National insurers want the marketplace to determine workers' comp rates. Smaller, Florida-based insurers see a big threat.
Property and casualty insurers -- especially commercial carriers selling workers' compensation insurance -- can look forward to another tough year. Nationwide, competition has driven rates down to about 65% of what they were four and five years ago. Meanwhile, there has been ample evidence in the past 18 months that claims covered by workers' comp insurance are starting to pick up momentum. Insurers are worried. "It will be a very difficult year," says John Gwynn, an independent insurance analyst at J.D. Gwynn & Associates in Ponte Vedra Beach. "It will be as difficult as we've seen in the last 10 years."
In Florida, large, national insurance carriers and some business groups likely will push for legislation of "open rating" for workers' comp rates. Currently, the Florida Department of Insurance must approve workers' comp rates; under an open rating system, however, the marketplace determines the rates.
In the short-term, open rating might be welcome news for Florida employers because full-bore competition would likely push their workers' comp premiums even lower. Within 18 months of the California Legislature passing open rating for its workers' comp industry in 1995, for example, workers' comp revenues plummeted 40%.
The question about open rating is what happens in the long term. Opponents of the open rating plan -- typically, smaller insurers, including Florida-based companies -- also point to what happened in California, where most of the smaller California-based workers' comp carriers disappeared after open rating went into effect.
In the long run, the smaller companies say, rates won't stay low because the bigger insurance firms will raise premiums after their competitors have gone out of business. In Florida, Gwynn says, "open rating obviously will, at best, aggravate an already bad situation."
The business lobbying group Associated Industries of Florida, which owns a workers' comp insurance company, is expected to strenuously fight open rating.
Don Pride, spokesman for the Florida Department of Insurance, says the agency is not opposed to open rating, but wants to be cautious about changing the system too quickly for fear of destabilizing the market.
"Before changing, there needs to be an objective and comprehensive analysis to determine what will happen to rates in the short term and long term," says Pride.
INSURANCE NEWS
Issues for Insurers
Homeowners: A showdown is brewing between two groups that are usually allies -- the insurance industry and homebuilders -- over tougher building codes. Insurers are lobbying for a hurricane-resistant building code. Requirements in the proposed code include shutters or impact-resistant glass for windows in all new buildings in coastal areas. But homebuilders, expected to put up a fight, say the new requirements would add too much to the cost of building new homes.
Healthcare: the insurance industry wants new legislation to limit the Florida Department of Insurance's discretion in setting health insurance rates. Insurance Commissioner Bill Nelson vehemently opposes any changes. House Insurance Chairman Stan Bainter, R-Eustis, is expected to push for a review of DOI's overall rate-making in property and casualty, life and health insurance during the upcoming legislative session.
Automobile Insurance: Auto insurers will be countering growing consumer concern over the use of used auto parts in the repair of crashed vehicles. Insurers want to reserve the right to use what they deem "competitive crash parts" in auto repairs. Consumer groups are pushing for laws requiring insurance companies to pay for parts supplied by the original equipment manufacturer.
BANKING NEWS
Sign of the Times
In Florida, is it NationsBank or Bank of America? With the merger of the two mega-banks, the Bank of America name has been adopted on NationsBank branches and offices throughout the country, but Florida's been stuck with the NationsBank moniker. Why? Mostly because NationsBank was still digesting Barnett Banks as merger talks commenced with BoA. In May, the confusion should end -- when all 850 Florida branches and numerous office buildings will sport the Bank of America name. The biggest bonanza in all the changes may come for the sign companies: All the shingle-hanging could cost as much as $26 million.
Watch out for Wachovia
A decade ago, when its North Carolina rivals -- NationsBank and First Union -- were aggressively expanding in Florida, Wachovia Corp. stayed home. Now, although late to the party, Wachovia, based in Winston-Salem, N.C., is looking to expand its banking franchise in Florida this year, either through opening new branches or acquiring existing facilities. Last year, longtime Wachovia banker Ken Coppedge transferred from Atlanta to the bank's Florida headquarters in Tampa. As president of Wachovia's Florida bank, Coppedge will direct the expansion program, which for now will mostly be concentrated in the Tampa Bay area and south Florida. Wachovia has about $1 billion in Florida deposits. By comparison, NationsBank has $50 billion in Florida deposits, and First Union has about $35 billion.
Fees & Intangibles
Florida bankers say they'll remain ever vigilant this year against any legislative attempts to ban or set limits on ATM fees. The Florida Bankers Association (FBA) is on guard after the California cities of Santa Monica and San Francisco banned financial institutions from charging non-customers fees for using their automated teller machines. "Our position is that it's a matter of choice," says Anthony DiMarco, FBA vice president and director of government affairs. "People don't have to use another bank's ATM."
In other legislative issues this year: The banking industry plans to continue pushing for the elimination of Florida's intangible tax, which is assessed on certain assets and investments. An FBA survey found that Florida residents transferred $4 billion in trust assets out of Florida in 1998 because of the intangible tax. That's $4 billion that could have been invested with Florida banks and trust companies, DiMarco says.
Who's Watching the Bank?
The FBA will be closely following an emerging issue over how the state will regulate the banking and insurance industries in the coming years, as a result of last year's constitutional amendment merging certain aspects of the Comptroller's Office and the Department of Insurance. The unresolved issue is whether the same regulators will be given oversight of banks and insurance companies. For its part, the banking industry wants separate regulators following each industry -- mostly because many federal banking laws supercede state laws, while insurance companies are solely regulated by state agencies.