Law & Ethics Update 2-143

Department Communication


The Communications Director manages the Department of Communications. The Insurance Commissioner appointed Florida’s Communications Director in March 2014. According to the Insurance Commissioner, the department’s Director (aka “Commissioner”) of Communications is responsible for: “… the day-to-day activities of the communications business unit. He will serve as the key spokesperson for the OIR, and advise on overall communication strategies.”
[Source: OIR Press Release]

The CFO and Insurance Commissioner are proponents of transparency for its citizens. Managing communications and making them public (as appropriate) enforces the transparency process. The Newsroom on the website makes the Director available, provides access to OIR actions, and ensures related news is current. Citizens are invited to follow them @FLOIR_comm on Twitter© and Facebook© and sign up for the weekly newsletter Dollars & Sense.



Guaranty Association


Florida Insurance Guaranty Association (FIGA) is part of a non-profit, state-based, statutorily-created system that pays certain outstanding claims of insolvent insurance companies. By paying these claims, guaranty associations protect policyholders and claimants. Guaranty associations are active in every state, the District of Columbia, Puerto Rico and the Virgin Islands. 

Guaranty associations ease the burden on policyholders and claimants of the insolvent insurer by immediately stepping in to assume responsibility for most policy claims following liquidation. The coverage guaranty associations provide is fixed by the policy or state law; they do not offer a "replacement policy."

By virtue of the authority given to the guaranty associations by state law, they are able to provide two important benefits: prompt payment of covered claims and payment of the full value of covered claims up to the limits set by the policy or state law.

Specifically, when a member insurer is found to be insolvent and is ordered liquidated, a receiver takes over the insurer under court supervision and processes the assets and liabilities through liquidation. Upon liquidation, FLAHIGA automatically becomes liable for the policy obligations the liquidated insurer owed to its Florida policyholders. [Chapter 631]



Life and Health Insurance Guaranty of Payments [§631.711]

What follows applies to direct life insurance, health insurance, annuity contracts, and supplemental contracts issued by those licensed to transact insurance in Florida. Coverage is provided to: 


· Those who are the beneficiaries, assignees, or payees of covered persons; and

· Those who are owners of policies or contracts, and who:

o Are residents of Florida; or

o Are residents of other states, IF:

* The insurer is in Florida;

* The insurers were not licensed in the states in which the individuals reside at the time specified in a state’s guaranty association law (necessary for coverage);

* Such other states have associations similar to the association created by Florida; and

* Such persons are not eligible for coverage by those associations.

* Notwithstanding any other provisions this part applies to coverage of a person who is a payee under a structured settlement annuity, or a beneficiary if the payee is deceased, with a coverage limit of $300,000 by the association, if:

· The payee is a resident of Florida.

· The payee, the beneficiary, or the contract owner is eligible for coverage by the association of the state in which the contract owner resides.


Administration and Assessment [§631.715(2)(a)]

 For purposes of administration and assessment, the association maintains three accounts:

· The health insurance account;

· The life insurance account; and

· The annuity account.

Borrowing between accounts for payment of policyholder and contract holder claims and other obligations of the association is authorized at the discretion of the board of directors, provided that the amounts are restored to the appropriate accounts not less than annually.

The association is under the immediate supervision of the department and subject to the applicable provisions of the insurance laws of Florida.



Florida HMO Consumer Assistance Plan [§631.811 and §631.828]

There is a nonprofit legal entity known as the Florida HMO Consumer Assistance Plan. All HMOs must remain members of the plan as a condition of their authority to transact business in Florida. The plan performs its functions under the plan of operations established and approved under the provisions and exercise its powers through a board of directors. The plan comes under the immediate supervision of the department and is subject to the applicable laws of Florida.





New Florida Law Updates


Senate Bill 166

Senate Bill 166, as amended, became §627.4554 of the Insurance Code. This statute provides protective requirements for the sale of annuities. Nationwide, states have continued to tighten the reins on the sale of suitable annuities. Since Florida has a hefty population of seniors (elderly) who make it a goal to retire in our warmer climate, the laws of annuities and suitability are imperative to selling these products. Insurance can be complicated enough for a layperson. Annuities are complicated, complex and sophisticated investment vehicles, the sales of which are not suitable for everyone, despite their ages.

Of the 19 million Florida residents, about 16 percent are seniors and both numbers are expected to grow. Many annuity products are likely most suitable for the other 16.3 million residents than the 3 million seniors. That still allows a pretty big pool on which to focus annuity sales.

Since §627.4554 of the code is already law, the focus here is on the more recent amendments. 


The primary consumer protections, which amended the law, were (in summary):  


· Suitability of Annuities – The law requires an insurer or agent recommending the purchase, exchange, or replacement of an annuity to have reasonable grounds for believing the recommendation is suitable for the consumer, based on information provided by the consumer.

· Documentation of Sales Transaction – The law requires agents and their representatives to record all recommendations made to a consumer, regardless of age.

