Florida may lift insurer’s rate cap
By JIM SAUNDERS
Tallahassee Bureau Chief
TALLAHASSEE — Worried about financial risks and an exodus of major insurers, Florida lawmakers started moving forward Wednesday with plans that could lead to higher property-insurance rates.
The House overwhelmingly approved a bill that would lift regulations on the rates that large insurance companies can charge.
Supporters say homeowners could choose to pay higher rates with those companies — or shop for cheaper coverage with smaller carriers or the state-backed Citizens Property Insurance Corp.
"It simply makes it possible for a consumer to have another choice," said bill sponsor William Proctor, a St. Augustine Republican whose district includes most of Flagler County.
Today, the House and Senate are expected to take up other bills that could raise Citizens Property Insurance rates next year by 10 percent or more and also lead to increases for customers of private companies.
With Florida residents getting hammered by the economic recession, critics say this is a bad time to increase homeowners’ rates. Some coastal and South Florida lawmakers say their constituents can only find coverage with Citizens.
"The reason Citizens exists is because no insurance company would write these risks, understandably," Sen. Rudy Garcia, R-Hialeah, said during a committee debate last week.
But supporters of the bills say Citizens and a state reinsurance program, known as the Florida Hurricane Catastrophe Fund, wouldn’t have enough money to cover claims if a major hurricane hits. They say that has created potentially multibillion-dollar financial risks for the state.
With Citizens rates frozen since 2007, Rep. Alan Hays, R-Umatilla, said this week there is "no free lunch."
"This 10 percent increase is the very least we can do," said Hays, whose district includes part of western Volusia County.
The debates come after two years of efforts by Gov. Charlie Crist and lawmakers to hold down insurance rates, which soared after a series of hurricanes hit the state in 2004 and 2005.
But many lawmakers also are concerned that major insurers have reduced the number of policies they sell in Florida — or have pulled out altogether. The highest-profile example came in January, when State Farm Florida announced it would gradually stop insuring homes, after regulators turned down a proposed 47 percent rate increase.
Crist on Wednesday called the possibility of a 10 percent Citizens rate increase next year "responsible." But he has long criticized private insurers’ attempts to raise rates.
"I think it’s very important that we stay on them for the benefit of the people," he said last week.
Proctor’s bill, which the House approved 105-13, could affect large insurers such as State Farm, Allstate and USAA. Companies that meet financial criteria would be able to raise rates without getting normal regulatory approvals, opening the door to large increases.
Backers say the proposal is a free-market approach aimed at helping attract major insurers to do business in the state.
But House Minority Leader Franklin Sands, D-Weston, said he is concerned the bill could lead to "price gouging" against people who are uneducated or unable to compare insurance rates.
State Farm spokesman Michael Grimes said the Proctor bill is a "step in the right direction." While the Senate has a similar bill, Grimes said it is difficult to tell what the final legislation will include — or whether it could influence the company’s decision to drop its property-insurance business.
"It would have to represent long-lasting and transformational change for us to take another look at the property-insurance market in Florida," Grimes said.
The bills headed to the House and Senate today probably will be more controversial, particularly because they involve more-direct rate increases for Citizens customers.
The Senate proposal would allow Citizens to raise rates up to 10 percent a year. The House, meanwhile, would allow increases of an average of 10 percent statewide, though some homeowners could see increases of as much as 20 percent.
The bills also likely would lead to varying rate increases for customers of private insurance companies. That is because of changes related to the Florida Hurricane Catastrophe Fund, which sells crucial backup coverage to insurance companies.