FLORIDA CHIEF FINANCIAL OFFICER ALEX SINK'S WEEKLY NEWSLETTER
Volume 4, Number 7, February 16, 2007
This week I was delighted to announce that an amazing
public servant, General Bob Milligan, has accepted the position of Insurance
Consumer Advocate. General Milligan is a retired three-star General who
served in the United States Marine Corps for almost 40 years. He also
served for eight years as the Comptroller of our state.
General Milligan and I share the same vision for the
Insurance Consumer Advocate’s office: for Floridians to have a stronger
voice when it comes to insurance matters in this state. Together, we will
work to increase the effectiveness of the Insurance Consumer Advocate as a
representative of the people.
Floridians deserve a strong consumer advocate who will
go head-to-head with the insurance companies seeking unfair rate increases.
But we see the insurance consumer advocate as much, much more. We need a
consumer advocate who will be proactive in finding insurance solutions in
other areas, such as expanding access and affordability of health insurance
in Florida. A strong insurance consumer advocate would also be able to call
attention to insurance companies operating in bad faith, using deceptive
sales practices or misleading consumers.
Please remember: if you have any questions on insurance
or finance issues, you may call our consumer helpline at 1-800-342-2762.
Trained consumer specialists are available to help you with your concerns.
CFO ALEX SINK ANNOUNCES GENERAL MILLIGAN
AS INSURANCE CONSUMER ADVOCATE
Florida Chief Financial Officer Alex Sink announced General and former
Comptroller Bob Milligan as Florida’s Insurance Consumer Advocate. General
Milligan will formally assume his new role in time for the Legislative
Session, starting March 6, 2007.
“I’m so honored that General Milligan has agreed to return to public service
as Florida’s Insurance Consumer Advocate,” said CFO Sink. “He will be a
strong advocate for the people and is a role model of integrity, honesty and
accountability in government.”
“I’m looking forward to working on behalf of Floridians as their Insurance
Consumer Advocate,” said General Milligan. “Together, the CFO and I want
Floridians to have a stronger voice when it comes to insurance matters in
General Bob Milligan, Insurance Consumer Advocate—General Milligan
was elected Florida's Comptroller from 1994 until 2002. General Milligan
served in the U.S. Marine Corps for 35 years, rising to the rank of
lieutenant general (3 stars). While a member of the Florida Cabinet, General
Milligan helped create the current position of Chief Financial Officer.
Throughout his service, he was known for doing what was right and putting
people ahead of politics.
CFO Sink has a three-pronged vision for a stronger Insurance Consumer
Advocate: proactive, investigative, and challenger of unfair rate increases.
She will work with Legislative leadership to enhance the current powers of
the Insurance Consumer Advocate.
•Proactive- The Insurance Consumer Advocate will be proactive in finding
insurance solutions in other areas. An example of a potential area needing
attention is the access and affordability of health insurance. While
property insurance has understandably been forefront on Floridians’ minds,
Florida has a real health insurance crisis as well. More than 3 million
Floridians lack health insurance and our state ranks among the bottom when
it comes to insuring our children. A stronger insurance consumer advocate
will be empowered to bring solutions and ideas from other states or work
with Congress to create federal solutions.
•Investigates Bad Practices- The Department of Financial Services runs a
statewide consumer helpline that receives approximately 500,000 financial
and insurance-related inquiries annually. A stronger Insurance Consumer
Advocate will examine the real-time concerns and complaints we receive from
Floridians everyday. We can identify negative trends and bad business
practices, and a stronger insurance consumer advocate will have the
authority to call attention to insurance companies operating in bad faith,
using unfair trade practices, or deceptive or misleading sales tactics.
•Challenging Unfair Rates- Floridians deserve a strong consumer advocate who
will go head-to-head with the insurance companies seeking unfair and
unjustified rate increases. In order to be effective in challenging unsound
rate hikes, the Insurance Consumer Advocate needs to have clear legal
authority, including subpoena powers and discovery rights. The Insurance
Consumer Advocate also should have access to all the same information as the
Office of Insurance Regulation.
