HB 1071

1	A bill to be entitled
2	An act relating to insurance; amending s. 501.212, F.S.;
3	deleting an exclusion from application of deceptive and
4	unfair trade practices provisions pertaining to the
5	Department of Financial Services or the Office of
6	Insurance Regulation; creating s. 624.156, F.S.; providing
7	that certain consumer protection laws apply to the
8	business of insurance; amending s. 627.041, F.S.; revising
9	definitions; amending s. 627.314, F.S.; revising certain
10	authorized actions multiple insurers may engage in
11	together; prohibiting certain conduct on the part of
12	insurers; creating s. 627.0662, F.S.; providing a
13	definition; requiring each residential property insurer to
14	report certain information to the office; providing for
15	determination of whether excessive profit has been
16	realized; requiring return of excessive amounts; creating
17	s. 627.41491, F.S.; requiring the office to provide health
18	care providers with a full disclosure of certain rate
19	comparison information each year; creating s. 627.41493,
20	F.S.; requiring a motor vehicle insurance and residential
21	property insurance rate rollback; providing for subsequent
22	increases under certain circumstances; creating s.
23	627.41494, F.S.; providing for consumer participation in
24	review of insurance rate changes; providing for public
25	inspection; providing for adoption of rules by the office;
26	creating s. 627.747, F.S.; requiring motor vehicle
27	insurers to offer good driver discount plans for a
28	discounted premium; amending s. 627.062, F.S.; providing
29	for the director of the office to establish rates before
30	they take effect; providing procedures for such filings;
31	deleting a provision excepting motor vehicle insurance
32	from application; deleting an arbitration provision;
33	requiring certain underwriting rules to be filed; amending
34	s. 627.0628, F.S.; limiting authority of insurers to use
35	findings of the Florida Commission on Hurricane Loss
36	Projection Methodology in certain rate filings; providing
37	that such findings are not admissible and relevant in
38	consideration of a rate filing unless the office has
39	access to all factors and assumptions used in developing
40	the standards or models found by the commission to be
41	reliable or accurate; providing an effective date.
42
43	Be It Enacted by the Legislature of the State of Florida:
44
45	Section 1.  Subsection (4) of section 501.212, Florida
46	Statutes, is amended to read:
47	501.212  Application.--This part does not apply to:
48	(4)  Any person or activity regulated under laws
49	administered by the Department of Financial Services or the
50	Office of Insurance Regulation of the Financial Services
51	Commission or Banks and savings and loan associations regulated
52	by the Office of Financial Regulation of the Financial Services
53	Commission or banks or savings and loan associations regulated
54	by federal agencies.
55	Section 2.  Section 624.156, Florida Statutes, is created
56	to read:
57	624.156  Applicability of consumer protection laws to the
58	business of insurance.--
59	(1)  Notwithstanding any provision of law to the contrary,
60	the business of insurance shall be subject to the laws of this
61	state applicable to any other business, including, but not
62	limited to, the Florida Civil Rights Act of 1992 set forth in
63	part I of chapter 760, the Florida Antitrust Act of 1980 set
64	forth in chapter 542, the Florida Deceptive and Unfair Trade
65	Practices Act set forth in part II of chapter 501, and the
66	consumer protection provisions contained in chapter 540.  The
67	protections afforded consumers by chapters 501, 540, 542, and
68	760 shall apply to insurance consumers.
69	(2)  This section does not prohibit:
70	(a)  Any agreement to collect, compile, and disseminate
71	historical data on paid claims or reserves for reported claims,
72	provided such data are contemporaneously transmitted to the
73	Office of Insurance Regulation and made available for public
74	inspection.
75	(b)  Participation in any joint arrangement established by
76	law or the Office of Insurance Regulation to ensure availability
77	of insurance.
78	(c)  Any agent or broker, representing one or more
79	insurers, from obtaining from any insurer such agent or broker
80	represents information relative to the premium for any policy or
81	risk to be underwritten by that insurer.
82	(d)  Any agent or broker from disclosing to an insurer the
83	agent or broker represents any quoted rate or charge offered by
84	another insurer represented by that agent or broker for the
85	purpose of negotiating a lower rate, charge, or term from the
86	insurer to whom the disclosure is made.
87	(e)  Any agents, brokers, or insurers from using, or
88	participating with multiple insurers or reinsurers for
89	underwriting, a single risk or group of risks.
90	Section 3.  Subsections (3) and (4) of section 627.041,
91	Florida Statutes, are amended to read:
92	627.041  Definitions.--As used in this part:
93	(3)  "Rating organization" means every person, other than
94	an authorized insurer, whether located within or outside this
95	state, who has as his or her object or purpose the collecting,
96	compiling, and disseminating of historical data on paid claims
97	or reserves for reported claims making of rates, rating plans,
98	or rating systems. Two or more authorized insurers that act in
99	concert for the purpose of collecting, compiling, and
100	disseminating historical data on paid claims or reserves for
101	reported claims making rates, rating plans, or rating systems,
102	and that do not operate within the specific authorizations
103	contained in ss. 627.311, 627.314(2), (4), and 627.351, shall be
104	deemed to be a rating organization. No single insurer shall be
105	deemed to be a rating organization.
