Lawmakers approve major changes in property insurance
But will the governor sign the bills into law?
By Brandon Larrabee Story updated at 10:19 PM on Friday, May. 1, 2009
TALLAHASSEE — Sweeping reform of the state’s property insurance market is on the way to Gov. Charlie Crist’s desk, where both of the bills approved easily Friday by the Legislature face dicey prospects.
The property measures, some of the most closely watched legislation of the year, passed on the 60th and, at least traditionally, final day of the session. While lawmakers are expected to return next week to finish the budget, everything not related to the spending plan had to win approval Friday or die.
Both of the bills are aimed at restricting government involvement in a market still recovering from the devastating 2004-05 hurricane seasons. Supporters say freeing the industry from excessive government regulation will leave the state better able to cope when the next major storm slams into the state.
Opponents say the bills will hammer recession-battered consumers with higher premiums.
One of the bills approved Friday would allow rates for policyholders with state-backed Citizens Property Insurance Corporation to increase by up to 10 percent a year. It would also begin to shed some of the coverage offered by the Florida Hurricane Catastrophe Fund to insurers to make sure they can cover claims in the event of a storm.
State officials say the CAT fund could not pay its bills if a major hurricane struck the state, hitting every policyholder in the state — including those with cars or other non-residential insurance plans — with an assessment critics call a “hurricane tax.” The program’s instability could also undermine the ratings of some private insurers reliant on the CAT fund, making it more difficult to get a mortgage.
“Right now, we’re Titanic heading into an iceberg,” said Rep. Bryan Nelson, R-Apopka. “We’re starting to turn the ship in the right direction.”
Backers also say the proposal puts Citizens on the same footing with private companies by raising premiums on a “glide path” — in the hopes that many residents surely insured by the state will instead find private plans.
Opponents said they were concerned with Floridians’ budgets as well as the viability of the state programs.
“At the same time, we need to remember the people of Florida and the financial situation they’re in,” said Rep. Julio Robaina, R-Miami.
The other measure would allow insurance companies with large cash reserves to offer insurance policies free of state premium regulations. That legislation emerged after State Farm Florida announced it was leaving the property insurance market in the wake of Insurance Commissioner Kevin McCarty’s decision to reject the company’s request for a rate increase that would average 47 percent statewide.
Sen. Mike Bennett, R-Bradenton, cited thousands of comments from policyholders that he said want to remain with their chosen insurer even if it meant paying more than regulators thought necessary.
“It’s finally giving consumers the choice they have begged for, and asked for, for years,” Bennett said.
That proposal came under fire from both sides. Some pushed to drop the legislation’s requirement that insurers have large reserves to offer the unregulated policies.
“We’re going to take care of the top 15 companies. … We’re not going to take care of the little guys,” said Sen. Steve Oelrich, R-Gainesville.
But Sen. Dan Gelber, D-Miami Beach, argued that dramatic increases in premiums could push far more homeowners out of the private market and into the public programs lawmakers were trying to curtail.
“The other thing this is going to do is send hundreds of thousands of policies to the Citizens risk pool,” Gelber said.
The bills now head to a governor who has supported efforts to control rates and publicly mused that Florida might be better off if State Farm left. Crist largely dodged a question about the proposal for Citizens and the CAT fund.
“I like lower rates,” he said. “That’s what I think. We’ll see what makes it to the desk.”
But he signaled no interest in allowing some companies to offer policies at deregulated rates.
“I have such respect for Commissioner McCarty and his good efforts and his vast knowledge as it relates to regulating insurance appropriately on behalf of the people,” Crist said, “so my preference would be that he continue to have that authority.”