On June 28, 2019, Florida Governor Ron DeSantis signed House Bill 301 into law and, in doing so, loosened regulatory restrictions and allowed insurers and their agents to utilize innovative technologies to reduce perils to insureds and the costs to insurers.
House Bill 301 situates Florida among a vanguard of states that have promulgated legislation freeing insurers to provide services and devices designed to mitigate risk and control losses.
The new law, effective July 1, 2019, covers a broad range of topics, among which is a provision allowing insurance companies or agents to give insureds loss mitigation or loss control services, merchandise, goods, wares, or other items for free or at a discounted price. However, permissible loss control or mitigation must relate to the risks covered under the policy.
In general, Florida’s Unfair Insurance Trade Practices Act prohibits paying or providing certain inducements to the purchase of insurance, including payments of rebates, dividends, stock, or other things of value to insureds or prospective insureds. House Bill 301 provides specific exemptions to this Act.
The Florida Legislature has allowed exemptions to this Act in the past. For example, health insurers are allowed to give insureds rewards or incentives for participation in wellness or health improvement programs. Last year, the Unfair Insurance Trade Practices Act was amended to allow insurers and their agents to offer loss mitigations services and other items up to $100 per calendar year to insureds, prospective insureds, or others.
The new law greatly expands the ability of insurers and their agents to provide loss mitigation services or goods relating to their policies, and states: [The Act] does not prohibit an insurer or agent from offering or giving to an insured, for free or at a discounted price, services or other merchandise, goods, wares, or other items of value that relate to loss control or loss mitigation with respect to the risks covered under the policy.
The language is intended to allow insurers to utilize innovative technology to reduce the severity or frequency of claims or eliminate the risk altogether. For example, a life or health insurer may now provide wearable technology that monitors an insured’s vital signs or activity level, or a property insurer could offer detection systems for fires or flooding. The legislative staff analysis provides the example that such loss control devices could include a sensor that sounds an alarm when the environment around high-value art exceeds set temperature or humidity levels or when a leak is detected.
As of July 2019, there is no limit on the value of loss mitigation or loss control services or merchandise which can be given to insureds. What remains unclear, however, is what fits under the scope of the exemption.
May an insurer collect data from a loss mitigation device? Can an insurer pay for periodic repairs to insured property as a loss mitigation service? May an insurer give away items like smart phones because the insured could then call emergency services, which would mitigate losses after covered events, like a car accident for an automobile insurance policy or a house fire under a property insurance policy?
The extent to what is a value-added product covered under the statute is unclear, leaving legislators or regulators with difficult decisions in the future.
Anti-Rebating Prohibitions Remain Nationwide
However, an insurer looking to provide loss mitigation or loss control devices or services on a nationwide basis should be careful. The anti-rebating laws of most states still prohibit such gifts, though some states are either seeking to promulgate legislation or clarify existing law to account for beneficial insurtech products. Some states allow gifts of varying values, from $25 to $100 dollars. Other states, including Maine, North Dakota and New Jersey, have drafted guidance declaring that they will not interpret anti-rebating provisions to prohibit loss mitigation or loss control solutions. California eliminated its anti-rebating prohibitions entirely.
Indeed, the National Association of Insurance Commissioners (NAIC) and the National Council of Insurance Legislators (NCOIL) have both taken steps to modernize their approaches to anti-rebating laws. The NAIC’s Innovation and Technology Task Force voted last summer to revisit its Unfair Insurance Trade Practices Model Act, used by many states as a basis for their own such laws. The goal would be to revisit and modernize its anti-rebating provisions, though the process could take years. NCOIL is looking to modernize state anti-rebating laws, discussing ways to allow innovation at its own summer meeting.
Despite acknowledgments that regulations remain a barrier to innovation in the field of insurance and that states’ interpretations of anti-rebating laws are inconsistent, insurers and consumers alike have reason to hope things will change.
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