106	(4)  "Advisory organization" means every group,
107	association, or other organization of insurers, whether located
108	within or outside this state, which prepares policy forms or
109	makes underwriting rules incident to but not including the
110	making of rates, rating plans, or rating systems or which
111	collects and furnishes to authorized insurers or rating
112	organizations loss or expense statistics or other statistical
113	information and data and acts in an advisory, as distinguished
114	from a ratemaking, capacity.
115	Section 4.  Section 627.314, Florida Statutes, is amended
116	to read:
117	627.314  Concerted action by two or more insurers.--
118	(1)  Subject to and in compliance with the provisions of
119	this part authorizing insurers to be members or subscribers of
120	rating or advisory organizations or to engage in joint
121	underwriting or joint reinsurance, two or more insurers may act
122	in concert with each other and with others with respect to any
123	matters pertaining to:
124	(a)  Collecting, compiling, and disseminating historical
125	data on paid claims or reserve for reported claims The making of
126	rates or rating systems except for private passenger automobile
127	insurance rates;
128	(b)  The preparation or making of insurance policy or bond
129	forms, underwriting rules, surveys, inspections, and
130	investigations; or
131	(c)  The furnishing of loss or expense statistics or other
132	information and data; or
133	(c)(d)  The carrying on of research.
134	(2)  With respect to any matters pertaining to the making
135	of rates or rating systems; the preparation or making of
136	insurance policy or bond forms, underwriting rules, surveys,
137	inspections, and investigations; the furnishing of loss or
138	expense statistics or other information and data; or the
139	carrying on of research, two or more authorized insurers having
140	a common ownership or operating in the state under common
141	management or control are hereby authorized to act in concert
142	between or among themselves the same as if they constituted a
143	single insurer.  To the extent that such matters relate to
144	cosurety bonds, two or more authorized insurers executing such
145	bonds are hereby authorized to act in concert between or among
146	themselves the same as if they constituted a single insurer.
147	(3)(a)  Members and subscribers of rating or advisory
148	organizations may use the rates, rating systems, underwriting
149	rules, or policy or bond forms of such organizations, either
150	consistently or intermittently; but, except as provided in
151	subsection (2) and ss. 627.311 and 627.351, they shall not agree
152	with each other or rating organizations or others to adhere
153	thereto.
154	(b)  The fact that two or more authorized insurers, whether
155	or not members or subscribers of a rating or advisory
156	organization, use, either consistently or intermittently, the
157	rates or rating systems made or adopted by a rating organization
158	or the underwriting rules or policy or bond forms prepared by a
159	rating or advisory organization shall not be sufficient in
160	itself to support a finding that an agreement to so adhere
161	exists, and may be used only for the purpose of supplementing or
162	explaining direct evidence of the existence of any such
163	agreement.
164	(b)(c)  This subsection does not apply as to workers'
165	compensation and employer's liability insurances.
166	(4)  Licensed rating organizations and authorized insurers
167	are authorized to exchange information and experience data with
168	rating organizations and insurers in this and other states and
169	may consult with them with respect to ratemaking and the
170	application of rating systems.
171	(4)(5)  Upon compliance with the provisions of this part
172	applicable thereto, any rating organization or advisory
173	organization, and any group, association, or other organization
174	of authorized insurers which engages in joint underwriting or
175	joint reinsurance through such organization or by standing
176	agreement among the members thereof, may conduct operations in
177	this state. As respects insurance risks or operations in this
178	state, no insurer shall be a member or subscriber of any such
179	organization, group, or association that has not complied with
180	the provisions of this part applicable to it.
181	(5)(6)  Notwithstanding any other provisions of this part,
182	insurers shall not participate directly or indirectly in the
183	deliberations or decisions of rating organizations on private
184	passenger automobile insurance.  However, such rating
185	organizations shall, upon request of individual insurers, be
186	required to furnish at reasonable cost the rate indications
187	resulting from the loss and expense statistics gathered by them.
188	Individual insurers may modify the indications to reflect their
189	individual experience in determining their own rates.  Such
190	rates shall be filed with the office for public inspection
191	whenever requested and shall be available for public
192	announcement only by the press, office, or insurer.
193	Section 5.  Section 627.0662, Florida Statutes, is created
194	to read:
195	627.0662  Excessive profits for residential property
196	insurance prohibited.--
197	(1)  As used in this section, the term "residential
198	property insurance" means coverage under s. 627.4025.
