To adopt the annual report card to be used by the Office of the Consumer Advocate, as required by Section 627.0613(4), Florida Statutes, and the procedures by which an insurer’s grade will be determined.

DEPARTMENT OF FINANCIAL SERVICES
Financial Services Commission

Rule No.: RULE TITLE
69M-236.001: Purpose
69M-236.002: Definitions
69M-236.003: Methodology
69M-236.004: Limitations and Exclusions
69M-236.005: Data Sources
PURPOSE AND EFFECT: To adopt the annual report card to be used by the Office of the Consumer Advocate, as required by Section 627.0613(4), Florida Statutes, and the procedures by which an insurer’s grade will be determined.
SUMMARY: Section 627.0613(4), Florida Statutes, requires the Consumer Advocate’s office to prepare an annual report card for each authorized personal residential property (homeowners) insurer, on a form and using a letter-grade scale developed by the Commission. The rule being proposed sets out the procedure by which the insurers would be graded and adopts the form by which the results are presented.
SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS: No Statement of Estimated Regulatory Cost was prepared.
Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.
SPECIFIC AUTHORITY: 627.0613 FS.
LAW IMPLEMENTED: 627.0613 FS.
IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE DATE,TIME AND PLACE SHOWN BELOW(IF NOT REQUESTED, THIS HEARING WILL NOT BE HELD):
DATE AND TIME: September 8, 2010, 1:30 p.m.
PLACE: 116 Larson Building, 200 East Gaines Street, Tallahassee, Florida
Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 5 days before the workshop/meeting by contacting: Debra Seymour, Office of Insurance Regulation, E-mail [e-mail]. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).
THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Debra Seymour, Office of Insurance Regulation, E-mail [e-mail]

THE FULL TEXT OF THE PROPOSED RULE IS:

69M-236.001 Purpose.

The purpose of the rules is to establish procedures to be used by the Office of the Insurance Consumer Advocate in preparing an annual report card to grade personal residential property insurers on their complaint history and the timeliness of paying claims. The grades will be restricted to each personal residential property insurer’s complaints and paid claims involving homeowners, mobile home owners, dwelling, tenants, condominium unit owners, cooperative unit owners, or similar personal residential property insurance policies. This rule does not apply to eligible surplus lines insurers or to insurers that do not write any homeowners, mobile home owners, dwelling, tenants, condominium unit owners, cooperative unit owners, or similar personal residential property insurance.

Rulemaking Authority 624.308(1), 627.0613(4) FS. Law Implemented 627.0613(4) FS. History–New________.

 

69M-236.002 Definitions.

(1) “Complaint” means any written communication, or oral communication subsequently converted to a written form, received by the Division that expresses dissatisfaction with a specific personal residential property insurer and requires the Division of Consumer Services to contact the personal residential property insurer in order to address the dissatisfaction expressed in the communication. Communications received by the Division that are determined by the Division to be an inquiry that do not require contact with a particular insurer do not constitute a complaint.

(2) “Division” means the Division of Consumer Services of the Department of Financial Services.

(3) “Experience period” means the latest five calendar years for the purpose of evaluating complaints and the latest five calendar-accident years for the purpose of evaluating time to pay claims.

(4) “Qualifying Premium” means the total personal residential direct written premium for the Experience Period.

Rulemaking Authority 624.308(1), 627.0613(4) FS. Law Implemented 627.0613(4) FS. History–New________.

 

69M-236.003 Methodology.

(1) The complaint grade for each insurer will be based on its average complaint ratio determined as follows: the average of the calendar year ratios of the insurer’s market share of personal residential policy-related complaints compared to its market share of personal residential average in-force policies.

(2) Each insurer will receive a complaint grade in accordance with the following:

(a) A grade of A if the average compliant ratio is less than 50%;

(b) A grade of B if the average complaint ratio is between 51% and 85%;

(c) A grade of C if the average complaint ratio is between 86% and 115%;

(d) A grade of D if the average complaint ratio is between 116% and 149%;

(e) A grade of E if the average complaint ratio is greater than 150%.

