Some legislators would “fix” the problem by letting all companies charge what they want. Bills have been filed in the House and Senate to deregulate property insurance. Gov. Crist, though, has made clear that he would veto deregulation, as he did last year. So the early action has centered around Senate Bill 2044, which has passed one committee.

The bill has good points. It would raise the minimum financial requirements for all insurers. For example, current law requires them to have at least a $4 million surplus. Under SB 2044, that amount would rise to $15 million. A separate law requires property insurers to have the means — through reserves, reinsurance and other financing — to pay claims from a one-in-100-year storm. The Office of Insurance Regulation has reported recently that several property companies are having financial problems, and the capitalization requirements haven’t changed since 1993.

Also, the bill would attempt to change the system that gives home-owners reduced premiums for hardening homes and businesses against storms. Such “mitigation credits” have been available since 1995, but in 2005 the Legislature required insurers to let policyholders know about all the discounts and how much homeowners could save with each protection, such as shutters, a reinforced garage door and roof restraints.

Now, the insurers claim that the discounts are too expensive and that some homeowners get discounts they don’t deserve. A task force made recommendations, such as raising the standards for inspectors. Reform in this area, where needed, makes more sense than deregulating rates.

Four years ago, Democrats proposed a new system for property insurance, with a state-run pool covering the first layer of claims — say, $30,000 to $50,000 — and private insurance picking up anything more. It was an alternative to Citizens, but never got a hearing, and Republicans still seem intent on market-oriented solutions for a market that doesn’t work because private companies have dumped so many policies.

That approach also depends on the insurers being straightforward. Usually, the industry repays every favor with another complaint. In 2007, it was reinsurance. Now, it’s discounts. And the industry wants to be able to raise rates if it adds such costs as higher commissions. The Office of Insurance Regulation opposes that.

The issue probably will come into sharper focus on March 23. The Office of Insurance Regulation will brief the governor and Cabinet on the financial condition of the 200-plus companies that write property insurance in Florida. Five weeks will remain in the legislative session. Obviously, Florida doesn’t need hurricane insurers that can’t afford to pay policyholders, but Florida also doesn’t need hurricane insurers that charge what policyholders can’t afford.

MANATEE — State Sen. Mike Bennett is a prolific filer of bills, and again this year, he’s proposing a number of changes to state insurance laws. 

The Bradenton Republican has filed a bill dealing with title insurance, one addressing Citizens Property Insurance Corp., and even a bill about the director of the state Office of Insurance Regulation. 

Among his proposals:   

Senate Bill 876, which Bennett considers a “consumer choice” bill. 

It would allow Floridians to buy insurance from any company they wish, even though the rate might be higher than state regulators think is warranted. 

“If you pay the premium, you should be able to choose the insurer of your preference, even if the rate is above what the state wants to let them have,” Bennett said Thursday. “We want to make sure the rate is adequate, so they’ll be in business when a major storm hits. Right now, rates have been artificially suppressed.” 

A similar bill legislators passed last year was roundly criticized by consumer groups, and vetoed by Gov. Charlie Crist. 

Crist would review a bill in its final form, but the governor has previously indicated if it’s like last year’s version, it would be vetoed, an aide said Thursday. 

 Senate Bill 2104, which would require that the state’s insurer of last resort, Citizens Property Insurance Corp., achieve actuarially sound rates by 2016. In the event the company does not, Citizens would have to file a plan of withdrawal. 

“Citizens by definition would be considered an illegal insurance carrier because its rate is not adequate enough to absorb the losses if a big storm hits,” Bennett said. 

“They are competing with private insurance carriers who have to have an adequate rate — Citizens doesn’t. We want to make sure those who do have Citizens know they have an insurance carrier that could pay off the claim if a storm hits,” he said. 

Christine Ashburn, director of legislative and external affairs for Citizens, said she understands Bennett’s frustration with the company’s need to make significant rate increases. 

However, she questioned what she said were terms of the bill — allowing only a 20 percent rate increase per year. On some lines of insurance, the company might need more to meet the goals set in the bill, she said. 

“If we didn’t make the standard, we would have to cancel a million policyholders,” she said. “It could be a million people that probably don’t have anywhere else to go for insurance.” 

Senate Bill 260, which Bennett said would allow consumers to better shop for title insurance. 