199	(2)  Each residential property insurer shall file with the
200	Office of Insurance Regulation, prior to July 1 of each year on
201	forms adopted by the Financial Services Commission, the
202	following data for residential property insurance business in
203	this state. The data must include both voluntary and joint
204	underwriting association business, as follows:
205	(a)  Calendar-year earned premium.
206	(b)  Accident-year incurred losses and loss adjustment
207	expenses.
208	(c)  The administrative and selling expenses incurred in
209	this state or allocated to this state for the calendar year.
210	(d)  Policyholder dividends incurred during the applicable
211	calendar year.
212	(3)(a)  Excessive profit has been realized if there has
213	been an underwriting gain for the 10 most recent calendar-
214	accident years combined which is greater than the anticipated
215	underwriting profit plus 5 percent of earned premiums for those
216	calendar-accident years.
217	(b)  As used in this subsection with respect to any 10-year
218	period, the term "anticipated underwriting profit" means the sum
219	of the dollar amounts obtained by multiplying, for each rate
220	filing of the insurer group in effect during such period, the
221	earned premiums applicable to such rate filing during such
222	period by the percentage factor included in such rate filing for
223	profit and contingencies, such percentage factor having been
224	determined with due recognition to investment income from funds
225	generated by business in this state. Separate calculations need
226	not be made for consecutive rate filings containing the same
227	percentage factor for profits and contingencies.
228	(4)  Each property insurer shall also file a schedule of
229	residential property insurance loss in this state and loss
230	adjustment experience for each of the 10 most recent accident
231	years. The incurred losses and loss adjustment expenses shall be
232	valued as of March 31 of the year following the close of the
233	accident year, developed to an ultimate basis, and at nine 12-
234	month intervals thereafter, each developed to an ultimate basis,
235	to the extent that a total of three evaluations is provided for
236	each accident year. The first year to be so reported shall be
237	accident year 2005, such that the reporting of 10 accident years
238	will not take place until accident years 2013 and 2014 have
239	become available.
240	(5)  Each insurer group's underwriting gain or loss for
241	each calendar-accident year shall be computed as follows: the
242	sum of the accident-year incurred losses and loss adjustment
243	expenses as of March 31 of the following year, developed to an
244	ultimate basis, plus the administrative and selling expenses
245	incurred in the calendar year, plus policyholder dividends
246	applicable to the calendar year, shall be subtracted from the
247	calendar-year earned premium to determine the underwriting gain
248	or loss.
249	(6)  For the 10 most recent calendar-accident years, the
250	underwriting gain or loss shall be compared to the anticipated
251	underwriting profit.
252	(7)  If the residential property insurer has realized an
253	excessive profit, the office shall order a return of the
254	excessive amounts to policyholders after affording the insurer
255	an opportunity for hearing and otherwise complying with the
256	requirements of chapter 120. Such excessive amounts shall be
257	refunded to policyholders in all instances unless the insurer
258	affirmatively demonstrates to the office that the refund of the
259	excessive amounts will render the insurer or a member of the
260	insurer group financially impaired or will render it insolvent.
261	(8)  The excessive amount shall be refunded to
262	policyholders on a pro rata basis in relation to the final
263	compilation year earned premiums to the voluntary residential
264	property insurance policyholders of record of the insurer group
265	on December 31 of the final compilation year.
266	(9)  Any return of excessive profits to policyholders under
267	this section shall be provided in the form of a cash refund or a
268	credit towards the future purchase of insurance.
269	(10)(a)  Cash refunds to policyholders may be rounded to
270	the nearest dollar.
271	(b)  Data in required reports to the office may be rounded
272	to the nearest dollar.
273	(c)  Rounding, if elected by the insurer group, shall be
274	applied consistently.
275	(11)(a)  Refunds to policyholders shall be completed as
276	follows:
277	1.  If the insurer elects to make a cash refund, the refund
278	shall be completed within 60 days after entry of a final order
279	determining that excessive profits have been realized; or
280	2.  If the insurer elects to make refunds in the form of a
281	credit to renewal policies, such credits shall be applied to
282	policy renewal premium notices which are forwarded to insureds
283	more than 60 calendar days after entry of a final order
284	determining that excessive profits have been realized. If an
285	insurer has made this election but an insured thereafter cancels
286	his or her policy or otherwise allows the policy to terminate,
287	the insurer group shall make a cash refund not later than 60
288	days after termination of such coverage.
289	(b)  Upon completion of the renewal credits or refund
290	payments, the insurer shall immediately certify to the office
291	that the refunds have been made.
292	(12)  Any refund or renewal credit made pursuant to this
293	section shall be treated as a policyholder dividend applicable
294	to the year in which it is incurred, for purposes of reporting
295	under this section for subsequent years.
296	Section 6.  Section 627.41491, Florida Statutes, is created
297	to read:
298	627.41491  Full disclosure of insurance information.--The
299	Office of Insurance Regulation shall provide health care
300	providers with a comparison of the rate in effect for each motor
301	vehicle insurer and residential property insurer. Such rate
302	comparison chart shall be made available to the public through
303	the Internet and other commonly used means of distribution no
304	later than July 1 of each year.