· Prohibitions on Agents – Prohibits agents from dissuading or attempting to dissuade a consumer from truthfully responding to the request for suitability information, filing a complaint, or cooperating with the investigation of a complaint.

· Unconditional Refund Period – The statute expands to 21 from 14 days the unconditional refund period for all purchasers of fixed and variable annuities.


· Limit on Surrender Charges – The law retains the prohibition against surrender charges or deferred sales charges in annuity contracts issued to a senior consumer, exceeding 10 percent of the amount withdrawn.

· The charge must be reduced so that no surrender or deferred sales charge exists after the end of the 10th policy year or 10 years after the premium is paid, whichever is later.

· Penalties – This section of the code authorizes the imposition of corrective action, appropriate penalties, and sanctions on insurers, agents, managing general agencies, or insurance agencies that violate the requirements. Specifically, an insurance agent must pay restitution to a consumer whose money the agent misappropriates, converts, or unlawfully withholds. [Source: Florida Senate Bill Tracker] 















































Source: Florida Legislature 2014: What Passed and What Failed; Tampa Bay Times, May 26, 2014; State Library and Archives of Florida, 2013 and 2014 Florida Senate Glossary





Pertinent Federal Law Review Pertinent to Florida Licensed Insurance Professionals


Each state’s insurance director manages most insurance issues and products at the state level. There are, however, instances in which the state and federal governments work together, for example, Medicaid is a state and federally funded program.

State and Federal Relationship

There is a relatively new (3-years) Federal Insurance Office (FIO) that was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA), which, so far, has allowed states the same freedoms as before creation of the FIO.

The fall of the economy, during which we endured the exposure of an insurance industry debacle, played a significant role in Title V of the DFA. It created the FIO and appointed a director who had previously been the acting Insurance Director in Illinois, and an officer for the NAIC. This appointment allowed a voice for the state-run industry and, as the director said during his first press conference, the FIO has refrained from stepping into state lines. He can, however, intervene if a reasonable request is made. The FIO authorities extend to all lines of insurance except health and LTC insurances (except those lines of insurance included with life or annuity components).


Although the FIO states, “authority extends to all lines except health … “ we can hardly call the Affordable Care Act “health insurance without federal input!” We have been virtually hit over the head with volumes of Affordable Care Act documentation, rules, policies, and dates. The Act is set to run on a rolling calendar, which results in yearly changes to the rules you become accustomed, each time January 1st rolls around. On a Federal level, these are AFA laws for 2014 and 2015.
































Chapter 3 Contents



Department Communication
Guaranty Association
Insurance Law &
Pertinent Federal Law Review Pertinent to Florida Licensed Insurance Professionals




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Florida State Law Updates



Brief Summary Descriptions

HB 1223

Deceptive and Unfair Trade Practices - Military

Authorizes a civil penalty for a person who willfully uses a deceptive or unfair trade act or practice against military Servicemembers or the Servicemembers' spouses or dependent children. Effective July 1, 2013

HB 157

E-Delivery of Policies

Authorizes an insurer to electronically transmit an insurance policy to the insured or other person entitled to receive the policy; provides an exception to electronic transmission for specified policies; requries a paper copy of the policy to be provided upon request. Effective July 1, 2013

HB 223

Internet in Lieu of Mail

This act authorizes posting of specified types of insurance policies and endorsements on an insurer's website in lieu of mailing or delivering if the insurer complies with certain conditions. Effective July 1, 2013

HB 935

Florida False Claims Act

Revises conditions under which a person is liable for a specified civil penalty; created Miscellaneous Proceedings;  Subpoena (§68.0831, F.S.); authorizes the Department of Legal Affairs to issue subpoenas for specified purposes without waiting on the filing of a civil proceedings; prohibits specified actions by a person knowing or having reason to believe a subpoena is pending; provides civil penalties (any natural person who violates this Act is subject to a civil penalty of not more than $100,000, reasonable attorney fees, and costs. Any other person who violates this subsection is subject to a civil penalty of not more than $1 million, reasonable attorney fees, and costs); amends Rights of the Parties in Civil Actions; amends Awards to Plaintiffs Bringing Action; provides for successful plaintiffs to receive, in addition to a portion of the amount recovered, awards of expenses and attorney fees and costs; amends Expenses; Attorney Fees and Costs; amends Exemptions to Civil Actions (§68.087, F.S.); revision of provisions relating to dismissal of an action if substantially the same allegations or transactions as alleged in the action were publicly disclosed; amends Limitation of Actions; Effect of Interventions by Department; amends Burden of Proof; provides for estoppel as to certain matters following a final judgment or decree rendered in favor of the state or federal government. Effective July 1, 2013

SB 1524

Florida Information Protection Act of 2014

Repeals provisions relating to a breach of security concerning confidential personal information in third-party possession; requires specified entities to take reasonable measures to protect and secure data containing personal information in electronic form; requires notice to individuals of data security breaches under certain circumstances. Effective July 1, 2014