The bill authorizes a title insurance agent to charge a reasonable fee for services; it also requires information be filed on each charge with the state Office of Insurance Regulation. 

The measure would prohibit knowingly quoting, charging, accepting, collecting or receiving a premium for title insurance other than that approved by the office, according to the bill. 

“We believe that you as a consumer should be allowed to shop your rate,” Bennett said. “It would require that the rate would be promulgated by the state, and those rates would have to be justified. It would allow competition and the ability to shop.” 

Senate Bill 740 would require the Financial Services Commission to reconfirm the appointment of the Director of the Office of Insurance Regulation every two years. Presently, the governor and his Cabinet, acting as the Financial Services Commission, appoint the director to an indefinite term. 

Sara Kennedy, Herald reporter, can be reached at (941) 745-7031.

Homeowners can still get insurance discounts for
hurricane clips and window shutters, they’ll just
have to file more paperwork to get them.

It’s a change sought by the insurance industry, part
of addressing what companies say is a financial
squeeze of low rates exacerbated by fraudulent
discounts.

“Criminals are very ambitious and they’ll find a way
to commit fraud, and there’s no way that a form can
stop all of it,” said Belinda Miller, deputy director of
the Office of Insurance Regulation. “But our goal
here is to make it easier to detect and harder to do.”

The rule approved by the Florida Cabinet on
Tuesday amends a form from a two-page version to
four pages that requires signatures and property
address on each page along with photos to prove
the construction elements that make homes
stronger. It fixes a system ripe for fraud that was set
in motion by the Cabinet and legislature when they
approved a short form for documentation and called
for inspectors certified by a state program that no
longer exists.

The old two-page form to get discounts from
insurance companies calls for the signature of an
inspector certified by the state’s My Safe Florida
Home agency, a program that hasn’t been funded in
two years and ceased to exist in June 2009. Now,
licensed architects, engineers and builders are
required to sign off on the work eligible for
discounts.

My Safe Florida Home was established to encourage
hurricane hardening and distribute grants for
mitigation, in combination with legislation that
required companies to better explain and publicize
discounts available to policyholders while also
doubling the maximum discounts companies were
required to offer. The state program conducted
400,000 free inspections and doled out 35,000
grants to homeowners to harden homes, but tight
budgets ended the program in 2009.

The insurance industry has said some companies
are showing underwriting losses even during non-
hurricane years and have included rampant
discounts from hurricane mitigation among the
reasons premiums are inadequate.

Miller said likely fraud has been noticed, if not
prosecuted.

“There was one case where the insurance company
was literally getting copies of the same form for
most” of a company’s submissions for discounts,
Miller said.

The insurance industry says mitigation discounts
have run rampant and reduce their ability to make
money.

“Insurers need to take advantage of years when the
wind doesn’t blow, so they can pay claims in the
years when it does,” said Jeff Grady, president of the
Florida Association of Insurance Agents, in a
legislative session policy report the insurance
council issued.

As one of Florida’s top insurance gurus, he knows reinforced roof, thicker drywall, even a couple of hurricane shutters can lower his monthly bill.

It takes a private inspector to certify it all.

But with a vote by the Florida Cabinet Tuesday, now those inspections have to include photos.

Miller says many inspectors have been willing to certify homes in no condition to get a discount.

“”I’m gonna make sure that the discount that you get on your insurance policy covers my fee and you still make money.’ So, when they make a promise like that and they haven’t even seen the house, well, you have to be concerned,” said Miller, Florida Insurance Council.

Up and down the state, there could be untold millions of dollars in fraud taking place, all based on the premise that if it’s on paper, it must be true. But a picture doesn’t lie.

That’s why Florida Chief Financial Officer Alex Sink voted for the crackdown. Sink argues when inspectors lie, we all pay.

“What the insurance companies do is they just take the cost of that fraud and put it right on the backs of the premiums of the honest property owners,” Sink said.

They may not be very glamorous, but they’re portraits of the truth. And if you want a break in your bill, your house will have to pose.

Insurance industry advocates say there have even been reports of drive-by and telephone inspections. But, they also point out the majority of Florida’s inspection companies already include photos in their reports.

TALLAHASSEE — Open government advocates and a state senator who’s had her own problems obtaining public records are backing a sweeping bill making it easier for people to get government records.