305	Section 7.  Section 627.41493, Florida Statutes, is created
306	to read:
307	627.41493  Insurance rate rollback.--
308	(1)  For any coverage for motor vehicle or residential
309	property insurance subject to this chapter issued or renewed on
310	or after July 1, 2004, every insurer shall reduce its charges to
311	levels that are at least 20 percent less than the charges for
312	the same coverage that were in effect on January 1, 2002.
313	(2)  Between July 1, 2004, and July 1, 2005, rates and
314	premiums reduced pursuant to subsection (1) may only be
315	increased if the director of the Office of Insurance Regulation
316	finds, after a hearing, that a motor vehicle insurer or
317	residential property insurer is unable to earn a fair rate of
318	return.
319	(3)  Any separate affiliate of an insurer is subject to the
320	provisions of this section.
321	Section 8.  Section 627.41494, Florida Statutes, is created
322	to read:
323	627.41494  Consumer participation in rate review.--
324	(1)  Upon the filing of a proposed rate change by an
325	insurer under s. 627.062 or s. 627.0651, the director of the
326	Office of Insurance Regulation shall require the insurer to give
327	notice to the public and to the insureds or associations of
328	insureds making the filing.
329	(2)  The office shall make the rate filing available for
330	public inspection. If the rate filing results in a statewide
331	average increase of 10 percent or greater and any insureds or
332	associations of insureds filing the proposed rate change request
333	the director of the Office of Insurance Regulation to hold a
334	hearing within 30 days after the mailing of the notification of
335	the proposed rate changes to the insureds, the director shall
336	hold a hearing within 30 days after such request. Any consumer
337	advocacy group or the Public Counsel under chapter 350 may
338	participate in such hearing, and the office shall adopt rules
339	governing such participation.
340	Section 9.  Section 627.747, Florida Statutes, is created
341	to read:
342	627.747  Good driver discount plan.--
343	(1)  Any rate, rating schedule, or rating manual for the
344	liability, personal injury protection, and collision coverages
345	of a motor vehicle insurance policy filed with the office must
346	provide for an appropriate reduction in premium charges as to
347	such coverages based on the following factors in decreasing
348	order of importance:
349	(a)  The insured's driving safety record.
350	(b)  The number of miles he or she drives annually.
351	(c)  The number of years of driving experience the insured
352	has had.
353	(d)  Other factors that the office adopts by rule and that
354	have a substantial relationship to the risk of loss. The rules
355	shall set forth the respective weight to be given each factor in
356	determining automobile rates and premiums. Notwithstanding any
357	other law, the use of any criterion without approval constitutes
358	unfair discrimination.
359	(2)  Each person who meets the criteria in subsection (1)
360	shall be qualified to purchase a good driver discount policy
361	from the insurer of his or her choice. An insurer may not refuse
362	to offer and sell a good driver discount policy to any person
363	who meets the standards of this section.
364	(3)  Any discount of 10 percent or less used by an insurer
365	is presumed appropriate unless credible data demonstrate
366	otherwise.
367	Section 10.  Section 627.062, Florida Statutes, is amended
368	to read:
369	627.062  Rate standards; prior rate approval.--
370	(1)  The rates for all classes of insurance to which the
371	provisions of this part are applicable shall be set by the
372	director of the Office of Insurance Regulation and may not be
373	excessive, inadequate, or unfairly discriminatory.
374	(2)  As to all such classes of insurance:
375	(a)  Insurers or rating organizations shall apply for
376	establish and use rates, rating schedules, or rating manuals to
377	allow the insurer a reasonable rate of return on such classes of
378	insurance written in this state.  A copy of rates, rating
379	schedules, rating manuals, premium credits or discount
380	schedules, and surcharge schedules, and changes thereto, must
381	shall be filed with the Office of Insurance Regulation under one
382	of the following procedures:
383	1.  If the filing is made at least 90 days before the
384	proposed effective date. and The filing may is not be
385	implemented during the office's review of the filing and any
386	proceeding and judicial review, then such filing shall be
387	considered a "file and use" filing.  In such case, the office
388	shall finalize its review by issuance of a notice of intent to
389	approve or a notice of intent to disapprove within 90 days after
390	receipt of the filing. The notice of intent to approve and the
391	notice of intent to disapprove constitute agency action for
392	purposes of the Administrative Procedure Act. Requests for
393	supporting information, requests for mathematical or mechanical
394	corrections, or notification to the insurer by the office of its
395	preliminary findings shall not toll the 90-day period during any
396	such proceedings and subsequent judicial review. The rate shall
397	be deemed approved if the office does not issue a notice of
398	intent to approve or a notice of intent to disapprove within 90
399	days after receipt of the filing.
