Regulators should consider the drop in reinsurance costs when deliberating rate increase requests from insurers, Insurance Consumer Advocate Robin Westcott said Thursday.
Lawmakers backing reductions to the Florida Hurricane Catastrophe Fund, the state’s reinsurance fund, cited falling reinsurance costs as a reason to push for reforms, and Westcott said reinsurance costs for Florida carriers have dropped 15 to 20 percent.
“When you have rates online going down 15 to 20 percent market wide for insurers in the state of Florida, that’s got to result in some savings for the company,” Westcott said. “Consumers have been charged for that, so shouldn’t we have some consideration when the insurance company receives a break on their reinsurance? Shouldn’t then consumers get a break?”
She spoke during a rate hearing for Fidelity National Property & Casualty Insurance Co., which is seeking a 28.1 percent average statewide increase in its homeowners’ coverage rates. Westcott noted that when reinsurance costs rose in recent years, insurers included that factor in their rate hike requests, so a decline in costs should also be taken into account.
Fidelity President and CEO Mark Davey said his company is considering expanding in Florida and writing more than its current 12,500 policies, but needs to get regulators to approve the rate increase first. Gov. Rick Scott and lawmakers wishing to reduce the number of policies in state-run Citizens Property Insurance Corp. have pointed to increased private carrier participation in the market as the key to that goal.
But Ken Ritzenthaler, an actuary with the Office of Insurance Regulation, questioned the need for a $25 fee per policy associated with a managing general agent agreement with Fidelity. An MGA is contracted by an insurer to conduct underwriting and other business on its behalf.
Davey admitted the agreement between Fidelity and the MGA was signed by him for both parties. Westcott also called for regulators to seek more transparency in MGA agreements with insurers.
Meanwhile, regulators also clamped down on a different insurer Thursday. Insurance Commissioner Kevin McCarty hit Universal Property and Casualty Insurance Co. with a $1.26 million fine for numerous violations of state laws and rules, including the practices of requiring separate proof-of-loss statements for claims with multiple payments and post-claim underwriting through investigations of customers. Universal is the largest private carrier in the state with 542,000 policies and $765 million in annual premiums -- nearly 9 percent of the property insurance market in Florida.
The order from OIR is not a final order, and Universal can ask for a hearing to dispute the order within 21 days.