insurers based upon the ratio of hurricane claims closed without
payment to the insurer’s total number of hurricane claims on policies providing wind or
windstorm coverage;
Has made significant payments to its managing general agent since the hurricane; or
As determined by OIR for any other reason.
The office must create, and FSC must adopt by rule, a risk-based selection methodology for scheduling
and conducting market conduct examinations. Under this methodology, OIR must initiate a market
conduct examination against an insurer if the following conditions exist:
15 S. 624.3161(1), F.S.
16 Id.
17 S. 624.3161(4), F.S.
18 See ss. 624.316 and 624.3161, F.S.
19 S. 624.3161(6), F.S.
20 Id.
21 Id.
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An insurance regulator in another state has initiated or taken regulatory action against the
insurer or entity regarding an act or omission that would constitute a violation of the Insurance
Code.
DFS and OIR have received a disproportionate number of certain claims-handling complaints
against the insurer based on its market share.
The results of a NAIC Market Conduct Annual Statement indicate the insurer is a negative
outlier with regard to particular metrics.22
There is evidence the insurer is engaged in a pattern or practice of violations of the Unfair
Insurance Trade Practices Act.
Any other conditions that OIR deems necessary for the protection of the public.
In addition to the methodology, the rule must provide criteria for how OIR will determine that it has
received a disproportionate number of claims-handling complaints. OIR must present the proposed
rules to FSC no later than October 1, 2023.
Hazardous Financial Condition of Insurers
Background
NAIC has issued the Model Regulation to Define Standards and Commissioner’s Authority for
Companies Deemed to be in Hazardous Financial Condition (Hazardous Financial Condition Model
Act).23 Current law provides the authority for FSC to adopt rules to define standards of hazardous
financial condition and corrective action similar to those contained in the Hazardous Financial Condition
Model Act.24 However, OIR has expressed concern regarding its authority to effectively deal with
insurers in a hazardous financial condition.25
Effect of the Bill – Hazardous Financial Condition
The bill codifies portions of the Hazardous Financial Condition Model Act. In determining whether the
continued operation of any authorized insurer selling insurance in Florida is hazardous to policyholders,
creditors, or the general public, OIR may consider:
Adverse findings reported in financial or market conduct examination reports, audits, or actuarial
opinions, reports, or summaries.
NAIC Regulatory Information System financial analysis solvency tools and reports.
Whether th