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Sha'Ron James

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Florida Commissioner: Assignment of Benefits Problem Needs to Be Handled in Surgical Way


Date: September 02, 2016
Source: AM Best
Author:  Thomas Harman


Florida’s insurance commissioner, David Altmaier, said the assignment of benefits issue in his state needs to be dealt with in a “surgical” way. Regulators must identify the loopholes being taken advantage of and look for ways to close them while leaving the mechanism in place. Altmaier, named commissioner in April, spoke with Best’s News Service at the recent summer meeting of the National Association of Insurance Commissioners.

Q: We’ve seen Citizens [Florida’s insurer of last resort] depopulate considerably. There are a lot of concerns about water damage cases, now maybe extending into hail damage threatening to hinder the depopulation. What do you think the Office of Insurance Regulation might be able to do to combat these issues?

A: I certainly think that it’s a frustrating issue. Given that we’ve had several years of very positive developments in our homeowners market, we have seen surplus growth considerably. We have seen companies be very profitably. When an issue like this comes up, it’s frustrating because with no storm activity and the other positive impacts that are going on in our marketplace, it’s something that certainly needs to be addressed. The assignment of benefits mechanism that’s being used in a lot of cases to potentially take advantage of insurance companies is an important mechanism for consumers to have available to them. The challenge with attempting to craft a solution to this issue is that it needs to be very surgical. We, as policymakers, need to identify the loopholes that are being taken advantage of and then look for ways that we can close those while leaving that mechanism in place for consumers to take advantage of down the road.

Q: Will this be something that you can do or that has to be done in the legislature?

A: There are some policy changes that we have approved for Citizens and that have been adopted by, I think, as many as 12 to 13 of our private carriers that seek to add additional specificity to already existing duties after loss that policyholders have when they file a homeowners insurance claim. We’re hopeful that those policy form changes will be helpful in mitigating some of the losses that insurance companies are seeing, but I do think that it would be helpful for us to have, in addition to that, some statutory changes that could potentially also help mitigate this. In the absence of that, we’re certainly looking at other potential policy form changes that we could look at that would help do what I just mentioned, which is address this issue in a manner that’s not adversarial for consumers.

Q: The idea is to make this apply for everybody, not just in south Florida? There have been some concerns about this spreading statewide.

A: Our data call would suggest that this is an issue that is beginning to spread to other areas of the state. We’ve just spoken with Citizens through their public rate hearing that they had, I think it was last week or the week before, and they highlighted this issue. It does seem to be impacting consumers in south Florida more than it is in other parts of the state, but it does also appear to be creeping into other regions of the state as well. This would need to be a solution that attempts to address it statewide.

Q: What challenges do you face coming up with an acceptable capital calculation? How are you defining this to people?

A: As regulators, we have done a lot of really solid work over the past several years on enhancing the manner in which we supervise the groups that are operating in the United States. We’ve done this through revisions to the holding company model law. We’ve done this through implementation of the ORSA model law. We have some really key tools in place, but one thing we don’t have is something of this nature, a group capital calculation that we can use as a tool to supplement those already existing, albeit somewhat new, holding company tools that we have available to us.

Q: Are there any potential conflicts out here with what the Fed is doing with the capital standard or what Europeans are doing with the standard here? How does this fit into what these guys are doing?

A: We’re certainly mindful that those work streams are ongoing. One of the charges for the working group is to make sure that we liaise with the ComFrame Development and Analysis Working Group as well as the Federal Reserve Board so that we’re apprised of the developments in their capital standards.

At the end of the day, the goal is to create a calculation that is to the benefit of U.S. state regulators. When it’s all said and done, that may not necessarily align with what the work that’s ongoing at the IIAS might be. We’re not intentionally trying to not do what they’re doing and things of that nature, but if they were to make a decision for their capital center at the ICS that didn’t align with what we felt was best for a group analytic tool in the U.S., then we may not necessarily implement that. That is something that is sensitive, because there are going to be some groups at the end of the day that could potentially have to do the capital calculation for all three of those bodies. We’re sensitive to the benefit to those groups if there was as much alignment as possible, but at the end of the day, the goal is to make something that works for state regulators. If we have to sacrifice that alignment to get that, then that will be the path that we go down.