400	2.  If the filing is not made in accordance with the
401	provisions of subparagraph 1., such filing shall be made as soon
402	as practicable, but no later than 30 days after the effective
403	date, and shall be considered a "use and file" filing.  An
404	insurer making a "use and file" filing is potentially subject to
405	an order by the office to return to policyholders portions of
406	rates found to be excessive, as provided in paragraph (h).
407	(b)  Within a reasonable time after Upon receiving a rate
408	filing, the Office of Insurance Regulation shall review the rate
409	filing and establish a rate or rate schedule that to determine
410	if a rate is not excessive, inadequate, or unfairly
411	discriminatory. In making that determination, the office shall,
412	in accordance with generally accepted and reasonable actuarial
413	techniques, consider the following factors:
414	1.  Past and prospective loss experience within and without
415	this state.
416	2.  Past and prospective expenses.
417	3.  The degree of competition among insurers for the risk
418	insured.
419	4.  Investment income reasonably expected by the insurer,
420	consistent with the insurer's investment practices, from
421	investable premiums anticipated in the filing, plus any other
422	expected income from currently invested assets representing the
423	amount expected on unearned premium reserves and loss reserves.
424	The office commission may adopt rules utilizing reasonable
425	techniques of actuarial science and economics to specify the
426	manner in which insurers shall calculate investment income
427	attributable to such classes of insurance written in this state
428	and the manner in which such investment income shall be used in
429	the calculation of insurance rates.  Such manner shall
430	contemplate allowances for an underwriting profit factor and
431	full consideration of investment income which produce a
432	reasonable rate of return; however, investment income from
433	invested surplus shall not be considered.
434	5.  The reasonableness of the judgment reflected in the
435	filing.
436	6.  Dividends, savings, or unabsorbed premium deposits
437	allowed or returned to Florida policyholders, members, or
438	subscribers.
439	7.  The adequacy of loss reserves.
440	8.  The cost of reinsurance.
441	9.  Trend factors, including trends in actual losses per
442	insured unit for the insurer making the filing.
443	10.  Conflagration and catastrophe hazards, if applicable.
444	11.  A reasonable margin for underwriting profit and
445	contingencies.
446	12.  The cost of medical services, if applicable.
447	13.  Other relevant factors which impact upon the frequency
448	or severity of claims or upon expenses.
449	(c)  In the case of fire insurance rates, consideration
450	shall be given to the availability of water supplies and the
451	experience of the fire insurance business during a period of not
452	less than the most recent 5-year period for which such
453	experience is available.
454	(d)  If conflagration or catastrophe hazards are given
455	consideration by an insurer in its rates or rating plan,
456	including surcharges and discounts, the insurer shall establish
457	a reserve for that portion of the premium allocated to such
458	hazard and shall maintain the premium in a catastrophe reserve.
459	Any removal of such premiums from the reserve for purposes
460	other than paying claims associated with a catastrophe or
461	purchasing reinsurance for catastrophes shall be subject to
462	approval of the office.  Any ceding commission received by an
463	insurer purchasing reinsurance for catastrophes shall be placed
464	in the catastrophe reserve.
465	(e)  After consideration of the rate factors provided in
466	paragraphs (b), (c), and (d), the Office of Insurance Regulation
467	shall set an appropriate rate that is not a rate may be found by
468	the office to be excessive, inadequate, or unfairly
469	discriminatory based upon the following standards:
470	1.  Rates shall be deemed excessive if they are likely to
471	produce a profit from Florida business that is unreasonably high
472	in relation to the risk involved in the class of business or if
473	expenses are unreasonably high in relation to services rendered.
474	2.  Rates shall be deemed excessive if, among other things,
475	the rate structure established by a stock insurance company
476	provides for replenishment of surpluses from premiums, when the
477	replenishment is attributable to investment losses.
478	3.  Rates shall be deemed inadequate if they are clearly
479	insufficient, together with the investment income attributable
480	to them, to sustain projected losses and expenses in the class
481	of business to which they apply.
482	4.  A rating plan, including discounts, credits, or
483	surcharges, shall be deemed unfairly discriminatory if it fails
484	to clearly and equitably reflect consideration of the
485	policyholder's participation in a risk management program
486	adopted pursuant to s. 627.0625.
487	5.  A rate shall be deemed inadequate as to the premium
488	charged to a risk or group of risks if discounts or credits are
489	allowed which exceed a reasonable reflection of expense savings
490	and reasonably expected loss experience from the risk or group
491	of risks.
492	6.  A rate shall be deemed unfairly discriminatory as to a
493	risk or group of risks if the application of premium discounts,
494	credits, or surcharges among such risks does not bear a
495	reasonable relationship to the expected loss and expense
496	experience among the various risks.
497	(f)  In reviewing a rate filing, the office may require the
498	insurer to provide at the insurer's expense all information
499	necessary to evaluate the condition of the company and the
500	reasonableness of the filing according to the criteria
501	enumerated in this section.
