The Florida Insurance FACT Book is the result of years of pertinent data accumulated by the Florida Insurance Council. It is a one-of-a-kind, constantly evolving, Florida-specific resource that includes important material compiled from Florida Insurance Council, along with data assembled from other Internet sites, including state agencies, the Florida Legislature and important national sources.

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July 16, 2007

A Florida Insurance Council White Paper 

Contact Sam Miller, Executive Vice President, (850) 386-6668, ext. 223

A recent editorial in a major Florida newspaper was entitled: “Insurers are preventing prevention”. It criticized the health insurance members of the Florida Insurance Council for opposing during the 2007 regular session bills that mandated coverage of specific health benefits.  Unfortunately, the editorial, as similar articles or opinion pieces in recent years, ignored the reasons why health insurance companies oppose such mandates.

The Florida Insurance Council is comprised of health plans that compete to sell policies that individuals and employers want - and can afford - to purchase.  These insurers try to meet the needs of Florida customers by offering policies that will best meet their needs. 

There are two major reasons why health plans oppose mandates.  First, mandates increase the cost of a policy.  Many customers already find it difficult to afford their health care coverage and will not be able to retain coverage if their costs continue to rise.  Second, customers may not wish to purchase coverage for certain benefits.  If mandated, they would be required to do so regardless of whether those benefits are needed.

It is also important to point out that health plans in Florida currently offer a multitude of product options that include coverage of benefit choices that are not mandated.  If a benefit is important to the consumer and they are willing to pay for it then it is in the best interest of the health plans to cover that benefit, regardless of whether it is required by law. 

To imply that health plans cover only what is absolutely necessary and have no interest in preventative coverage is completely untrue.  In 2006 Blue Cross and Blue Shield of Florida covered more than 870,000 child and adult immunizations, performed more than 45,000 child health checkups and filled approx. 13.5 million prescriptions.  BCBSF and other FIC health plans care about their members and encourage them to take advantage of the preventative services offered to them.

The home health care mandate offers a perfect example of the negative impact that mandates can have on coverage.  Most health plans covered home health services before the Florida Legislature mandated them.  Home health care was cost effective and convenient for plan members. What impact did the decision to mandate home care have?  Instead of contracting with the highest quality home health providers of their own choosing and negotiating with those providers to keep costs down, health plans were forced to contract with lesser-quality home health providers in order to meet mandated requirements.  Forcing health plans to contract with home health agencies also took away any negotiating leverage that health plans had, resulting in higher costs and lower quality for plan members. 

Choosing home health care was not by chance, as it is the rarest of mandates – a cost-effective one our customers value.  It shouldn’t be mandated for those reasons cited, but likely would be included in policies even if repealed.  Most mandates - current and proposed - are neither cost-effective nor demanded by customers, and therefore should not be required.

FIC health plan members will work to continue to offer what our customers want: high quality network products at affordable prices.  We will continue to find ways to market lower cost products to cover the uninsured.  Mandates impede accomplishment of those objectives by raising costs and limiting access options for individuals and groups that must absorb continued health cost increases.


From the Florida Insurance Council

Updated on August 20, 2008

This report includes these sections:

Eighteen States and District of Columbia Have Hurricane Deductibles  

2 & 5 Percent Deductibles Now Common in Florida, With 10 Percent a New Option

2004 Hurricane Season Produced Single Season Hurricane Deductible,
Multiple Deductible Reimbursement Program

HB 9A, Hurricane Deductibles

Residential Deductibles Scheme is Complex

Deductible is Triggered by Losses from a Hurricane System

Damages Subject to Hurricane Deductible Must Be Caused by Same Storm System

January 2007 Special Session: 10 Percent Deductibles Cap Repealed;
Consumers Authorized to Exclude Coverage for Contents or Windstorm Altogether, Ultimate Deductible 

Eighteen States and District of Columbia Have Hurricane Deductibles  
 "After Hurricane Andrew, with computer-based models of storms, coastal development patterns and increasing values all indicating how vulnerable insurers were to large weather-related losses, homeowners insurers had difficulty finding the reinsurance coverage they needed to protect their own bottom line. Many homeowners insurers couldn't obtain reinsurance coverage unless they agreed to greatly reduce their potential maximum losses from such events through higher deductibles," the Insurance Information Institute in New York noted in a June, 2007 report. "These deductibles exist in regions prone to hail as well as hurricane damage. They are generally equal to a percentage of the structure's insured value as opposed to a straight dollar amount, such as $1,000. Eighteen states and the District of Columbia have what have become known as hurricane deductibles.

