THE NEWS SERVICE OF FLORIDA: Groups react favorably to insurance bill

By MICHAEL PELTIER
THE NEWS SERVICE OF FLORIDA
 
THE CAPITAL, TALLAHASSEE, May 28, 2009……A measure that calls for increased premiums for the state-run property insurance company’s policyholders and reduced hurricane exposure for the state prompted enthusiastic responses on Thursday.
 
A day after Gov. Charlie Crist signed HB 1495 into law, a host of groups lauded the measure they say would move the state toward a more competitive insurance market while insulating coastal residents from the shock of an immediate, more drastic rate hike.
 
“This bill puts Florida in a better position to weather the aftermath of a hurricane by beginning the process of tackling Citizens’ finances and reducing the Cat Fund’s overexposure,” said Christian R. Cámara, director of the Competitive Enterprise Institute Florida Insurance Project, a conservative group that backs free market approaches. “Enacting this legislation is definitely a step in the right direction.”

The measure would allow Citizens Property Insurance Corp. premiums to increase by 10 percent a year until they are actuarially sound. Citizens officials told lawmakers earlier this year that average rates are about half of what they should be.
 
The Citizens rate hike was included in a package of changes that also reduce the state’s hurricane exposure by phasing out the optional upper tier of backup coverage provided by the state to private insurers through the Hurricane Catastrophe Fund. Over the next six years, the state’s hurricane exposure will drop by $12 billion, decreasing the potential burden on policyholders who would be required to pay the bill if a massive storm hits.
 
“Reducing the state’s risk lessens the risk that United Way of Florida and other charities will be hit with additional ‘hurricane taxes’ in the future,” said Ted Granger, president and CEO of United Way.  “Those hurricane taxes are a huge burden on our organization that takes money away from our core function of helping those in need.”
 
Given the weak economy, critics said during the session that now is not the time to begin returning insurance premiums to higher rates, even if they are not actuarially sound.
Backers countered that the private market will return to pick up the slack if rates are allowed to reflect the risk. At least one business group said Thursday that more reforms are needed before that can happen.

Any long-term fix must include components to make deadly hurricanes less destructive by improving building techniques and providing incentive for homeowners to take advantage of them, said Barney Bishop, president and CEO of Associated Industries of Florida. The state also needs to get out of the insurance business.

“We will continue to work with our elected officials to foster a more competitive business environment, where the true costs of risks are transparently borne by those who incur them, and are not shifted to other Floridians or outside our state,” Bishop said.