502	(g)  The office may at any time review a rate, rating
503	schedule, rating manual, or rate change; the pertinent records
504	of the insurer; and market conditions.  If the office finds on a
505	preliminary basis that a rate may be excessive, inadequate, or
506	unfairly discriminatory, the office shall initiate proceedings
507	to establish a new disapprove the rate and shall so notify the
508	insurer. However, the office may not disapprove as excessive any
509	rate that for which it has established given final approval or
510	which has been deemed approved for a period of 1 year after the
511	effective date of the filing unless the office finds that a
512	material misrepresentation or material error was made by the
513	insurer or was contained in the filing.  Upon being so notified,
514	the insurer or rating organization shall, within 60 days, file
515	with the office all information which, in the belief of the
516	insurer or organization, proves the reasonableness, adequacy,
517	and fairness of the rate or rate change.  The office shall
518	establish an appropriate rate within a reasonable time after
519	receiving an issue a notice of intent to approve or a notice of
520	intent to disapprove pursuant to the procedures of paragraph (a)
521	within 90 days after receipt of the insurer's initial response.
522	In such instances and in any administrative proceeding relating
523	to the legality of any the rate, the insurer or rating
524	organization shall carry the burden of proof by a preponderance
525	of the evidence to show that the rate is not excessive,
526	inadequate, or unfairly discriminatory.  After the office
527	notifies an insurer that a rate may be excessive, inadequate, or
528	unfairly discriminatory, unless the office withdraws the
529	notification, the insurer shall not alter the rate except to
530	conform with the office's notice until the earlier of 120 days
531	after the date the notification was provided or 180 days after
532	the date of the implementation of the rate.  The office may,
533	subject to chapter 120, disapprove without the 60-day
534	notification any rate increase filed by an insurer within the
535	prohibited time period or during the time that the legality of
536	the increased rate is being contested.
537	(h)  After setting In the event the office finds that a new
538	rate or rate schedule change is excessive, inadequate, or
539	unfairly discriminatory, the office shall issue an order of
540	disapproval specifying the that a new rate or rate schedule and
541	which responds to the findings of the office be filed by the
542	insurer. The order constitutes final agency action for purposes
543	of chapter 120. The office shall further order, for any "use and
544	file" filing made in accordance with subparagraph (a)2., that
545	premiums charged each policyholder constituting the portion of
546	the rate above that which was actuarially justified be returned
547	to such policyholder in the form of a credit or refund. If the
548	office finds that an insurer's rate or rate change is
549	inadequate, the new rate or rate schedule filed with the office
550	in response to such a finding shall be applicable only to new or
551	renewal business of the insurer written on or after the
552	effective date of the responsive filing.
553	(i)  Except as otherwise specifically provided in this
554	chapter, the office may shall not prohibit any insurer,
555	including any residual market plan or joint underwriting
556	association, from paying acquisition costs based on the full
557	amount of premium, as defined in s. 627.403, applicable to any
558	policy, or prohibit any such insurer from including the full
559	amount of acquisition costs in a rate filing.
560
561	The provisions of This subsection does shall not apply to
562	workers' compensation and employer's liability insurance and to
563	motor vehicle insurance.
564	(3)(a)  For individual risks that are not rated in
565	accordance with the insurer's rates, rating schedules, rating
566	manuals, and underwriting rules filed with the office and which
567	have been submitted to the insurer for individual rating, the
568	insurer must maintain documentation on each risk subject to
569	individual risk rating.  The documentation must identify the
570	named insured and specify the characteristics and classification
571	of the risk supporting the reason for the risk being
572	individually risk rated, including any modifications to existing
573	approved forms to be used on the risk.  The insurer must
574	maintain these records for a period of at least 5 years after
575	the effective date of the policy.
576	(b)  Individual risk rates and modifications to existing
577	approved forms are not subject to this part or part II, except
578	for paragraph (a) and ss. 627.402, 627.403, 627.4035, 627.404,
579	627.405, 627.406, 627.407, 627.4085, 627.409, 627.4132,
580	627.4133, 627.415, 627.416, 627.417, 627.419, 627.425, 627.426,
581	627.4265, 627.427, and 627.428, but are subject to all other
582	applicable provisions of this code and rules adopted thereunder.
583	(c)  This subsection does not apply to private passenger
584	motor vehicle insurance.
585	(4)  The establishment of any rate, rating classification,
586	rating plan or schedule, or variation thereof in violation of
587	part IX of chapter 626 is also in violation of this section.
588	(5)  With respect to a rate filing involving coverage of
589	the type for which the insurer is required to pay a
590	reimbursement premium to the Florida Hurricane Catastrophe Fund,
591	the insurer may fully recoup in its property insurance premiums
592	any reimbursement premiums paid to the Florida Hurricane
593	Catastrophe Fund, together with reasonable costs of other
594	reinsurance, but may not recoup reinsurance costs that duplicate
595	coverage provided by the Florida Hurricane Catastrophe Fund.