"Percentage deductibles for windstorm losses, which may be mandatory in some coastal areas of a state, vary from 1 percent of the home's insured value to 15 percent, depending on many factors that differ from state to state, and sometimes from insurer to insurer, including the home's insured value and the "trigger," the nature of the event to which the deductible applies. In some states or portions of a state, policyholders have a "buy back" option — paying a higher premium in return for a traditional dollar rather than percentage deductible." The most common hurricane deductible in Florida on residences is 2 percent.

2 and 5 Percent  Deductibles Now Common in Florida, With 10 Percent a New Option

Percentage hurricane deductibles have been imposed by insurers on most homes in Florida valued at $100,000 or more. Two percent is the most common deductible level, although 5 percent deductibles are widespread on higher-priced dwellings.  Insurers cannot require a percentage deductible on homes valued at less than $100,000 and the deductible for most policies in this group is $500.

Mobile home deductibles are separate. Insurers can require a 5 percent hurricane deductible on mobile homes with a lien and 10 percent on dwellings without a lien.

Creation of a percentage deductible by the Florida Legislature following Hurricane Andrew improved insurers' ability to pay all of their hurricane claims and reduced the pressure on insurers to non-renew policies or otherwise reduce their presence in Florida. There are important consumer safeguards. Insurers can impose a percentage deductible on higher-priced homes only if they guarantee to renew the homeowners policy for the succeeding year. Consumers also benefit from a lower premium than they would pay with a $500 hurricane deductible. General deductibles - usually $500 - apply on all homeowners policies for non-hurricane losses, including tornadoes and severe thunderstorms which are not part of a hurricane system, and fire.

The Florida Hurricane Catastrophe Fund reported in a March 23, 2007, document that 3.8 million "residential units" were  are subject to a 2 percent deductible,  83 percent of the total units covered by the Cat Fund.  Another 192,000 residential units were subject to a 5 percent deductible, about 4 percent of the total; 35,000 units had a 1 percent deductible, 0.76 percent of the total;  2,600 risks had  deductibles of 10 to 14 percent, 0.06 percent of the total; and 1,830 risks had deductibles of 15 percent or greater, 0.04 percent of the total. Ten percent of the risks, 452,000, still had a dollar amount hurricane deductible, $500 or less. The report covered 4,653,559 "residential units" with reinsurance provided by the Cat Fund.

Separate data on mobile home deductibles was compiled. The most common mobile home deductible remained $500 to $250, 263,000, or 50 percent of the total. Another 21,000, or 4 percent, had dollar amount deductibles of greater than $500. About 26 percent had a 2 percent deductible, 138,000 units; with 70,000, or 13.5 percent, having a 5 percent deductible. Some 19,000 had deductibles of 10 percent or greater, 3.7 percent of the total.   The report covered 522,553 mobile home units with reinsurance provided by the Cat Fund. 

The outlined above is from reports carriers must file with the Cat Fund. Cat Fund officials caution that one "unit" doesn't necessarily equate to one policy because one policyholder could have several units. But the numbers are probably a close approximation of the extent of percentage deductibles in the Florida marketplace today.

2004 Hurricane Season Produced Single Season Hurricane Deductible,
Multiple Deductible Reimbursement Program

The four-storm 2004 hurricane season was the first time hurricane deductibles were implemented to a significant extent in Florida and produced the consequence that thousands of Floridians had to meet the deductible twice and an undetermined number of others even three times. As it had been implemented in the early 1990’s, the hurricane deductible applied to each and every separate hurricane loss claim.

The Florida Legislature, meeting in special session in late 2004, changed all of that. It provided a single season hurricane deductible, beginning with the 2005 hurricane season. Consumers would meet the deductible once during the year, even if it was the result of losses from combined storms, and then face their “all other perils” deductible for further hurricane claims that year.

In addition, the Legislature appropriated up to $150 million from the Florida Hurricane Catastrophe Fund for the Department of Financial Services to reimburse residential property insurance policyholders who had absorbed their hurricane deductible more than once during 2004. 

While thousands of Floridians applied for and did receive reimbursements, a substantial portion of the $150 million was not appropriated. 

