Posted on 14 May 2009
Florida's highest ranking elected officials have responded positively to testimony from the National Association of Mutual Insurance Companies (NAMIC). Members of the Florida Financial Services Commission today abandoned a proposed rule change after NAMIC outlined the unintended consequences it could cause.
“Our members believe the proposed rule before you today is poor public policy and will result in a negative impact on auto insurance consumers,” testified Liz Reynolds, NAMIC’s Southeast state affairs manager. “Many drivers will be left with higher rates, fewer choices, and the distinct possibility of placement in the JUA.” The Joint Underwriting Association is Florida’s insurance market of last resort.
The commission, consisting of Florida Gov. Charlie Crist, CFO Alex Sink, Attorney General Bill McCollum, and Department of Agriculture and Consumer Services Commissioner Charles H. Bronson, considered a rule change that would have reinterpreted a state statute to prohibit insurers from surcharging for not-at-fault accidents for new business.
“Applicants with not-at-fault or, more accurately, unproven fault accidents on their driving records will likely see increased rates and find it more difficult to obtain coverage,” if the rule change were to pass, Reynolds explained. “It makes sense to require insurers to ascertain fault before surcharging existing policyholders … because companies have access to information necessary for making such a determination. Applicants, however, are a different story.”
Insurance companies don’t have access to information that would reveal whether an applicant with an unproven fault accident is truly blameless, Reynolds explained. Drivers who have been at fault for past accidents are more likely to have insurance claims in the future.
“If applicants with clean records must be pooled with applicants with unproven fault accidents on their records, then rates will rise for all because losses for the group will increase,” Reynolds testified. “Pricing will be less accurate and low-risk, or clean, drivers will subsidize high-risk drivers.”
Reynolds also said insurance companies could choose to reject applicants with accidents on their records. “The rule would, in fact, give insurers an incentive to do so. This ultimately could lead to private market disruption and growth in the residual market.”
The Governor failed to get a second from the other cabinet members, which means the rule will not go forward at this time.