DISCUSS REGIONAL CATASTROPHE FUND
This Thursday, I traveled to the National Association
of Insurance Commissioners’ (NAIC) Multi-State Catastrophe Fund meeting in
Atlanta. The meeting was called by insurance commissioners from various
states to discuss the critically important issue of a regional catastrophe
fund that could serve as a financial “backstop” for states confronting
Representatives of Louisiana, Mississippi, Alabama and other coastal states
discussed and reflected upon their states’ experience dealing with Hurricane
Katrina and its aftermath. Other states, such as Nebraska and Rhode Island
discussed the catastrophes affecting their residents. There were informative
presentations the cost and scope of regional catastrophes (hurricanes,
earthquakes), mitigation science and the benefits of mitigation, the history
of NAIC’s advocacy for a national catastrophe program, the NAIC interstate
insurance compact, and the structure and governance of a multi-state
catastrophe fund compact.
While there, Florida Insurance Commissioner Kevin McCarty and I spoke with
regulators, insurance companies, reinsurance companies and other
stakeholders about how we could bring the coastal states together to help
stabilize our insurance markets. It was invaluable to speak directly with
elected insurance commissioners from other states about our need to find
long-term solutions to the current crisis in the property insurance market.
It will be difficult, but not impossible, for us to develop this initiative
with other states. In the coming months, I look forward to keeping you
updated on the progress of a regional catastrophe fund.
CFO WEIGHS IN ON
CFO Alex Sink delivered Friday the following letter to
Commissioner Kevin McCarty regarding the recent hearing on education and
occupation as rating variables in automobile insurance policies:
Office of Insurance Regulation
200 East Gaines Street
Tallahassee, FL 32399
Thank you for holding a hearing last
week to evaluate how education and occupation are currently being used as
rating factors in automobile insurance policies. I share your concern that
these factors have the potential to unfairly discriminate against minority
or low income residents of our state and respectfully request your careful
consideration of testimony presented by Mr. Stephen Alexander of the
Insurance Consumer Advocate’s Office.
In particular, I respectfully request
your attention to the following recommendations:
1. Establish a Definition of
Disparate Impact-- The Office of Insurance
Regulation (OIR) should establish a definition of disparate impact. An
underwriting criteria or rating variable that results in a high
percentage of minority or low-income drivers would constitute prima
facie evidence that this variable is a proxy for prohibited classes, and
its use by insurers should be prohibited. For example, if 80% or more
of Florida construction workers are minority or low-income drivers, then
their occupation should not be used for underwriting or rating their
auto insurance policies.
In addition, the definition of disparate
impact should prohibit the use of underwriting or rating variables that
have a high correlation with income. For example, if it is found that
there is a high correlation between education and income (after
controlling for other variables such as gender, age,
marital status, occupation, race and
ethnicity) then the use of education as an
underwriting or rating variable should be prohibited.
It is my understanding that the U.S. Census Bureau has available
Florida-specific current information on a wide range of topics including
educational attainment, gender, age, marital status, occupation, income,
race and ethnicity. I would encourage OIR
to make maximum use of this information rather than requiring insurers
to request sensitive information from their policyholders.
2. Require Insurers to
Demonstrate Fair Rates--
OIR should require all insurers to demonstrate that they are not
overcharging certain classes of drivers. While correlations exist among
variables used in automobile insurance underwriting and rating (gender,
age, credit rating, marital status, education, occupation, etc.), an
insurer should not apply those variables in a manner that unfairly
penalizes policyholders. For example, the 21-year-old male, who is less
likely to have an advanced degree than is a 40-year-old male, should not
be charged twice for both his age and his lack of advanced education.
Instead, according to Mr. Alexander, various multivariate statistical
techniques such as generalized linear and minimum bias models provide
effective controls that eliminate these kinds of redundancies in
automobile underwriting and rating. OIR is urged to require insurers to
employ such models and provide evidence to OIR that they are not placing
excessive reliance on any underwriting criteria or rating variable
beyond that indicated by these types of models.
Our goal should be to allow the use of
cost-driven criteria for calculating sound rates, while ensuring that
underwriting and rating variables are not stacked so as to create – even
inadvertently – an unfair or discriminatory premium.
My staff and I look forward to working
with you and your office to ensure that all Floridians are treated fairly by
their auto insurers.
