Florida Senate Property Insurance Bill Pleases Regulators, Angers Insurers

Insurance Journal--April 16, 2008
By Brian Kern

As insurers and other interested parties criticized a Florida property insurance bill that passed through the state Senate this week on a 32-7 vote, Florida’s insurance commissioner lauded the action.

Sponsored by state Sen. Jeff Atwater, R-North Palm Beach, the Florida Insurance Council said the legislation that the Senate Banking and Insurance Committee approved earlier this month, “dramatically increases regulation and causes of action involving all lines of insurance, not just hurricane insurance.”

Insurance Commissioner Kevin McCarty said the legislation (SB 2860) is consumer-focused and praised the Senate for their work.

“There are numerous consumer safeguards in this key piece of legislation that will protect Florida consumers from unnecessary and unsupported property insurance rate increases,” McCarty said. “It will stop insurance companies from bypassing my office and increasing rates through the use-and-file or arbitration processes. It also will increase the Office’s authority to make certain that companies pay their policyholders’ claims on time.”

David Daniel, vice president of governmental affairs for the Florida Chamber of Commerce, said his organization is opposed to the legislation. He voiced the Chamber’s disapproval before the Senate Banking and Insurance Committee and the General Government Appropriations Committee.

“If you think of the Legislature as taking a gamble with HB 1A by artificially suppressing rates and hoping for no hurricanes, this (SB 2860) just furthers the gamble and lengthens the time that we have to hope for no hurricanes,” Daniel said.

Daniel added that the state is making all insured residents pay for 1.3 million subsidized Citizens’ policyholders. He said SB 2860 doesn’t lower assessments and assessment potential enough to “take care of the problem.”

McCarty believes the legislation will entice new insurers into the state’s beleaguered market.

“Through its funding for the Capital Build-Up Incentive Program, the bill will help continue to encourage growth in Florida’s insurance market, which already has seen more than 20 new companies and $3.4 billion in capital added to the Florida market since January 2006,” the commissioner said. “I hope the House now will also see the importance of this legislation for Florida consumers and how it will enable my office to continue to ensure that companies are keeping insurance available and affordable.”

FIC lobbyist Gary Guzzo said that the expanded causes of action and expanded sanctions and regulations won’t promote a smoother, broader private property market. It will even threaten auto insurance, workers’ compensation and health insurance, where private markets have been working well or fairly well in recent years, he added.

Under the Senate bill, property insurers would be required to use the “file and use” filing procedure for rate changes that are greater than the rate most recently approved by the Office of Insurance Regulation. The 2007 Legislature mandated this rate filing provision to be effective through the end of 2008, but the Senate bill would extend it through 2011.

The National Association of Mutual Insurance Companies joins in FIC’s disagreement with McCarty, saying the legislation would curtail competition and dissuade new insurers from entering the marketplace.

“This bill attempts to punish insurance companies with increased authority by the Office of Insurance Regulation at the expense of encouraging a competitive environment that would provide more choices for consumers,” said Liz Reynolds, NAMIC’s Southeast state affairs manager. “It also subjects insurers to Florida anti-trusts laws, setting up dual regulation.”

Reynolds said several provisions in the bill could have a dangerous and chilling effect on the private market. Some other troubling provisions of the bill include a 10-fold increase in administrative fines against insurers for violating the Insurance Code, increased unfair trades practices fines, and allowing million-dollar homes to be covered by Citizens Property Insurance Corp., she added.

Reynolds said during the Senate markup of the legislation, Sen. Atwater praised a provision to allow Citizens a “glide path” to actuarially sound rates, with a “stairstep” approach to increasing rates over several years.

“At the same time members of the Senate recognize the need for Citizens to become solvent through collection of actuarially sound rates, they are chilling the private marketplace with tighter regulation on the ratemaking process,” Reynolds said. “Don’t consumers in the private market deserve the same ‘glide path’ to reach solvency for their chosen insurer instead of obstacles to providing appropriate coverage at appropriate rates?”

Reynolds also rebuffed comments by several senators who charged insurance companies with ignoring their responsibilities and neglecting their customers.

“What about the responsibility of remaining solvent?” she asked. “Companies have made good on their promises to pay claims, and they want to continue to be able to do so.”

Sources: Florida Insurance Council
National Association of Mutual Insurance Companies