House passes legislation allowing Florida property insurers to raise rates
By Julie Patel, Sun Sentinel
8:14 p.m. EDT, April 28, 2010
The Florida House passed a broad measure Wednesday to strengthen the state’s property insurance market by raising rates and lowering insurers’ claims costs.
The bill, SB 2044, cleared the Florida Senate last week and was approved Wednesday by the House with a minor change. If the Senate makes additional changes to the bill, it would have to go back to the House before it’s sent to Gov. Charlie Crist to sign or veto.
Crist, who is running for U.S. Senate, has said he doesn’t support anything that would raise rates for consumers but he has not weighed in on this particular bill, which the House passed by a 72-to-44 margin.
Consumer advocates are opposed to parts of the bill allowing insurers to raise rates with less state oversight, noting regulators have already approved many rate increases in the past year.
Since last year, the Office of Insurance Regulation has approved about 100 statewide residential property insurance rate increases ranging from 0.2 percent to 27.9 percent and rejected about 15 ranging from 0.7 percent 14.9 percent.
Proponents of the bill say it would help insurers that have lost money in recent years and are struggling to keep up with claims costs. Several national insurers have scaled back from Florida and a few smaller insurers folded last year.
Some insurance company officials say the rate provisions of the bill are less critical than other parts to reduce claims costs, which they say have increased in recent years despite four years without hurricanes.
The provisions affecting rates would allow insurers to:
Raise premiums without full regulatory scrutiny by up to 10 percent for inflation or financing products to replace reinsurance. This would be folded into a law passed last year that already allows an increase of 10 percent or less for certain reinsurance costs.
Raise rates if the companies provided too high of a discount to homeowners for fortifying their homes.
Pass on to customers the costs of recruiting policyholders, including advertising and agent commission costs, without interference from regulators. In rejecting State Farm’s request for a 47 percent or 67 percent rate increase in 2009, state regulators said in part that the company spent more than needed for agent commissions, marketing and advertising at a time it is no longer taking new property insurance customers in Florida.
Some lawmakers said the bill could harm consumers. “It’s not right to hit Floridians again and again in the pocket,” said Rep. Julio Robaina, R-Miami.
But Locke Burt, president of Security First Insurance in Ormond Beach, said: “Rates are going to go up no matter what the Legislature does. …The only thing the Legislature can do is slow the rate of increase by addressing the cost. If you don’t address those issues, rates are going to go up faster.”
That’s the intent of new restrictions in the bill for public insurance adjusters, hired by policyholders during claims disputes with their insurers, and a requirement for homeowners to file a windstorm claim within three years after a hurricane. It’s also the goal of a provision to allow insurers to withhold part of a claim until policyholders have a contract to make repairs.
Insurers say the changes, which would address rising costs for non-catastrophe and sinkhole claims, are critical to keeping some insurers afloat.
Rep. Janet Long, D-Seminole, agreed. “Billions of dollars are paid out every year for reopened claims that happened five years ago,” she said. “We are all paying for that. … If we can get a handle on this, then we can make our rates better.”
Floridians pay fees on their insurance policies to offset deficits in state insurance programs.
But Rep. Rick Kriseman, D-St. Petersburg, said the “claims procedures in this bill are not consumer friendly.”
Gwyn Clarke-Reed, D-Deerfield Beach, said the bill could cause problems for people like her, who had to wait four years to get paid by state-backed Citizens Property Insurance for her hurricane claim. “I was looking to get a public adjuster because I wasn’t getting anywhere,” she said.
Some provisions of the bill are backed by consumer advocates and regulators. For instance, the bill would require insurers and policyholders or their representatives to provide documents used to estimate damage costs when using the state’s mediation program, a non-binding process to help resolve claims disputes between insurers and policyholders before they go to court. It also would require new insurers to have $12 million to $15 million in claims-paying reserves and require insurers to file detailed financial information about affiliates they hire for certain products and services.
Regulators have raised questions in recent months about insurers that reported losses last year but sent some money to their affiliates.
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