New bill could expand state’s power over insurers

South-Florida Sun-Sentinel--Mar. 25, 2008

By Julie Patel

TALLAHASSEE

The Senate Banking and Insurance Committee approved a bill Tuesday that would make sweeping property insurance changes in Florida.

The bill would expand the state’s power to suspend and fine insurers that violate state laws, extend the freeze on Citizens Property Insurance Corp.’s rates one more year until Jan. 1, 2010 and again allow Citizens to insures homes worth more than $1 million.

It’s unclear what will happen with the legislation, however, given the strong opposition in the House.

The House and Senate are “so far apart,” said Senate Minority Leader Steve Geller, D- Cooper City. “That’s why more likely than not I don’t see anything passing. I hope I’m wrong.”

Sen. Jeff Atwater, R- North Palm Beach, who introduced the bill after co-chairing a special committee formed this year to investigate how insurers set rates, said consumers’ frustration over high insurance prices sparked massive changes in insurance laws last year and that may happen again.

But the Senate panel’s approval comes the day after a House insurance committee meeting in which members said they adamantly oppose more property insurance regulation.

Geller said the bill the Senate committee approved may only have a shot of passing if the governor and House and Senate leaders strike a deal. Senate President Ken Pruitt said: “The bill is in very capable hands with Senator Atwater and Senator Geller leading the charge.”

Gov. Charlie Crist also offered early support for the legislation.

“Property insurance remains a very important issue to the Governor and he commends the work of this committee,” said Erin Isaac, Crist’s communications director. “This bill continues to evolve and we believe it is one to watch.”

Chief Financial Officer Alex Sink thanked the Senate panel for passing a separate bill Tuesday which would shrink the amount of coverage offered by the Florida Hurricane Catastrophe Fund by about $3 billion. This would reduce the risk of a major hurricane wiping out the fund and triggering fees on homeowner policyholders statewide to offset deficits. Sink said the bill would eliminate “the risk of $5.5 billion in hurricane assessments if we have a bad storm this year.”

Sink said Citizens, the state’s largest property insurer with 1.3 million policyholders, poses a similar risk because its rates don’t cover projected losses. But she said rate increases for Citizens’ customers must occur in phases, an idea that’s included in the Atwater bill.

Meanwhile, the Senate bill on the catastrophe fund passed Tuesday was drafted as a result of the yearlong battle between state leaders and property insurers over rates. In December, Crist recruited a team of attorneys to explore suing insurers. The next month, Insurance Commissioner Kevin McCarty briefly suspended Allstate Insurance Co. and nine affiliates from doing business in the state and the ban is now pending a court decision. And last month, Atwater and Geller’s special committee held three days of hearings to explore why insurers failed to pass savings to consumers from a law last year that expanded the catastrophe backup coverage fund by $12 billion.

Among other things, this bill would:

Require insurers to use storm risk-predicting methods approved by the state.

Limit how much of the cost of backup coverage insurers can pass to consumers and bar insurers from paying broker fees when buying backup coverage from an affiliate company.

Prohibit Citizens from offering new wind-only policies to help beef up its bottom line.

Set criminal penalties for insurers that knowingly give false or misleading information to the state.

Make permanent two temporary provisions passed last year that allow state insurance regulators to block rate hikes and prohibit insurers from using arbitration panels when they disagree with rate decisions. These provisions are credited for helping reduce homeowner coverage prices by a statewide average of 15 percent last year.

Without the provisions, insurers can raise rates before notifying the state. Atwater said that means consumers are hit with rate increases right away, while insurance regulators review a rate increase request. “I wouldn’t mind holding that in my bank, either,” Atwater said.