Op-Ed

Modernize the marketplace for Florida’s insurance risk-takers

Many insurers are reluctant to cover damage from catastrophic weather conditions.
Many insurers are reluctant to cover damage from catastrophic weather conditions. Getty Images

Given the rapid pace of change in Florida, and the relatively slow pace of the state’s legislative process, there often is a lag time when it comes to updating outdated provisions in Florida law.

Invariably, the “housecleaning” comes, and old laws are changed to address new times. We hope that the state Legislature pushes through needed updates to the state’s prehistoric regulations governing the surplus lines insurance industry.

Admittedly, people aren’t marching in the streets, and pundits aren’t shouting over each other on cable news about surplus lines insurance. In fact, the typical reaction might be: Surplus lines what?

Think Lloyds of London, think about downtown skylines, think about all the things you never thought about buying insurance for — surplus lines insurers cover risks that many companies will not.

These risks could include a new business start-up, one that doesn’t have a track record to qualify for standard insurance. It could include new technology or new products — maybe even new theme park rides.

With the digital age has come the new and very expensive risk of losing data or getting hacked. That often has to be insured, and doing so often requires the kind of specialized knowledge and coverage not found in the standard insurance marketplace.

Florida is well versed in catastrophic weather damage. As risks have grown, so has the hesitancy of some insurers to cover them, meaning that surplus lines have become increasingly important in covering Florida’s risk.

Surplus lines insurance helps keep Florida in business. In Miami-Dade County, almost 700 agents serve surplus lines consumers, with more than $1.3 billion in last year’s annual written premium.

But the industry still operates under some outdated regulations.

There are myriad state-mandated reporting requirements, long ago rendered obsolete by new electronic filings.

There is currently an unrealistic $35 cap on fees that agents who provide and process surplus line policies charge. This fee is the same amount they’ve been receiving since 2001, because nearly two decades ago someone wrote it into law. Still, no one knows why $35 was ever chosen. It’s inflexible and unscalable, hampering consumer options.

A bill pending in the Legislature — HB 387 — modernizes the marketplace for Florida’s risk-takers.

Since there is no “one size fits all” approach that works well in this context, the agent’s fee is separately itemized for the client to see. This modernization is, by the way, how it is handled in most other large surplus lines states. Florida is the nation’s third-largest consumer of surplus lines insurance.

The same bill also eliminates unnecessary reports and paperwork.

Last, the bill extends existing provisions designed to increase access to the private flood insurance market. Looking at the seas rising along Florida’s coast and the more than 4 million households still without flood insurance, this is nothing more than common sense.

We urge state lawmakers to act on these important updates, increase efficiency and competition in the private market and to reduce unnecessary regulatory burdens.

Harvey Sheldon, CPCU, is the director of Advanced E&S of Florida, Inc.

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