The measure (SB 1598, HB 1211) is the product of Gov. Charlie Crist’s Commission on Open Government, which has spent three years coming up with the recommendations, and will be considered Tuesday by the Senate Community Affairs Committee.

If lawmakers approve the “Open Government Act,” it would rank among the state’s most significant public records reforms, said Florida First Amendment Foundation President Barbara Petersen, who chaired the panel.

 The bill would:

 •Require government officials to get training in open records and meetings.

•Bar agencies from charging for copies of records that take less than 30 minutes to duplicate.

•Prohibit agencies from charging for redaction of information that is personal in nature and exempt from public records laws and prohibit charging for any redaction fees of any records after Jan. 1, 2013.

•Require that all new exemptions be reviewed every 10 years after the initial five-year-review currently required by state law.

•Set uniform penalties, and attorneys’ fees, for public records violations.

•Give circuit judges jurisdiction to issue injunctions to enforce open records laws.

Sen. Paula Dockery, the bill’s sponsor who also sat on the panel, says she’s optimistic that lawmakers will heed the public’s demands for more transparency in government and approve the bill.

Dockery, who last year complained about the state Department of Transportation’s handling of her public records request for e-mails pertaining to a controversial Central Florida commuter rail project known as “SunRail,” said today, “In an election year, it would make good political sense that we start passing some bills that make the public happy. This bill would go a long way toward restoring public’s trust, but that may be wishful thinking on my part.”

In Dockery’s dispute with the transportation department, a few of the e-mails she eventually received had subject headings such as “Pancakes” and “French Toast,” spurring an investigation by Crist’s inspector general into whether the transportation secretary was trying to hide the purpose of the mail. The investigation found no wrongdoing by any DOT staff.

“Hopefully what we do will have a positive impact on all levels of government and their ability to provide in a timely fashion the records that are being requested and at a cost that’s not prohibitive,” said Dockery, a Lakeland Republican who is running in the GOP primary for governor against Attorney General Bill McCollum.

Several more small startup property insurers in Florida are headed for insolvency, leaving tens of thousands of homeowners looking for a new company as hurricane season approaches June 1.

Florida regulators are working quickly to mesh the troubled insurers with larger companies to soften the impact on home and business owners.

The Office of Insurance Regulation has been running audits in recent weeks on smaller insurers to be certain they could play claims if policyholders were hit with a destructive hurricane this summer.

The department’s solvency expert says the days are over when a company can get into the insurance business in Florida with just $5 million in capital.

Last Modified: Friday, March 5, 2010 at 5:52 p.m.

Florida homeowners have learned to live with the risk of hurricanes. They shouldn’t have to live with the risk that their property insurer won’t cover their losses if disaster strikes.

Yet, as detailed last Sunday in a Herald-Tribune investigative report by Paige St. John, numerous small, undercapitalized insurers operating in Florida are in perilous financial condition.

St. John’s report also depicted a state insurance regulatory apparatus that not only has permitted the heightened state of risk but encouraged suspect insurers to take on more homeowners policies than they could safely cover. The state even concealed some companies’ shaky status through the end of last year’s hurricane season.

The report makes clear that the Florida Legislature needs to step in to make sure that property insurers licensed to operate in this state have adequate means to cover the policies they are allowed to write.

Based on insurance industry standards used by regulators, industry insiders, academics and consumer watchdogs, St. John found that one in three privately insured Florida homeowners “relies on insurers that exhibit one or more signs of financial risk.”

Six property insurers in Florida have failed in the past year — more than in any other state. And state regulators openly admit that more will fail — leaving Florida taxpayers and consumers to pay the tab through assessments on homeowner, auto, boat and other insurance policies.

Hurricanes and fallout

This precarious position is largely a result of Florida’s recent history of hurricanes — and of the state government’s well-intentioned but ultimately flawed efforts to deal with the insurance industry fallout.

After 1992, when Hurricane Andrew devastated much of South Florida, and continuing through the multiple hurricane strikes in 2004 and 2005, major national insurers have dropped thousands of homeowners policies and largely withdrawn from the state.

The state government responded by creating its own insurer, Citizens Property Insurance, to cover homes considered too risky by private companies. The state also established the Florida Hurricane Catastrophe Fund to provide reinsurance — or backup funding — for insurers in the event a hurricane strikes.

