Fla. Lawmakers Confront Property Insurance, again, in 2008 Session

Insurance Journal--Feb. 22, 2008
By Brent Kallestad

Property insurance wasn’t supposed to be the big issue in the 2008 Florida Legislature. To the chagrin of many lawmakers, it just won’t go away.

Legislators thought they’d largely taken care of the issue last year when they passed a bill they hoped would reduce premiums. Instead, most Floridians still pay expensive rates to protect their homes and businesses, and relief remains elusive. Only 20 percent of Floridians have seen their premiums decrease following the passage of House Bill 1A in a January 2007 special session.

That has legislators upset and thinking of ways to confront the issue when the legislative session opens March 4. But they’ll be revisiting property insurance on top of other important issues in a session where fewer dollars are available for the second straight year.

Gov. Charlie Crist and lawmakers are frustrated that property insurance rates haven’t dropped across the board after they increased the amount in the state’s Hurricane Catastrophe Fund last year. That plan was designed to help lower premiums for consumers by providing cheaper reinsurance to commercial companies. Aside from a handful of relatively new domestic startup companies, few insurers have failed to come back with lower rates.

With rates still high, lawmakers are taking sworn testimony from private insurers in hopes of reducing rates and Crist has enlisted three prominent private-sector attorneys to study the possibility of a class action suit against the industry. A specially-formed Senate committee has interviewed insurance executives and worked through the math they use to set rates. Meanwhile, the Office of Insurance Regulation is in court with Illinois-based insurance giant Allstate Corp. over information about its rates.

“Continuing to have our friends in the Legislature keep the industry’s feet to the fire is incredibly important,” Crist said during a presession interview with The Associated Press.

Florida regulators have also refused more than three dozen rate requests in hopes of forcing homeowners’ premiums to drop, especially in the high-risk market along the state’s horseshoe coastline.

While the state continues to struggle with insurers, legislators will have additional proposals to reduce rates once the session begins. Many Florida lawmakers are now convinced last year’s bill contained loopholes that some private insurance companies may have exploited. Now they face a delicate balancing act of trying not to scare off investors while closing those loopholes.

Sen. Bill Posey, R-Rockledge, who chairs the Senate Banking and Insurance Committee, thinks another answer to lowering rates lies in requiring residents to upgrade their homes, hardening them against storms.

At the same time, some officials including Chief Financial Officer Alex Sink believe lawmakers may have gone too far last year in increasing to $28 billion the amount the state would have to pay in the event of a catastrophic hurricane. Sink is seeking to roll back that amount by $3 billion, a suggestion described as “prudent” by Crist.

Lawmakers are mindful of the eight costly hurricanes in 2004 and 2005 but also the $16 billion in losses that result from 1992’s Hurricane Andrew.

Another Andrew could wipe out the state’s catastrophe fund and leave the state-backed Citizens Property Insurance Corp. insolvent. If Citizens goes belly up, anyone in Florida who owns a home, car or business would be paying assessments on top of their insurance premiums.

House Speaker Marco Rubio, R-West Miami, says lawmakers understand the urgency of the situation.

“We’ve got some structural problems in hurricane insurance that go beyond just affordability,” Rubio said. “We’re one hurricane away from being on the doorsteps of the federal government begging for a bail out.”