Features
In the eye of the storm
By Lindy McCollum-Brounley
Kevin McCarty (JD 86) stepped into the Office of Insurance Regulation as Gov. Jeb Bush’s appointee for insurance commissioner in 2003.
One year later, all hell broke loose.
“In 2004 and 2005, we had eight named storms that made landfall within 16 months, reaching $36 billion in insured losses,” McCarty said. “All but one or two counties in the state, at one point or another, were declared a disaster area; so it was a very trying time for the office, not only to the effect of ensuring that policy holders were being paid for claims but also working collaboratively with various government agencies to provide storm relief to people who were beset by the tragedy.”
Fortunately for Florida, McCarty was already a pro at managing volatile insurance markets caused by hurricane devastation. Following his early work at the Florida Department of Labor & Employment Security, McCarty joined the Florida Department of Insurance in 1991 as a strategic private market expert. He is credited with implementing strategies to strengthen the private insurance marketplace following the $26 billion in damages caused by Hurricane Andrew in 1992.
“Insurance is the keystone for rebuilding in a community after a disaster,” McCarty said. “You have federal money, but the bulk of the money that comes in after a disaster is insurance money. Making sure that people had money to rebuild their homes, return to their jobs, and return the economy to a more stable environment was very important for Florida.”
Following the devastating hurricanes in 2004, McCarty mobilized the Office of Insurance Regulation’s 300 employees, 29 of whom are attorneys, to assure policyholders had the basic essentials to rebuild their lives and communities. McCarty — who was recently elected vice president of the National Association of Insurance Commissioners — said the Office of Insurance Regulation works hard to strike a balance between protecting consumers and promoting a robust insurance marketplace for the state’s $100 billion insurance industry.
“Regulation of insurance is very different from most other government agencies, because most other agencies are either charged with administration of a program or for policing a particular area of concern,” McCarty said. “With insurance, you have to wear two hats. On the one hand, you are the first line of consumer protection for the people of Florida; and on the other hand, you are also the person responsible for building sound financial markets in your state, and for building a vibrant marketplace where goods and services are available to consumers — because a vibrant market is also a consumer protection.”
Skyrocketing insurance rates in 2006 following the back-to-back devastation of the 2004-05 hurricanes made fostering a vibrant marketplace somewhat of a challenge for McCarty. Global reinsurers, the companies that sell insurance to insurance companies to dilute risk by spreading it worldwide, reacted to the anticipation of yet a third devastating hurricane season by dramatically increasing their rates for reinsurance, sometimes by as much as 60 percent. The burden of that extra expense was passed onto Florida consumers and insurance premiums ballooned.
“In the aftermath of rate increases in 2006, the Florida Legislature, particularly the Florida Senate, wanted the Office of Insurance Regulation and its own office to discover whether or not there was price fixing, whether there was collusion, and whether there were any violations of Florida law,” McCarty said.
Toward that end, the Office of Insurance Regulation opened investigations into the state’s major carriers’ rate increases, and document requests were made. Allstate Insurance defied the order, claiming the documents to be privileged, trade secret information. McCarty’s office sued for the records, was sustained in court, and, in January 2008, suspended Allstate from doing business in the state until the documents were produced. Allstate appealed the suspension, but it was upheld in district court, leaving Allstate no choice but to finally capitulate, after months of brinkmanship, and hand over the requested documents, as well as pay a $5-million fine and agree to write another 100,000 policies in the state.
“I think that was a success story where the Office of Insurance Regulation stood up to big insurance and big insurance blinked,” McCarty said.
Though McCarty and the Office of Insurance Regulation have been instrumental in helping the state and its insurance marketplace recover their sea-legs following the severe hurricane seasons of 2004-05, the office has enjoyed other achievements in which McCarty takes great satisfaction. These include the Senior Protection Act of 2008 aimed at protecting seniors from fraud when purchasing annuities, and success on gaining “freedom to travel,” which prevents life insurance companies from denying coverage for or raising rates on policyholders based on their country of origin or intent to travel to foreign countries. McCarty’s office has also been successful in decreasing workers’ compensation rates by more than 60 percent over the last seven years, and assisted with the passage of House Bill 1A in 2007 to expand the role of the Florida Hurricane Catastrophe Fund.
“When I was in law school, I never thought I would end up in insurance,” McCarty said. “But I do think, in terms of working in public service, this is the kind of work that is really cut out for attorneys, because every day when you go to work, you are doing something to protect those people who are unable to protect themselves during financially vulnerable times. It is very rewarding work.”
