FPCA Homeowners Division: Mixed Message on HB 1171, Insurance Agents Say
May 14, 2009
The News Service of Florida reports that insurance agents are unsure whether to support HB 1171, which would allow large insurers to raise premiums without the approval of the Florida Office of Insurance Regulation.
The News Service of Florida article is reprinted below.
Insurance Agents: Mixed Message on HB 1171
By Michael Peltier
The News Service of Florida
THE CAPITAL, TALLAHASSEE, May 14, 2009…Insurance agents say they don’t quite know what to think about a measure traveling to the governor’s desk to free some insurers from state oversight when it comes to setting property insurance premiums.
On one hand, HB 1171 breaks historic ground by letting the free market dictate the cost of property insurance premiums. On the other hand, it targets the wrong companies, agents contend.
The Florida Association of Insurance Agents on Thursday suspended official judgment on whether Gov. Charlie Crist should sign legislation that surprised at least one of its sponsors by making to Crist’s desk at all.
What is clear is the need for reform, says Jeff Grady: president of the Florida Association of Insurance Agents. With the state now acting as Florida’s largest property insurer, nothing less than dramatic reform will be enough to ensure that property owners are protected in the event of a major storm, he said.
With the state able to reach only its most basic level of coverage, property owners could be on the hook for up to $12 billion in hurricane losses the state cannot get from the private market.
“Florida has in essence created a fragile system of insurance that leaves Florida homeowners and tax payers at risk,” Grady told reporters Thursday. “We’re only one storm away.”
One response that unexpectedly gained traction was allowing companies to circumvent the Office of Insurance Regulation’s oversight of premiums.
On May 1, lawmakers sent HB 1171 to the governor. It allows large insurers to raise premiums without the approval of state regulator. About 15 large insurers could do so if the measure is approved. That includes State Farm Insurance Co., which has threatened to leave the state because it says it can’t get approval for rates it considers high enough.
Backers say the bill would allow policyholders to keep their familiar insurance company, rather than being forced to switch – and that some people would rather keep a well-capitalized insurer they know and pay a little more for it, than change insurance companies.
Critics say the measure would allow insurance companies to, in essence, cancel policies by raising rates to unacceptable levels. The House passed the measure by a 105-13 vote. The Senate followed suit with a 27-9 vote.
The bill’s success took many by surprise. Introducing the bill at its first House committee stop, Rep. Bill Proctor, R-St. Augustine, referred to it as a “vehicle for discussion.” He wasn’t the only one who sold the bill short.
“I never thought I’d see a session where we would see any deregulated sector of the insurance industry,” said Scott Johnson, FAIA lobbyist.
But the measure has flaws, the biggest of which may be that it’s targeting the wrong insurers, Grady said. Many of the state’s largest private insurers, including State Farm, aren’t necessarily the companies that would benefit from premium flexibility. State Farm, for example, has announced its intention to close out its book of business in Florida over the next 10 years.
“It is very discriminatory, Grady said. “It does not reach the folks who we expect to write more insurance.”