• 300 Words (More or Less) 2015

    Advocacy_IconEach year, FAIA's advocacy staff develops succinct summaries of insurance-related issues to help lawmakers, the media, and the public better understand these often-complicated insurance topics.

    Workforce Development for Insurance Careers
    Assignment of Benefits
    Ride-Sharing Insurance Gaps
    Patent Trolling 

    Workforce Development for Insurance Careers

    PROBLEM: Almost 20 percent of the American Agency System’s workforce is expected to retire by 2018. This huge talent gap threatens the growth and stability of the insurance industry.

    BACKGROUND: Under current law, state college students who complete nine credit hours of Department of Financial Services (DFS) approved curriculum and earn an associate’s degree are awarded a customer service representative license upon completion. Very few, if any, students take this path, because there are quicker ways to obtain the license through existing designation programs. As such, some state colleges are reluctant to put academic insurance programs in place. Increasing the licensing options for students who complete a college-level insurance specialization program will make the programs more attractive to both state colleges and students, which in turn will help expand the pipeline of educated, qualified applicants for insurance industry jobs.

    SOLUTIONHouse Bill 1133 by Rep. Fant and Senate Bill 1222 by Sen. Richter creates a college-to-career pathway for degree-seeking students who pursue insurance careers by waiving state exams based on the completion of college coursework. Specifically, the bill authorizes DFS to waive the state exam for a personal lines agent’s license if the applicant receives an associate’s degree that includes a minimum of 9 credit hours of insurance instruction approved by DFS. In addition, the bill authorizes DFS to waive the state exam for a general lines agent’s license if the applicant receives a four-year college degree that includes a minimum of 18 credit hours of insurance instruction approved by DFS.  The bill also includes other provisions proposed or supported by the DFS Division of Agent and Agency Services. The bill:

    • Allows a general lines agent to sell health insurance for any carrier, not just those for which the agent also sells property and casualty insurance,
    • Clarifies that the “Agent in Charge” of an agency must hold the licenses required to transact at least two of the lines of insurance sold by the agency,
    • Specifies that agents must retain policy records for at least five years after policy expiration,
    • Clarifies that agents may collect from insureds the exact amount charged by a credit card company for credit card transactions, and
    • Authorizes email delivery of agent notices to their customers regarding insurer insolvencies. 

    CALL TO ACTION: Support passage of HB 1133 and SB 1222.

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    ­Assignment of Benefits

    PROBLEM: Assignment of Benefits (AOB) abuse, which occurs when unscrupulous vendors file inflated claims with insurance companies and then threaten to sue if the claim is not paid, is driving up the cost of residential property insurance premiums in Florida.

    BACKGROUND: In residential property insurance, AOB occurs when a policyholder has a loss and signs a contract with a third party to remediate the damage. The contract also provides for forfeiture (assignment) of the proceeds (benefits) of the homeowners insurance policy to the third-party remediator, often a water extraction firm or roofer.  

    Since water claims are the single greatest cause of loss in Florida, representing over 50 percent of the total non-catastrophic claims frequency, let’s use one for example. A cracked water pipe floods a home. A plumber fixes the leak and refers the homeowner to a water extraction company. The extraction company assures the homeowner it’s there to help, but a contract must be signed before work can begin. The homeowner often doesn’t know about the AOB provisions or doesn't understand the implications. The insurer is billed $12,000 but knows extractions for a comparable house typically run about $3,500. It investigates or attempts to negotiate, but the mitigation company files suit and threatens to put a lien on the insured’s home.

    In far too many situations, the claim is paid (since attorney fees are in addition to the claim in such situations and costs mount quickly), but the homeowner is left with an incomplete job, shoddy workmanship, and no recourse. The Division of Insurance Fraud is now investigating nearly 200 complaints regarding such abuse.

    SOLUTION: Insurance carriers agree AOB needs reform, and roofers favor outright prohibition of AOB.  This session, lawmakers should focus on either prohibiting the use of AOB in property insurance claims, or allowing insurers to limit AOB in their policy language. The problem could also be addressed by amending the “add on” attorney fee statute that underlies much of the abuse. 

