Consumer eViews

Volume 4, Number 7, February 16, 2007

Dear Floridian:

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. 

Alex Sink


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 this state.”

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. 


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 large-scale catastrophes.

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 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:

February 16, 2007

Mr. Kevin McCarty
Insurance Commissioner
Office of Insurance Regulation
200 East Gaines Street
Tallahassee, FL  32399 

Dear Commissioner McCarty: 

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. 


Alex Sink
Chief Financial Officer
State of Florida

cc:  General Bob Milligan


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 Financial Officer)
• Mr. Ed Dees, former Business Manager for Ironworkers, Local #397 (Chief Financial Officer)
• 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 House)

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 meetings.


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

“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.


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 Cabinet.

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