Some Homeowner's and other Property Insurance Companies have requested rate hikes in Florida using unauthorized computer models to project and predict huge Hurricane losses in the next few years. These requested rate hikes, based on unauthorized, unknown computer models have all been denied to date.
Other Homeowner's and Property Insurance Companies have complied with Florida law and have not found any problem doing so. They have reduced Premiums for the benefit of Florida Homeowners and other Property Insurance Policyholders because they have lowered their profit margins.
The most important law governing authorized vs. unauthorized computer models to predict future Hurricane losses is Florida Statute Section 627.0628. It has been around since 1995 and it was enacted partly in response to Hurricane Andrew. Here is a searchable link to the Florida Insurance Statutes and other Statutes provided by the Florida Legislature's web site.
In Section 627.0628, the Florida Commission on Hurricane Loss Projection Methodology was born. Here is a link to the web site of the Florida Commission on Hurricane Loss Projection Methodology.
Subsection (3)(c) of Section 627.0628 tells what kinds of catastrophe models can be used by insurers in their rate filings, or requests for premium increases, which are governed by Florida Statute Section 627.062, "Rate Standards". The law governing authorized vs. unauthorized models, Section 627.0628, says that Insurers making such a rate filing requesting authority to charge higher Premiums may use models "found by the commission to be accurate or reliable to determine hurricane loss factors for use in a rate filing".
Parenthetically, Florida is perhaps the only State that also provides "a public model for hurricane loss projections." By law, this public model is required to be accurate and reliable "pursuant to the same process and standards as the commission uses for the review of other hurricane loss projection models." Florida Statute Section 627.06281.
There does not appear to be any doubt about the meaning of the words in Section 627.0628 in any past year since the words were first written. If insurers want to make a rate filing or request a premium rate increase, then the kinds of models they use are models found by the commission to be accurate or reliable to determine hurricane loss factors for use in a rate filing.
EVEN IF authorized models are used in making the rate filing, the resulting "findings and factors are admissible and relevant in consideration of a rate filing" ONLY IF IN ADDITION the Florida Office of Insurance Regulation and the Florida Consumer Advocate are allowed to see all of the factors that went into the insurer's computer models (among other things) AND the insurer does not try to keep them secret. What happens if, as appears to be the case this year, an insurer makes a rate filing using a computer model which has NOT been found by the commission to be "accurate or reliable to determine hurricane loss factors" for use in the rate filing AND which the insurer tries to keep secret? The statute provides in what clearly seems to be express language that hurricane loss factors are NOT "admissible and relevant" WITHOUT providing the access AND DROPPING the secrecy.
Result of using unauthorized computer models WITHOUT providing the access AND WITHHOLDING secrets about the models? Rate Filing DENIED. That is the result that the Florida Statute clearly and reasonably seems to require. That is the apparent result also in every rate filing in which the insurer used such computer models to date. (This reality is, sadly, contrary to some opinions, some of which in turn are arguments for an absurd interpretation of the Florida Statute. Everybody has an opinion, and some opinions are expressed here in a newspaper report suggesting that since a few but by no means all Insurance Company representatives argued for such an interpretation of the Florida Statute, then maybe an absurd interpretation is the same thing as a reasonable interpretation. Not in the Florida Courts.)
There does not appear to be any "loophole" actually in the Florida law, not on the face of the Florida Statute nor in the practical interpretation provided by the agency applying it.
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