Chief Financial Officer
State of Florida
cc: General Bob Milligan
SECOND MEETING OF THE WINDSTORM
MITIGATION STUDY COMMITTEE HELD
The second meeting of the legislatively-created
Windstorm Mitigation Study Committee was held on Thursday, February 15, 2007, in Tallahassee.
The committee was created as a result of House Bill 1A, passed recently by
the Florida Legislature during Special Session. The committee is comprised
of eight members, with two appointments each from the Governor, Chief
Financial Officer, Senate President and Speaker of the House. The following
Floridians have been appointed to the committee:
• Garrett Walton, Chair (Governor)
• Bill Coffey, Services Director of Home Services, Home Depot (Governor)
• Mr. James Ayotte, Florida Manufactured Housing Association (Chief
• Mr. Ed Dees, former Business Manager for Ironworkers, Local #397 (Chief
• Mr. Michael Aranda, EH Building Group II, LLC (Senate President)
• Mr. Stephen C. Burgess, Office of Public Counsel (Senate President)
• Deirdre Finn, Meridian Strategies, LLC (Speaker of the House)
• The Honorable Trey Traviesa, Florida House of Representatives (Speaker of
The committee is charged with analyzing short- and long-term solutions and
programs that address the need to immediately and effectively mitigate homes
in Florida. A final committee report, including legislative recommendations,
is due to the Governor, Chief Financial Officer, Insurance Commissioner,
Senate President and Speaker of the House by March 6, 2007. Floridians can
learn more about the committee, its duties and upcoming meetings at
Floridians interested in hurricane mitigation are encouraged to attend the
CFO SINK RESTRICTS PUBLIC ADJUSTERS FROM
COLLECTING FEES ON RESIDENTIAL PROPERTY DECLARED A TOTAL LOSS
Florida Chief Financial Officer Alex Sink has issued an
emergency rule prohibiting public insurance adjusters from collecting fees
on contracts with policyholders whose homes were destroyed earlier this
month by tornadoes if there is no dispute with the insurance company that
the home is a total loss. The emergency rule, issued last Friday to cover
policyholders in Lake, Seminole, Sumter and Volusia counties affected by the
Feb. 2 tornadoes, also gives homeowners 14 days to rescind a public adjuster
contract without penalty.
Public adjusters are not
affiliated with any insurance company and are hired by the consumer for a
fee, which is usually a percentage of the claim payment. The emergency rule
can be viewed at
To find out more about public adjusters or get help with filing an insurance
claim, call the Department of Financial Services at 1-800-22-STORM
(1-800-227-8676) or log on to www.MyFloridaCFO.com.
“Public adjusters provide a service when consumers feel
they cannot negotiate with their insurance company on their own,” CFO Sink
said. “We simply want to make sure that no one takes advantage of the
financial and emotional turmoil these victims are facing.”
Bob Besserman, president of the Florida Association of
Public Insurance Adjusters, said a public adjuster inspects the loss site,
analyzes the damages, assembles claim support data, reviews the insured's
coverage, and exclusively serves the client, not the insurance company. He
said the association encourages consumers to check with DFS to ensure they
are working with a licensed public adjuster.
“When a property is decreed a total loss by the insurance
company, that does not mean that is all you are entitled to,” Besserman
said. “Be aware that there are extensions of coverage such as personal
property, debris removal and code upgrades, to name just a few, and perhaps
additional endorsements over and above the written limit of coverage.”
Because of the Governor’s declaration of emergency, the
maximum fee that public adjusters can charge tornado victims in the affected
area is capped at 10 percent of the claim payment, regardless of when they
enter into a public adjuster contract for a claim related to tornado damage.
Furthermore, public adjusters are prohibited from demanding or accepting any
type of advance fees, retainers, or other compensation prior to any payment
being made on the claim.
NEW LEADERS: THE FLORIDA
In November, 2006, Florida voters changed the face
of leadership in Tallahassee when they elected a new Governor, Attorney
General, Chief Financial Officer and Agriculture Commissioner.
Florida Crossroads takes a more personal look at the new and
familiar faces in part one of our series, New Leaders: The Florida
Air Dates and Times on PBS Stations:
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Consumer Services HelpLine (800) 342-2762