(3) Each insurer’s grade for timeliness of claim payment will be determined based upon the proximity of each insurer’s average number of months to pay homeowners claims to the median number of months to pay homeowners claims of all personal residential property insurers. The calculation will be done for each calendar-accident year and then averaged for all calendar-accident years.

(4) Each insurer will receive a timeliness of claim payment letter grade based on the following:

(a) A grade of A if the insurer’s average number of months to pay claims is more than one month less than the industry median;

(b) A grade of B if the insurer’s average number of months to pay claims is between one and one half of a month less than the industry median;

(c) A grade of C if the insurer’s average number of months to pay claims is within one half of a month of the industry median;

(d) A grade of D if the insurer’s average number of months to pay claims is between one half of a month and one month more than the industry median; and

(e) A grade of E if the insurer’s average number of months to pay claims is more than one month greater than the industry median.

(5) Each insurer is assigned an overall grade for the five year experience period based upon a weighted average determined as follows:

(a) 50% weight to complaints grade; and

(b) 50% weight to claims payment timeliness grade.

(6) If an insurer’s overall grade falls between two grades, it will receive the higher grade.

(7) To provide appropriate incentives for the second and subsequent years’ annual Insurer Report Cards, each insurer will be graded on absolute scales developed from the 2004 through 2009 calendar years’ complaints history and 2004 through 2009 calendar-accident years’ paid claims experience. Absolute grading scales will reflect higher expected complaint ratios in hurricane years.

(8) The Office of the Insurance Consumer Advocate will issue an annual report card on a form that provides the name of each insurer followed by a letter grade for:

(a) Overall score;

(b) Complaint score; and

(c) Score for time to pay claims.

(9) Form CA-01, “Annual Report Card of the Insurance Consumer Advocate of Residential Property Insurers” is incorporated herein and adopted by reference.

Rulemaking Authority 624.308(1), 627.0613(4) FS. Law Implemented 627.0613(4) FS. History–New_______.

 

69M-236.004 Limitations and exclusions.

(1) Complaints will be evaluated on or after April 1 of the year following the experience period that is being graded.

(2) All complaints for which the complete insurer name is missing from the complaint file are excluded.

(3) All flood complaints are excluded.

(4) The maximum complaint ratio in any one calendar year for any insurer will be limited to 350%.

(5) Claims are assumed to be paid on average in the middle of the calendar year in which they close.

(6) For calendar-accident years in which a company had fewer than 50 paid claims as of the end of the latest calendar year, such claims are assumed to have been paid in the industry median number of months.

(7) Insurers with less than $30 million in qualifying premium are included in the grading process but are given grades of “I” for “insufficient credibility.”

(8) Insurers with less than 5 years of experience are only graded for those years for which they had experience.

(9) Insurers with less than $100,000 in direct written personal residential premium in the latest calendar year will not be graded.

Rulemaking Authority 624.308(1), 627.0613(4) FS. Law Implemented 627.0613(4) FS. History–New________.

 

69M-236.005 Data sources.

The insurer report card will be based on data obtained from the following sources:

(1) Complaint data from the Division of Consumer Services, Florida Department of Financial Services;

(2) Paid claim data from the Statutory Annual Statements, Schedule P, Part 5A, Section 1, filed by insurers with the Office of Insurance Regulation; and

(3) In-force policy and direct written premium data from the Quarterly Summary Reports (QSR) of the Florida Office of Insurance Regulation.

Rulemaking Authority 624.308(1), 627.0613(4) FS. Law Implemented 627.0613(4) FS. History–New________.

NAME OF PERSON ORIGINATING PROPOSED RULE: Debra Seymour, Office of Insurance Regulation, E-mail [e-mail]
NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: The Financial Services Commission
DATE PROPOSED RULE APPROVED BY AGENCY HEAD: November 17, 2009
DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAW: July 17, 2009