But both government entities have become seriously underfunded, leading state officials to actively seek private insurers to assume more of the financial risk.

National property insurers, thwarted by state regulators in their pursuit of huge rate increases, have continued to pull out of the state. Into the breach have stepped small insurers that operate only in Florida.

“In 1992, these concentrated risk-takers insured just 6 percent of Florida,” St. John noted. “Today, including the Florida-only subsidiaries of national insurers, they cover 71 percent.”

How well they cover their many policy-holders is the question — and the Legislature needs to find the answer.

Last year, the Legislature tried to reverse the exodus of national insurers by passing a bill, co-sponsored by state Sen. Mike Bennett of Bradenton, that would have let them charge homeowners rates free from state regulation. The rates of small insurers would continue to be regulated.

Gov. Charlie Crist vetoed the legislation, contending that the smaller companies would be placed at a competitive disadvantage and that nothing would prevent the major providers from raising their rates and later leaving the state.

This year, Bennett has proposed a bill that would let all property insurers in the state charge whatever the market will allow.

Weaknesses need correction

In light of the risks posed by the current crop of small, undercapitalized insurers, Bennett’s bill deserves a fair hearing and, if approved by the Legislature, serious consideration by the governor.

But the Legislature should not stop there. Weaknesses in the state’s insurance regulatory system, exposed in the Herald-Tribune report, should be examined and corrected.

Among the issues worthy of scrutiny:

State law requires insurers to have a minimum of $4 million in reserve to pay future claims. Many industry insiders say the amount is insufficient, and some say Florida insurers should have $25 million or more. The state Office of Insurance Regulation uses $10 million as an unofficial benchmark, St. John reported. The Legislature should officially raise the minimum to $10 million or higher.

The state uses national standards to determine when insurers carry too much risk for their assets; companies falling below a “score” of 200 must file a remediation plan. The National Association of Insurance Commissioners is considering requiring insurers in high-risk areas — and Florida should qualify — to carry enough additional capital to achieve a score of 230. The Legislature should make 230 the minimum score.

Officials with the Office of Insurance Regulation, St. John noted, acknowledge that some Florida insurers “are on the verge of collapse,” but the OIR “will not name the companies or say how many are in trouble.” The OIR has placed weak companies under its supervision but, citing state insurance laws, concealed details from policyholders. The Legislature should re-examine the laws to see if the public would benefit from more transparency in the regulatory process.

One inevitable consequence of creating a more stable, reliable insurance market in Florida — whether by Bennett’s legislation or by setting high standards for all insurers — will be rate increases for policyholders.

But the rates — and the risk they cover — are part of the price of living in a state that is prone to hurricanes. It’s a price from which the state government — through its public insurance entities, its rate regulation and its encouragement of small, Florida-only insurers — has tried to shield residents.

We suspect that most Floridians would willingly pay a higher premium to have the security of knowing that, if disaster strikes, their home and possessions will be covered. After all, that’s why we have insurance.

The Florida Senate’s insurance committee narrowly struck down a proposal from Insurance Consumer Advocate Sean Shaw this week that would allow his office to participate in insurance rate hearings.

It would specifically give his office access to confidential documents involved in calculating rates so it can provide its own analysis and recommendations on behalf of consumers — much like the Office of Public Counsel does for utility rate hearings.

Sen. Mike Bennett, R-Bradenton, proposed adding the provision to a broad property insurance measure proposed by Sen. Garrett Richter, R-Naples, but withdrew saying legislators could discuss the idea later.

Sen. Mike Fasano, R-New Port Richey, proposed the provision instead. He said if lawmakers postpone the provision, they should delay the main bill too or approve the provision now because the committee can’t add it later if the bill is passed.

Sen. Ronda Storms, R-Brandon, agreed: “Now is the time to make sure this rides on the train.”

“You will find many areas of this bill that are anti-consumer and pro-insurance company,” Fasano said. “Could we not put something in there to protect the consumer…who is going to wind up paying those rates?

The panel struck down the idea by a 5 to 4 vote. Voting for it were Fasano, Storms, Joe Negron, R-Jupiter, and Alex Villalobos, R-Miami. Voting against it were Bennett, Richter, Chris Smith, D-Fort Lauderdale, Al Lawson, D-Tallahassee, and Jeremy Ring, D-Margate.