HB 9A, Hurricane Deductibles
Here are highlights of the 2004 special session hurricane deductible package taken from a summary by the Senate Banking & Insurance Committee:

The 2004 hurricane season was particularly destructive for Florida, with Hurricanes Charley, Frances, Ivan, and Jeanne causing extensive damage throughout the state. According to the Office of Insurance Regulation (OIR), as of December 2, 2004, insurance companies have reported over 1.5 million property insurance claims for all four hurricanes and $10.5 billion in total claims payments. The companies estimate that the total expected gross property loss will reach $20.8 billion.

Residential hurricane deductibles are typically 2 percent of policy limits and may generally be as high as 5 percent of policy limits, or even higher for certain policies. However, $500 hurricane deductibles are still prevalent for homes and mobile homes valued under $100,000. The deductible applies to each hurricane, which can result in significant out-of-pocket expense to many policyholders.

According to a survey of insurers by OIR, it appears that in many cases of multiple hurricane claims, the insurer waived application of multiple deductibles. But, using the survey results and attempting to account for missing information, committee staff estimates that about 36,000 policies had multiple deductibles applied and that the cost to policyholders of second and subsequent deductibles may total about $70 million. But this estimate apparently includes only policies for which insurers paid two or more claims and deducted the full amount of the deductible, and does not include “no payment” claims below the deductible or claims not reported to the insurer.

Requiring Residential Policies to Provide Annual Hurricane Deductibles

The 2004 law, which applies to residential property insurance policies issued or after May 1, 2005, required  that the hurricane deductible be applied on an annual basis to all hurricanes that occur during the calendar year, rather than to each hurricane. For example, if a home is insured for $200,000 and has a 2 percent hurricane deductible, which is a $4,000 hurricane deductible; it would apply to all hurricane losses for the year, rather than to each hurricane loss. However, insurers may apply the “other perils” deductible, which is typically $500, or the remaining amount of the hurricane deductible, whichever is greater, to a loss for a second hurricane and each subsequent hurricane that year.

This requirement applies to hurricane losses covered under one or more policies in effect during the same calendar year that are issued by the same insurer or an insurer in the same insurer group. For example, if a policyholder has a hurricane loss in August and renews the policy in September, the hurricane deductible would apply to the August loss and to any additional hurricane losses that occur through the end of December.

The new law effectively requires insurers and policyholders to keep track of hurricane losses that occur, even if they are under the deductible. Insurers are allowed to require policyholders to report claims below their deductible and to maintain records or receipts in order to apply the loss to a subsequent hurricane.

If a policyholder has a hurricane loss and then changes the hurricane deductible, the highest deductible applies. If a policyholder has a hurricane loss and then lowers their deductible, the insurer must notify the policyholder in writing that the lower deductible amount does not apply until January 1 of the following year.

 Residential Deductibles Scheme is Complex
The current deductibles scheme is complex. It is described in detail in this excerpt from the Florida Senate Banking and Insurance Committee's September 1999 report, "Availability and Cost of Residential Hurricane Coverage: "Florida law limits the maximum and minimum hurricane deductibles that may be offered by residential property insurers and requires that certain deductibles be offered . In practice, this results in most homeowners being given two options for a hurricane deductible - either 2 percent or 5 percent of policy limits."

"More specifically, for homes valued at under $100,000, the insurer must offer a $500 hurricane deductible and a 2 percent of policy limits hurricane deductible. For homes valued in excess of $100,000, the insurer must offer the 2 percent deductible, but the $500 deductible may not be offered if the insurer guarantees that it will renew the policy for another year. The maximum allowable deductible is 2 percent for homes valued under $100,000, 5 percent for homes valued between $100,000 and $500,000  and unlimited for homes valued in excess of $500,000. On mobile homes, the law allows a hurricane deductible up to 5 percent of the value when there is a lien on the mobile home, and up to 10 percent for mobile homes when there is no lien.

"For condominium association and cooperative association policies, the maximum allowable hurricane deductible is 5 percent of the insured value, but the insurer must offer a 3 percent deductible. For other commercial residential structures, like apartment buildings, the maximum hurricane deductible is 10 percent, but the insurer must offer a 3 percent deductible and may offer any deductible in between."

