News & Updates


Insurers may get free rein on rates

April 03, 2009 

Tallahassee Bureau Chief

TALLAHASSEE — For two years, Florida lawmakers and regulators have reined in property-insurance rates.

But legislative efforts are building this spring — with Volusia and Flagler counties’ lawmakers playing prominent roles — to ease regulations on insurance companies and increase rates.

Part of the reason is lawmakers fear state insurance programs have taken on too much financial risk and could be devastated by a major hurricane.

But part of it also comes after a wave of decisions by State Farm Florida and other major companies to dramatically reduce the number of homes they insure — or leave the state altogether.

Rep. William Proctor, a St. Augustine Republican who represents most of Flagler County, said it is not realistic to expect cheap windstorm insurance in a hurricane-prone state with heavy coastal development.

"Politically, it sounds good," Proctor said. "But pragmatically, nobody has shown me how you do that."

Proctor and a bipartisan group of House members held a news conference Thursday to push for bills that include raising rates for the state-backed Citizens Property Insurance Corp. and making it easier for private insurers to increase premiums.

As an example, Proctor is sponsoring a bill that would give wide latitude to major insurers — such as State Farm, Allstate and USAA — to raise rates by the amounts they want.

Supporters say the proposal would give consumers the choice of paying more to stay with name-brand insurers or possibly finding cheaper coverage with smaller carriers. Also, they say it could help attract major insurers to do business in Florida.

State Farm, the largest private insurer in Florida, announced in January it would leave the state after regulators rejected a 47 percent rate increase. It and other large insurers have repeatedly argued they aren’t allowed to charge high enough rates to cover their potential risks.

But bills such as Proctor’s proposal would be a dramatic shift from the state’s approach since lawmakers held a special session in 2007 to overhaul the property-insurance system. Since that session, regulators, lawmakers and Gov. Charlie Crist have focused on holding down rates.

"I would call this a sea change," said lobbyist Lisa Miller, a former deputy insurance commissioner.

A pivotal player in the debate likely will be Crist, who has frequently criticized companies such as State Farm. Spokesman Sterling Ivey said Crist might accept "moderate" rate increases but wants to see what lawmakers ultimately pass.

Ed Domansky, a spokesman for the state Office of Insurance Regulation, said the state has tried to make sure companies have enough money to pay claims while also not charging excessively high rates to consumers.

"We have to try to meet in the middle, and that’s what makes it a balancing act," Domansky said.

But Rep. Alan Hays, a Umatilla Republican who represents part of West Volusia and led Thursday’s news conference, warned that Florida is facing the potential of a "major financial crisis" because of the way it has handled property insurance.

During the 2007 session, lawmakers froze rates for Citizens and expanded the Florida Hurricane Catastrophe Fund. That fund sells cheap reinsurance — a crucial form of backup coverage — to insurers to help hold down costs.

But many state and industry officials now say Citizens and the catastrophe fund would not have enough money to pay claims after a major hurricane. If that happens, policyholders throughout the state likely would be forced to pay extra to cover the deficits.

Along with Proctor’s bill, members of the House and Senate have worked this week on bills that would raise rates for Citizens customers and reduce the size of the catastrophe fund. The reduction in the fund would lead to higher rates for customers of private companies.