Deregulating Florida property insurance rate still at issue
State Farm’s deal won’t deter bid to deregulate property coverage cost.
Supporters of legislation allowing companies to offer property insurance with deregulated rates said Thursday they were undeterred by a deal announced a day earlier that would keep State Farm Florida in the Florida market.
“This is a piece of the answer, but it’s still not the whole answer,” said Rep. Bill Proctor, R-St. Augustine, who is sponsoring the House version of a bill that would allow companies to set their own rates.
State Farm reached a settlement Wednesday with the Office of Insurance Regulation to increase rates 14.8 percent and drop 125,000 of more than 800,000 residential property insurance policies.
A bill last spring, vetoed by Gov. Charlie Crist, would have allowed companies with large surpluses to offer the deregulated plans. The new bill would allow any plan in the state to offer rates without first getting approval from regulators. Sponsors say that’s a response to concerns by some consumer and industry groups that the proposal would give large companies an unfair advantage.
Under both bills, companies could charge essentially unlimited rates. Supporters say homeowners should be able to hold any policy they’re willing and able to pay for. Consumer advocates argue removing state oversight could lead to price gouging, especially for homeowners in high-risk areas, and could flood cheaper, state-backed insurance plans with those who can’t afford higher rates.
Although State Farm’s plan to withdraw, announced in January, had provided a poster child for sponsors of a similar measure last year, Proctor said Thursday that the bill wasn’t intended just for State Farm. Proctor said he got the idea from a constituent who was insured by another large company.
“[The settlement] changes the picture for State Farm,” Proctor said. “This was never a State Farm bill.”
Proctor said there are still several questions about what happens to the insurance policies State Farm will drop.
“Where does that go? Who picks that up? How much of that finds its way to Citizens?” he asked, referring to the state-run Citizens Property Insurance Corp.
Barney Bishop, president and CEO of Associated Industries of Florida, a conservative business group, called the State Farm Florida settlement “a temporary reprieve” and said the deregulation bill “will remain AIF”s top priority this upcoming legislative session.”
“Over-regulation of the industry has wreaked havoc on our ability to maintain a competitive market, stripped consumers of choices and hurt insurance companies’ ability to protect policyholders and get the rate of return to which they are entitled,” Bishop said in a statement issued by the group. “While I appreciate that [regulators] finally made the right decision and found a way to keep State Farm here in Florida, this is not the time to rest on our laurels.”
Both parties to Wednesday’s settlement said they’re still evaluating the new proposal.
“We do believe Floridians would be best served by a robust, competitive private market for property insurance,” said Michael Grimes, a spokesman for the company. “To the extent that the legislation accomplishes that, we would generally be supportive.”
Jack McDermott, a spokesman for Insurance Commissioner Kevin McCarty, suggested the commissioner wasn’t much more enthusiastic about this year’s proposal.
“He has said he’ll be reluctant to support any legislation that will allow companies to charge excessive rates or rates that are not actuarially justified,” McDermott said.
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