596	(6)(a)  Underwriting rules not contained in rating manuals
597	shall be filed for private passenger automobile insurance and
598	homeowners' insurance. After any action with respect to a rate
599	filing that constitutes agency action for purposes of the
600	Administrative Procedure Act, except for a rate filing for
601	medical malpractice, an insurer may, in lieu of demanding a
602	hearing under s. 120.57, require arbitration of the rate filing.
603	Arbitration shall be conducted by a board of arbitrators
604	consisting of an arbitrator selected by the office, an
605	arbitrator selected by the insurer, and an arbitrator selected
606	jointly by the other two arbitrators. Each arbitrator must be
607	certified by the American Arbitration Association. A decision is
608	valid only upon the affirmative vote of at least two of the
609	arbitrators. No arbitrator may be an employee of any insurance
610	regulator or regulatory body or of any insurer, regardless of
611	whether or not the employing insurer does business in this
612	state. The office and the insurer must treat the decision of the
613	arbitrators as the final approval of a rate filing. Costs of
614	arbitration shall be paid by the insurer.
615	(b)  The submission of rates, rating schedules, or rating
616	manuals to the Office of Insurance Regulation by a licensed
617	rating organization of which an insurer is a member or
618	subscriber is sufficient compliance with this subsection for
619	such insurer to the extent that the insurer uses these rates,
620	rating schedules, and rating manuals. All such filed information
621	shall be available for public inspection at the office during
622	usual business hours. Arbitration under this subsection shall be
623	conducted pursuant to the procedures specified in ss. 682.06-
624	682.10. Either party may apply to the circuit court to vacate or
625	modify the decision pursuant to s. 682.13 or s. 682.14. The
626	commission shall adopt rules for arbitration under this
627	subsection, which rules may not be inconsistent with the
628	arbitration rules of the American Arbitration Association as of
629	January 1, 1996.
630	(c)  Upon initiation of the arbitration process, the
631	insurer waives all rights to challenge the action of the office
632	under the Administrative Procedure Act or any other provision of
633	law; however, such rights are restored to the insurer if the
634	arbitrators fail to render a decision within 90 days after
635	initiation of the arbitration process.
636	(7)(a)  The provisions of this subsection apply only with
637	respect to rates for medical malpractice insurance and shall
638	control to the extent of any conflict with other provisions of
639	this section.
640	(b)  Any portion of a judgment entered or settlement paid
641	as a result of a statutory or common-law bad faith action and
642	any portion of a judgment entered which awards punitive damages
643	against an insurer may not be included in the insurer's rate
644	base, and shall not be used to justify a rate or rate change.
645	Any common-law bad faith action identified as such, any portion
646	of a settlement entered as a result of a statutory or common-law
647	action, or any portion of a settlement wherein an insurer agrees
648	to pay specific punitive damages may not be used to justify a
649	rate or rate change. The portion of the taxable costs and
650	attorney's fees which is identified as being related to the bad
651	faith and punitive damages in these judgments and settlements
652	may not be included in the insurer's rate base and may not be
653	utilized to justify a rate or rate change.
654	(c)  Upon reviewing a rate filing and determining whether
655	the rate is excessive, inadequate, or unfairly discriminatory,
656	the office shall consider, in accordance with generally accepted
657	and reasonable actuarial techniques, past and present
658	prospective loss experience, either using loss experience solely
659	for this state or giving greater credibility to this state's
660	loss data after applying actuarially sound methods of assigning
661	credibility to such data.
662	(d)  Rates shall be deemed excessive if, among other
663	standards established by this section, the rate structure
664	provides for replenishment of reserves or surpluses from
665	premiums when the replenishment is attributable to investment
666	losses.
667	(e)  The insurer must apply a discount or surcharge based
668	on the health care provider's loss experience or shall establish
669	an alternative method giving due consideration to the provider's
670	loss experience. The insurer must include in the filing a copy
671	of the surcharge or discount schedule or a description of the
672	alternative method used, and must provide a copy of such
673	schedule or description, as approved by the office, to
674	policyholders at the time of renewal and to prospective
675	policyholders at the time of application for coverage.
676	(f)  Each medical malpractice insurer must make a rate
677	filing under this section, sworn to by at least two executive
678	officers of the insurer, at least once each calendar year.
