Legislative Session Kicks Off With a Full Property Insurance Agenda
The 2011 legislative gets underway with several property insurance bills on its agenda. Both the Senate and the House of Representatives have major property insurance bills on file that include numerous revisions to the property insurance laws, and in particular to laws governing residential property insurance.
Perhaps the biggest issue of the 2011 session will be Florida’s sinkhole insurance crisis. With no geological explanation, the number of sinkhole claims in this state has exploded. Despite the large dollar amount of these claims, relatively few policyholders use their insurance proceeds to repair their homes. This has led to a depletion of insurance capacity in the state and to large reductions in municipal tax bases as inrepaired homes are devalued. A key outcome of the 2011 legislative session will be producing insurance laws going forward that eliminate claims for cosmetic damage that policyholders are not deeming worthy of repair. The legislature also will need to consider the impact of the “tail” of claims that exist under current law or might be brought in the future relating to prior policy periods.
The legislature also has its attention on Citizens Property Insurance Corporation. Bills relating to Citizens can be expected to pushit back in the direction of being a residual market. This might include increasing the pace at which Citizens gets to an actuarially sound rate, as well as changes that enable Citizens to offer coverage that is more restricted than the private market.
Florida’s rating law also will get a look during this session. In recent years, the legislature has advanced legislation that would allow insurers to file rating plans with rates exceeding their approved plans. Although the bills from prior sessions never became law, the proposal is back again. It would allow insurers to raise rates 15% per year according to rating plans that exceed their approved rates.
Although Florida has enjoyed several hurricane-free years, the property insurance industry has not been able to accumulate the surplus that will be needed when storms eventually return. The 2011 legislature has an opportunity to address some of the reasons for insurers’ lackluster performance in recent years and begin to restore stability to the market.