    CALL TO ACTION: Support AOB reform, up to and including an outright prohibition for property insurance claims.

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    Ride-Sharing Insurance Gaps

    PROBLEM: Regulation has not kept pace with the rapid growth of ride-sharing services such as Uber and Lyft. As such, there’s no statute that specifically addresses insurance coverage requirements for ride-sharing companies and/or drivers. Until “rules of the road” are in place, the personal and financial safety of consumers, passengers, and drivers is at risk.

    BACKGROUND: Personal auto insurance policies (PAPs) are not intended to cover the higher risks associated with using a car for commercial purposes, which is why the typical standard PAP contains a “livery” exclusion that applies when the vehicle is being rented out or used to carry passengers for hire. This exclusion means any damages or losses sustained when the car is being used for ride-sharing activities will not be covered by the PAP. The policy also will not provide coverage for the driver or passenger if they are hit by an uninsured or underinsured driver, and won’t provide coverage to repair the driver’s vehicle if it is damaged while being used for hire.

    Ride-sharing companies may have commercial liability coverage, but it’s not clear when it applies. Does it apply when drivers have the app on but have not yet been matched with a passenger? Does it apply after a passenger has been dropped off at her location? It must be clear when the ride-sharing company’s coverage on the vehicle is in effect and when it is not.  

    Without policymakers taking action that better clarify what insurance coverage is being provided and when, there will continue to be uncertainty about whether there is proper coverage for injuries or damage caused by an accident.

    SOLUTIONHouse Bill 757 by Rep. Hager and Senate Bill 1298 by Sen. Simmons ensures adequate insurance is in place to protect drivers and passengers. The bill:

    • Develops clear guidelines that define when ride-sharing-company coverage begins and ends,
    • Requires companies and/or their drivers to carry primary coverage that specifically applies to livery activity, and
    • Requires disclosure about what insurance coverage is being provided, when, and by whom.  

    CALL TO ACTION: Support passage of HB 757 and SB 1298.

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    Patent Trolling

    PROBLEM: Companies that buy cheap patents from declining companies and then seek money from firms that infringe upon these patents are targeting small businesses in Florida. These so-called “patent trolls” send small businesses that use off-the-shelf technology such as printers, scanners, and wireless networks, letters asserting that the business may be infringing on a patent owned by the troll. The troll demands licensing fees, and, if the fees aren’t paid, threatens to sue. Some businesses choose to pay the licensing fee, even though the letter is questionable, because of the high cost of patent litigation.

    BACKGROUND: Patent trolling is an emerging problem that now accounts for more than 60 percent of all U.S. patent litigation according to the Federal Trade Commission. Licensing fees demanded by patent trolls range from a few hundred dollars to several thousand dollars. The patent troll often lacks any evidence that the business is even using the patented technology, but they seek the licensing fee anyway. Typically, a troll will ask for information about a business’ computer network configuration and request that the business enter into a licensing agreement in the amount of $1,000 per employee. If the business refuses to pay the fee within a short period of time, a lawsuit is threatened. These actions often appear to be nothing more than fishing expeditions and the follow up threats of legal action sometimes appear to be made in bad faith.

    SOLUTION: Senate Bill 1084 by Sen. Brandes and House Bill 1103 by Rep. Stone creates the “Patent Troll Prevention Act,” which protects the rights of legitimate patent holders, while protecting businesses from frivolous suits. It prohibits a person from making a bad faith assertion of patent infringement and sets forth the criteria for what is considered a violation. It puts forth a series of steps that must be followed in alleging patent infringement and provides penalties, including attorney fees in defending frivolous lawsuits, if those steps are not followed. It also provides for punitive damages equal to $50,000 or three times the total damages, costs, and fees in defending frivolous lawsuits.

    CALL TO ACTION: Support passage of SB 1084 and HB 1103. 

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