Deductible is Triggered by Losses from a Hurricane System
Originally, Florida's percentage deductibles applied to any windstorm loss - tornado, thunderstorm, tropical storm, hurricane. The 1997 Legislature, with the industry's support, agreed in the mid-1990's to limit percentage deductibles to hurricane losses. Current Florida law on percentage deductibles (Section 627.701, F.S., 1997) was patterned after Hawaii's  percentage hurricane deductible, the only law in effect at the time. The Florida Insurance Council believes the statute is clear as currently worded. However, FIC has supported efforts over the past several years to make it even clearer. 

There was some confusion over application of the hurricane deductible following Hurricane Irene, which came ashore October 15-16, 1999,  in Dade, Broward and Palm Beach counties. Irene caused $100 million in wind damage and $100 million in flooding losses. Some south Florida homeowners complained because the hurricane deductible was applied even though it was never clear Irene produced hurricane-force winds over the Florida mainland.

Common misconceptions include:

  • The hurricane deductible is triggered by a hurricane watch or warning from the National Hurricane Center, allowing insurers to impose it regardless of whether hurricane-force winds ever hit the state.
  • Once the hurricane deductible is triggered, it can be applied anywhere in Florida, even for an unrelated weather event hundreds of miles away. Section 627.4025, Florida Statutes, provides that application of percentage hurricane deductibles  is triggered not by a watch or warning, but by windstorm losses resulting from  "a storm system that has been declared to be a hurricane by the National Hurricane Center of the National Weather Service." The deductible was appropriate for Irene claims because the Irene system had been declared a hurricane, regardless of whether hurricane-force winds occurred over mainland Florida.

As the Senate Banking and Insurance Committee noted in its September 1999 study, "on a case by case basis, it may be difficult to determine whether a windstorm loss in a particular county or area was caused by or resulting from a hurricane particularly if the wind speed is below hurricane force winds (which is very difficult to determine) and is geographically distant from the center of the storm system." The key is that the system had been declared a hurricane at some point and that the losses resulted from that system, the standards established by Hawaii. 

Section 627.4025 restricts the duration of the insurance industry's application of the percentage deductible. The hurricane deductible can be imposed beginning "at the time a hurricane watch or warning is issued for any part of Florida," continuing "for the time period during which the hurricane conditions exist anywhere in Florida" and ending 72 hours following the termination of the last hurricane watch or warning."

A hurricane watch or warning does not authorize use of the percentage deductible, but defines when use of the percentage deductible can begin and when it must end - to the benefit of consumers. An insurer could not impose the deductible on damage to a home from a sudden severe thunderstorm when a hurricane system is still hundreds of miles and several days from Florida because a watch or warning would not have been issued. Carriers must stop imposing the percentage deductible 72 hours after termination of the last watch or warning, so damages from severe thunderstorms which often occur a week or more after a hurricane would be subject to the general deductible.

Damages Subject to Hurricane Deductible Must Be Caused by Same Storm System

The hurricane deductible can be applied to all damages resulting from the hurricane system, even damage distant from areas receiving the storm's most serious impact. However, in these cases, insurance regulators will require the insurer to prove that the distant damage was caused by the hurricane storm system rather than an unrelated weather event. This was reenforced in a June 1997 memo by Don Dowdell of the former Florida Department of Insurance (now the Office of Insurance Regulation).

"Evidently, some insurance agents and others" are concluding that once the hurricane deductible has been triggered for any part of the state "any damage cause by wind would...be subject to the hurricane deductible...This interpretation of the statute is erroneous," Dowdell wrote. If the deductible is triggered in "one area of the state and property damage caused by an unrelated weather event occurs in a second area of the state, the property damage in the second area would not be subject to the hurricane deductible, but would, instead, be subject to the general deductible specified in the insurance policy."

Most insurers apply the general deductible rather than the hurricane deductible when they are in doubt as to which deductible applies. The Florida Insurance Council is not aware of a single instance where a carrier has been accused of imposing the percentage deductible for damages not associated with a hurricane system that made landfall in another part of the state.

January 2007 Special Session: 10 Percent Deductibles Cap Repealed;
Consumers Authorized to Exclude Coverage for Contents or Windstorm Altogether, Ultimate Deductible
The Florida Legislature, during the January, 2007 special session, eliminated the 10 percent cap on hurricane deductibles that had applied for certain value homes and authorized consumers, at their option, to purchase hurricane policies without contents coverage or without windstorm coverage at all, the deductible of all deductibles. Here is a Senate Banking & Insurance Summary of pertinent sections of HB 1A:

HB 1A Coverage Exclusions; Deductibles
The act includes three provisions that would allow policyholders to significantly reduce their windstorm coverage and to assume the risk of loss, in exchange for a lower premium, as follows:

•Requires insurers to make available to policyholders the option to exclude windstorm
coverage, if the policyholder personally writes a statement that he/she does not want such
coverage and provides documentation of approval by any mortgage or lien holder.

