Purchasing Options

In Florida, you have the option of purchasing your insurance through a variety of insurance organizations, depending on the type and size of your business.

Many authorized insurers are licensed to sell commercial insurance in Florida. Also, surplus lines insurers can provide coverage for businesses and professionals in high-risk situations.

There are risks and limitations associated with both types of insurance provider. The following sections outline these organizations and explain how they are licensed and regulated.

Authorized Insurers

An authorized insurer is a company authorized by the Department of Financial Services to sell insurance. Most business owners seek coverage through authorized insurers and the licensed agents who represent them.

The Department requires authorized insurers to regularly submit their rates, financial standing, premiums, claims and policy forms for review. These measures ensure that you are treated fairly and that the insurance company has enough reserve cash to pay claims.

Authorized insurers must also contribute to the Florida Insurance Guaranty Association (FIGA), which pays most claims for policyholders if an insurer becomes insolvent.
Although many business owners choose to use authorized insurers, other options may be available.

Alternatives to Authorized Insurers

Commercial self-insurance funds

With this type of plan, a group of business owners pools its risks and money to provide insurance through a shared fund. The fund must have enough assets to guarantee the payment of claims, and all rates must be filed with the Department. A commercial self-insurance fund may provide commercial liability, property and workers’ compensation insurance.

Commercial self-insurance funds must issue assessable policies. This means that if a business does not have enough money to pay the claims, the other participating businesses are assessed, or charged, to make up any shortfalls. Commercial self-insurance funds cannot write insurance outside of Florida, and the Department must approve all forms used by the fund administrators. However, FIGA will not pay the claims of failed or bankrupt commercial self-insurance funds.

Joint Underwriters Association (JUA)

The JUA is an organization of licensed insurance companies that provides coverage to consumers unable to obtain it in the traditional marketplace. Insurance may be purchased through various types of JUAs, including the Workers’ Compensation Joint Underwriters Association, the Florida Joint Underwriters Association for Commercial Auto Risks.

Damage from Florida’s recent hurricane seasons has made obtaining commercial property insurance difficult for some businesses. As a result, a JUA is being established to assist business owners who cannot otherwise find coverage. For more information, call the DFS Consumer Helpline at
1-800-342-2762.

Risk retention groups

A risk retention group provides commercial liability insurance to its members. Generally, members are professionals with similar businesses, or engage in similar business activities with similar liabilities. Risk retention groups must apply for permission to organize in one state (called the certificated state). Once the risk retention group has been certified in one state, it registers as a liability insurance company in other states in which it wishes to do business. The Department cannot regulate the forms or the rates of a risk retention group that is not certified in Florida, and FIGA will not cover losses if the group becomes insolvent or bankrupt.

Surplus lines insurers

Standard insurance companies often reject high-risk applicants that do not meet their underwriting criteria, such as liability for day care centers or property coverage for expensive business equipment. Surplus lines insurers fill this need. However, before turning to a surplus lines insurer, your agent must apply for and receive rejections from at least three standard insurers.

Freedom from some regulation allows surplus lines insurers to respond to the unmet needs of insurance consumers. The Department does not issue surplus lines insurers licenses to offer insurance in Florida. Therefore, no regulator in Florida has reviewed these insurance contracts, and FIGA does not provide any coverage for claims if a surplus lines company goes bankrupt. However, when surplus lines insurers provide certain financial information, they may receive official approval from the Department.

The Department does not regulate the rates these companies charge or the policy forms they use. Therefore, if you obtain a surplus lines policy, it is important that you read it thoroughly. These policies frequently involve differences in coverage and deductibles not found in other policies.

Purchasing groups

Business owners or professionals may form a purchasing group to buy commercial coverage, thereby saving money by negotiating a group rate through a trade association rather than by purchasing individual policies.
Before buying coverage for a group of businesses, the purchasing group must get approval from the Department of Financial Services. Purchasing groups must buy coverage from an authorized insurer, a risk retention group or an eligible surplus lines insurer. Coverage through purchasing groups is not protected by FIGA.