Michael Peltier: Insurance to be bitter pill
By MICHAEL PELTIER (Contact)
4:54 p.m., Sunday, April 5, 2009
TALLAHASSEE — There seems little debate that the system is broken. What remains is how much immediate pain do lawmakers want to inflict on policyholders in the state-run insurance company as they attempt to get Florida out of the property insurance business.
Proposals moving in the House and Senate both call for increased rates for policyholders of Citizens Property Insurance Corp., the state-run company that now insures more property owners than anyone else in the state.
As lawmakers enter the second half of the 60-day session, they seem bent on crafting some type of fix to raise rates while shielding current Citizens customers from more dramatic rate hikes if nothing is done.
The Senate Banking and Insurance Committee was expected to roll out its property insurance fix last week but disagreements over what role Citizens should play and whether proposals to lure policyholders into the private markets would be too expensive prompted Sen. Garrett Richter, R-Naples, the chairman of the committee, to postpone action on the bill.
Richter said he would work with critics but argued that tough decisions have to be made and lawmakers need to get policyholders out of Citizens.
That will involve higher premiums for everyone.
“We managed to get ourselves, as a state, into the insurance business,” Richter said. “This bill is trying to get us out of the insurance business.”
Citizens rates are now artificially low, critics charge, and are not sufficient by actuarial standards to offset the risk of coastal living.
Lawmakers want to increase rates until they are adequate to match the potential need.
Without legislation, Citizens policyholders could face rate increases in excess of 50 percent in 2010, when a current freeze on rate hikes is scheduled to expire.
The Senate proposal would raise average rates for Citizens customers by 10 percent over each of the next five years, with some policyholders seeing a 60 percent increase over that period.
The House, in turn, has called for rate hikes of up to 20 percent for its riskiest policies, while maintaining a 10 percent statewide rate.
The House Insurance Business and Financial Affairs passed its version Friday but continued debate, and changes are expected.
“In 30 or 45 days, we’ve got some realities that are not digestible for the state of Florida,” Richter said. “Doing nothing is not an option.”
But some critics of Citizens say rates are already too high. If private insurers can’t raise rates — State Farm was denied a 43 percent rate hike last year and has since announced it would leave the state’s property insurance market — Citizens should be prohibited as well.
“I’m choking on the thought of passing a rate increase to Citizens policy holders when I see that its rates are higher already than private insurers,” said Sen. Mike Bennett, R-Bradenton.
E-mail Michael Peltier at email@example.com