The Florida Legislature has approved rate regulation reform measures that the insurance industry said are the first steps toward real market competition.
Changes allowing insurers to hike or cut rates without prior regulatory approval within set limits were incorporated in an omnibus property insurance reform bill approved Friday night in the closing hours of the 2006 session.
The legislation allows companies to increase or decrease rates by up to 5 percent statewide average, and up to 10 percent for any territory without approval by the Office of Insurance Regulation. It allows such leeway once a year.
The so-called “flex band” system has been seen by the industry as the first step toward market competition that exists in most other states.
The legislation also mandates that the OIR must first declare that a reasonable level of competition exists in a territory before the flex band can become effective.
William Stander, regional manager for the Property Casualty Insurers Association of America (PCI), said the measure was a good first step, but his organization is concerned about the needed OIR approval.
“It basically restricts it [the flex band] to wherever the OIR sees fit to restrict it to,” he said.
The bill also requires the OIR to reevaluate the discounts for homes built to meet the Florida Building Code and to determine the full actuarial value of such discounts. The reevaluation must be completed by July 1 of next year.
It allows the OIR to continue to use the public hurricane loss model for rating, which must be submitted for review to Florida authorities by March 1 of next year. It will use that model until it has been deemed unreliable or inaccurate.
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