679	(8)(a)1.  No later than 60 days after the effective date of
680	medical malpractice legislation enacted during the 2003 Special
681	Session D of the Florida Legislature, the office shall calculate
682	a presumed factor that reflects the impact that the changes
683	contained in such legislation will have on rates for medical
684	malpractice insurance and shall issue a notice informing all
685	insurers writing medical malpractice coverage of such presumed
686	factor. In determining the presumed factor, the office shall use
687	generally accepted actuarial techniques and standards provided
688	in this section in determining the expected impact on losses,
689	expenses, and investment income of the insurer. To the extent
690	that the operation of a provision of medical malpractice
691	legislation enacted during the 2003 Special Session D of the
692	Florida Legislature is stayed pending a constitutional
693	challenge, the impact of that provision shall not be included in
694	the calculation of a presumed factor under this subparagraph.
695	2.  No later than 60 days after the office issues its
696	notice of the presumed rate change factor under subparagraph 1.,
697	each insurer writing medical malpractice coverage in this state
698	shall submit to the office a rate filing for medical malpractice
699	insurance, which will take effect no later than January 1, 2004,
700	and apply retroactively to policies issued or renewed on or
701	after the effective date of medical malpractice legislation
702	enacted during the 2003 Special Session D of the Florida
703	Legislature. Except as authorized under paragraph (b), the
704	filing shall reflect an overall rate reduction at least as great
705	as the presumed factor determined under subparagraph 1. With
706	respect to policies issued on or after the effective date of
707	such legislation and prior to the effective date of the rate
708	filing required by this subsection, the office shall order the
709	insurer to make a refund of the amount that was charged in
710	excess of the rate that is approved.
711	(b)  Any insurer or rating organization that contends that
712	the rate provided for in paragraph (a) is excessive, inadequate,
713	or unfairly discriminatory shall separately state in its filing
714	the rate it contends is appropriate and shall state with
715	specificity the factors or data that it contends should be
716	considered in order to produce such appropriate rate. The
717	insurer or rating organization shall be permitted to use all of
718	the generally accepted actuarial techniques provided in this
719	section in making any filing pursuant to this subsection. The
720	office shall review each such exception and approve or
721	disapprove it prior to use. It shall be the insurer's burden to
722	actuarially justify any deviations from the rates required to be
723	filed under paragraph (a). The insurer making a filing under
724	this paragraph shall include in the filing the expected impact
725	of medical malpractice legislation enacted during the 2003
726	Special Session D of the Florida Legislature on losses,
727	expenses, and rates.
728	(c)  If any provision of medical malpractice legislation
729	enacted during the 2003 Special Session D of the Florida
730	Legislature is held invalid by a court of competent
731	jurisdiction, the office shall permit an adjustment of all
732	medical malpractice rates filed under this section to reflect
733	the impact of such holding on such rates so as to ensure that
734	the rates are not excessive, inadequate, or unfairly
735	discriminatory.
736	(d)  Rates approved on or before July 1, 2003, for medical
737	malpractice insurance shall remain in effect until the effective
738	date of a new rate filing approved under this subsection.
739	(e)  The calculation and notice by the office of the
740	presumed factor pursuant to paragraph (a) is not an order or
741	rule that is subject to chapter 120. If the office enters into a
742	contract with an independent consultant to assist the office in
743	calculating the presumed factor, such contract shall not be
744	subject to the competitive solicitation requirements of s.
745	287.057.
746	Section 11.  Paragraph (c) of subsection (1) and paragraph
747	(c) of subsection (3) of section 627.0628, Florida Statutes, are
748	amended to read:
749	627.0628  Florida Commission on Hurricane Loss Projection
750	Methodology.--
751	(1)  LEGISLATIVE FINDINGS AND INTENT.--
752	(c)  It is the intent of the Legislature to create the
753	Florida Commission on Hurricane Loss Projection Methodology as a
754	panel of experts to provide the most actuarially sophisticated
755	guidelines and standards for projection of hurricane losses
756	possible, given the current state of actuarial science.  It is
757	the further intent of the Legislature that such standards and
758	guidelines must be used by the State Board of Administration in
759	developing reimbursement premium rates for the Florida Hurricane
760	Catastrophe Fund, and, subject to paragraph (3)(c), may be used
761	by insurers in rate filings under s. 627.062 unless the way in
762	which such standards and guidelines were applied by the insurer
763	was erroneous, as shown by a preponderance of the evidence.
764	(3)  ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.--
765	(c)  With respect to a rate filing under s. 627.062, an
766	insurer may employ actuarial methods, principles, standards,
767	models, or output ranges found by the commission to be accurate
768	or reliable to determine hurricane loss factors for use in a
769	rate filing under s. 627.062, which findings and factors are
770	admissible and relevant in consideration of a rate filing by the
771	office or in any arbitration or administrative or judicial
772	review. However, such findings and factors are not admissible
773	and relevant in consideration of a rate filing unless the office
774	has access to all factors and assumptions that were used in
775	developing the actuarial methods, principles, standards, models,
776	or output ranges found by the commission to be accurate or
777	reliable, and the office is not precluded from disclosing such
778	information in a rate proceeding.
779	Section 12.  This act shall take effect October 1, 2004.

CODING: Words stricken are deletions; words underlined are additions.