News & Updates


Insurers’ rate deregulation up to Crist


Published: May 15, 2009

The fate of legislation that would allow Florida’s largest property insurers to raise homeowners rates as much as they want rests with Gov. Charlie Crist, who may not want to make waves as he runs for U.S. Senate.

During the latest legislative session, which ended last week, the Florida House and Senate abandoned efforts to hold down premiums and overwhelmingly approved House Bill 1171, which would allow certain insurers, including State Farm and Allstate, to charge unregulated rates.

The bill must be signed by Crist for it to become law.

A spokesman for Crist, who made lower insurance rates central to his gubernatorial campaign three years ago, said the governor is concerned about letting private insurers set rates with no oversight by the state.

"Some of the provisions in the bill do concern him," said Sterling Ivey, Crist’s spokesman. Still, he would not say what action Crist might take on the bill.

The bill, authored by state Sen. Mike Bennett, R-Bradenton, was introduced after State Farm, Florida’s largest private property insurer, announced plans to drop more than 1 million policies, including 700,000 homeowners, over two years beginning in November. The announcement came shortly after regulators denied State Farm’s request to raise rates 47 percent on average statewide. Regulators and State Farm still are negotiating an exit plan.

Bill Newton, executive director of the Florida Consumer Action Network, has urged Crist to veto the bill.

"It would be a disaster for the state and Charlie Crist," Newton said. "He needs to come out and dump it and end the suspense."

Proponents of the bill say it would lead insurers to write more policies, encourage competition and eventually drive down rates. Also, it would give consumers willing to pay a higher rate the option of staying with a company that has enough capital to pay claims should a major storm strike.

Walter Dartland, executive director of the Consumer Federation of the Southeast, said the bill would bolster Florida’s troubled insurance market and benefit consumers in the long run.

"Paying more for insurance now is probably better than having worthless or no insurance at all," Dartland said.

Insurers need more freedom to set actuarially sound rates, said Jeff Grady, president of the Florida Association of Insurance Agents. Forty percent of the state’s insurance carriers lost money in 2008, yet not a single hurricane hit the state, he said.

"We’re not suggesting that rates should go wildly higher," he said. "But we’ve got to get reasonable about ratemaking in this state."

Newton said the bill would not encourage competition because it favors large companies with a lot of capital.

"The smaller companies that have been coming into our market and been able to compete against State Farm would be driven out," Newton said. "It would discourage small insurers from coming in."

If smaller insurers are not willing to take on the policies of homeowners offered unregulated rates by large insurers, homeowners may have nowhere else to go. Citizens Property Insurance Corp. only takes homeowners who are not offered policies in the private market.

Newton and others contend the bill is designed to bail out State Farm.

"To allow State Farm to manhandle the state like this is awful," Newton said. "Charlie Crist needs to send a message that if you lose in the regulatory arena, you can’t just bribe the Legislature."

State Farm spokesman Chris Neal dismissed Newton’s allegations,

"That is so far from the truth, so inaccurate and totally off-the-charts wrong," Neal said.

State Farm provided legislators technical expertise but had no influence on the bill’s language. Neal said he does not know whether State Farm will continue issuing policies in Florida if the bill is signed into law.

Ed Domansky, spokesman for the Office of Insurance Regulation, said the bill probably won’t prompt insurers to write more policies in Florida.

"No company, including State Farm, has said that they will write more business," Domansky said. "This is not about rates. They just don’t want the exposure."

Reporter Russell Ray can be reached at (813) 259-7870.