Commissioner Approves First Property Insurance Rate Reduction In Wake Of New Insurance Reforms
TWO INSURERS ALSO DROP USE OF CREDIT SCORING
TALLAHASSEE (02/16/2007) Florida Insurance Commissioner Kevin McCarty today approved the first filing with proposed rate cuts in response to the recently enacted insurance reform law. American Strategic Insurance Company (ASI) was approved for a statewide average rate reduction of 11.4 percent to become effective on March 1st for new customers and on May 1, 2007, for renewal business.
The Office of Insurance Regulation (Office) has also received filings from Royal Palm Insurance Company (Royal Palm) and Security First Insurance Company (Security First). Royal Palm filed for a statewide average rate reduction of 20.7 percent, and Security First filed for a statewide average rate reduction of 22.3 percent. Both companies also reported that they would no longer rely on applicant or policyholder credit scores when determining insurance rates.
Under the new law passed by the Legislature in January and signed into law by Gov. Charlie Crist, insurers must file new rates that incorporate savings generated by the newly enacted reforms. The Office is required to calculate what those savings will be by March 15th, and insurers must then file new rates to become effective for new and renewal business on or after June 1st.
McCarty said ASI, Royal Palm and Security First did not want to wait to reduce rates. "These companies wanted to get the savings into their policyholder's pockets as soon as possible, and we certainly do not want to stand in the way of that," said McCarty. "Also, I am extremely pleased that both Royal Palm and Security First have elected to determine rates without resorting to credit scores. The use of credit scores has troubling implications in a state like Florida, with such a diverse ethnic and racial makeup."
Any rates for the companies that are ultimately approved will have to match the presumed factor rate reductions that the Office eventually calculates. If not, the companies will have to amend rates to make sure they provide enough of a reduction.
ASI also reported to the Office that recent reports by state industry trade groups saying that the company was no longer willing to insure homes built prior to 1995 were erroneous. In fact, the company has written at least 134 policies for such homes since the beginning of the month.
The Office has also been notified that a new Florida insurer, American Integrity Insurance, of Tampa, has begun sending notices to about 90,000 Citizens Property Insurance Corporation policyholders with an offer of private market coverage at lower rates.
In 2003 the Legislature approved a new law to limit the use of credit scores by insurers. Last year the Financial Services Commission approved a new rule that requires all insurers making filings to the Office of Insurance Regulation to provide information proving the use of credit information does not disproportionately affect persons of any race, color, religion, gender, age or place of residence. Presently that rule is being challenged in court by various insurance industry trade groups.
McCarty said his concerns about insurers' use of credit scores are due, in large part, to one public study which found that one in four credit reports contains errors or omissions serious enough to disqualify consumers from purchasing a home, a car or getting a job. Just this week a large national insurer finalized settlement of a class action lawsuit regarding credit scoring. Also, in recent years the same company paid a multi-million dollar fine to settle state charges that it used negative credit information to deny or discourage applicants from obtaining automobile coverage.
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