• Eliminates maximum allowable deductibles, but requires a written statement by the
policyholder and approval by a mortgage or lien holder if the deductible is in excess of
10 percent for a home valued at less than $500,000. Insurers are still required to offer
annual hurricane deductibles of 2 percent, 5 percent, and 10 percent of policy limits, with
certain exceptions. The act allows, but does not require, the offer of a higher deductible.

• Requires insurers to make available to policyholders the option to exclude coverage for
contents, if the policyholder personally writes a statement that he/she does not want such

Florida Medical Malpractice Joint Underwriting Association

July 13, 2007, From the Florida Insurance Council staff 

For more than a generation, Florida has had an underwriting pool for medical malpracticeinsurance called the Florida Medical Malpractice Joint Underwriting Association (FMMJUA). The pool was designed, and operates today, as a means of providing malpractice insurance toindividual health care providers and hospitals who otherwise would be unable to purchase protection for their patients from a commercial insurance company.

The original action to create the FMMJUA was taken during a time when there was a shrinking market for such coverage in Florida. This was based in part on Florida’s regulation of premiums insurers could charge medical providers, in part on a dramatic increase in the number of medical malpractice claims being filed, and in part on the loss of companies providing this type of insurance due to insolvency or corporate decisions that offering this line of insurance was no longer profitable in Florida.

There has been little significant change in the structure or operation of the pool since it was created by act of the Florida Legislature in 1975. The pool operates under the responsibility of the Insurance Commissioner and direction of a Board of Governors. The board is composed of representatives of the Florida Medical Association, Florida Hospital Association, Florida Bar, Florida Dental Association, and the insurance industry.

The board sets rates and policy, subject to the regulatory approval of the Insurance Commissioner. In this way, the FMMJUA operates much the way a private insurance company would operate. Claims are processed by a "servicing carrier," an insurance company with whom the FMMJUA contracts to provide this service. Premiums sent to the pool are invested and ultimately used to pay claims. In the event there is a surplus of premiums to claims, this surplus is returned to policyholders on a pro rate basis. In the event there is a deficit in the payment of claims, policyholders may be required to pay additional premiums or are absorbed by assessments charged to participating insurance companies, self-insurers and risk-retention groups.

JUA Stays in Black; Actually Returns Dividends to Doctor/Policyholders

From Kurt Driscoll, First Professionals Insurance Company, Jacksonville, and chair of the FIC Subcommittee on Medical Malpractice Insurance.

"The JUA has been profitable for many years now and has been returning those profits to the policyholders on years that have no more claims.  It continues to show a surplus and will soon commence a grant process to entities that strive for patient safety.  The JUA has always maintained its premium levels just slightly higher than the industry and always actuarially sound.

"The FMMJUA comes in to play when the market dries up as it did in 2002.  However, even that year it only reached 1000 policyholders. It is truly run as a residual market and stabilizer of the market and not in competition with the market.  It is not a bureaucracy and has only two or three employees while most of the work is contracted with a carrier that writes Medmal on a regular basis.  Not being forced to write at or below market levels has allowed the company to return
profits and not be saddled with deficits that will take years to be paid for by the next generation."

For further information, contact: Preston Cowie, FMMJUA general manager, Tallahassee, 850) 385-8114. or
the association's Internet site at http://www.fmmjua.com



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ISO's Public Protection Classification (PPCTM) program
ISO's Building Code Effectiveness Grading Schedule (BCEGSTM)

ISO Mitigation Online

ISO's Building Code Effectiveness Grading Schedule (BCEGSTM)

One of the factors in hurricane insurance rates in Florida is the local grade given building code departments under ISO's Building Code Effectiveness Grading Schedule. Florida was one of the first states to see development of this program by ISO.

The Building Code Effectiveness Grading Schedule (BCEGS) assesses the building codes in effect in a particular community and how the community enforces its building codes, with special emphasis on mitigation of losses from natural hazards.

See this special report from the ISO Interet site:
ISO Building Code Enforcement Grading Program

This informational memorandum was posted by the Office of Insurance Regulation on its Internet site on July 12.

OIR Informational Memo on HMO Legislation