Storms successfully proposed removing a provision in Richter’s bill that would allow insurers to refuse replacement coverage for roofs older than 20 years. The bill was postponed because the committee did not finish debating Storms’ idea to remove a provision from Richter’s bill that would allow insurers to hold back part of a claim until the homeowner actually makes the repairs needed.

Representatives from the American Insurance Association and a lobbyist for several insurance companies said some homeowners file claims and instead of using all the money to make repairs, they pocket most of it.

Storms said she wants to help fight fraud but also wants to ensure consumers get paid for damages. “That’s what insurance is for,” she said. “I was an elected official in time of the hurricanes and I saw what people went through so that’s what I’m trying to address.”

by Joe Shea

Floridians are caught between the devil and the deep blue sea when it  comes to the insurance industry. While we have had aggressive regulation of pricing by the State Insurance Commissioner in the past  few years, we have had enormous insurance industry losses due to the  2004 hurricanes, with the result that a large number of healthy insurers have left the state’s homeowners without reliable coverage. Inevitably, smaller players less able to take their place and meet their obligations have prospered in the vacuum left behind.

That quandary was admirably pointed out in an investigative report that ran Sun., Feb. 28, on page 1 of the Sarasota Herald-Tribune. The  reporters found that at least 38,000 homeowners have policies with  companies the state and industry believe are going to fail soon, and at  least 100,000 homeowners have policies with companies that meet at  least one of three criteria for the likelihood of failure. There are companies out there with not so much as a Website, phone  number or contact name, doing business legally with a Florida license.  Dozens of companies – 48 have been identified – have little more than  the required $4 million reserve, and couldn’t even cover a house fire,  much less hurricane losses. Homeowners banking on them for coverage if  disaster strikes are going to be sorely disappointed.

Meanwhile, our Manatee County-based state legislators have been working  to remove any limits from what larger insurance companies can charge homeowners  for insurance. Last year, State Sen. Mike Bennett introduced such legislation, which Gov. Charlie Crist vetoed last year. This year, State Rep. Bill  Galvano, an attorney, has introduced the same proposal, and  Bennett is backing it in the State Senate. We may not know the outcome  of the legislation until sometime around midnight on the day the legislative session comes to a close, as hundreds of unread and ill-considered bills are rushed to the floor for last-minute passage  when, they hope, journalists are not watching.

You might well make the point that if insurance rates were not capped, the companies with no real reserves beyond the required $4 million could  attract larger premiums and perhaps set themselves on a sounder  footing. But wouldn’t it make a lot more sense to require insurance companies to have reserves that are a fixed percentage of their premium  liabilities? But what that would really do is bring the big companies  back to the table. On average. companies like Allstate have reserves of  about $4,000 per policy; the smaller firms have reserves on average of  about $750 for each home. The larger insurers would raise their rates -  also, admittedly, their certainty of covering losses – while the smaller  ones would either vanish or be devoured by the big fish. Their uncovered  losses would become the liability of the state’s insurance guaranty  fund, which may prove to be underfunded, too.

The entire insurance industry, however, is in crisis. Under pressure  for reform, the firms often try to exaggerate losses and demand inflated  premium increases, hoping they will get at least a portion of what they  ask for. As in the health care business, where insurers may be  charged $1,000 for a toothbrush, $53 for an alcohol wipe, $140 for a  single Tylenol and for 41 IV bags at $23 each when they only use one — as CNN just revealed. They are also taken advantage of by homeowners  who want more than they deserve for their losses. Some insurers, like State Farm, have just walked away from their homeowner business, preferring to  maintain automobile insurance  policies that are required by lenders and  the state. Here, drivers are a captive  audience, and the income is vast.

Because no hurricane has hit Manatee County since early in the last  century, the $15,000 a year my homeowner’s association pays for  insurance has been essentially wasted; had we started a self-insurance  program 10 years ago, the $150,000 we’d have piled up in reserves would  go a very long way to fixing any issues associated with hurricane damage  to our 32-unit building. Instead, we have thrown the money down on the altar of the great god Insurance, where it bursts into flame. In my estimate, however, the believers are diminishing in number and many are becoming skeptical of the value of their needless sacrifices.

BY STEVE BOUSQUET

Herald/Times Tallahassee Bureau