THE NEWS SERVICE OF FLORIDA: House, Senate Property Insurance Bills Differ

The following article was published by THE NEWS SERVICE OF FLORIDA on May 4, 2011:

HOUSE, SENATE PROPERTY INSURANCE BILLS DIFFER

By David Royse

As the House prepares to vote today on a property insurance bill that seeks to address what insurers say plagues the industry – from re-opened hurricane claims years after a storm to questionable sinkholes – the issue may be up against the legislative clock.

The bill (SB 408) was amended Tuesday on the House floor and now has major differences from what was passed by the Senate. As the insurance industry watches intently in the wings, the question becomes whether the two chambers will work out those differences before Friday’s scheduled session end.

“We’re trying to reach a compromise that everyone can live with,” said Rep. John Wood, R-Winter Haven, the sponsor of the measure in the House.

Backers and opponents alike agree the bill is intended to help insurers. Supporters say the industry – despite facing no big hurricanes since 2005 – continues to bleed money from insuring people in Florida. In addition to having to pay old hurricane claims, the wind storms have now been replaced by what insurers say is almost as big a problem: a mystery explosion in sinkhole claims that the companies say can’t be related to some new geological phenomenon.

“The problem with sinkholes is not sinkholes,” Wood said on the House floor Tuesday. “It’s a problem with our statutes.”

Wood, and insurance companies, say the rules for what is considered a sinkhole are too lax.

The bill gives the industry several outs to reduce their payouts in sinkhole claims, including a two year limit on claims – an important provision for the industry – new, more stringent definitions of what a sinkhole is, and the ability for insurers to offer customers a type of policy where the company would only pay for new items actually purchased. That is, rather than simply paying a claim when a customer has a loss, the company would be able to give the customer some money up front, but pay the rest only after getting a receipt for the actual repair or replacement item.

A big difference though, is that the House measure requires insurers to cover sinkholes. The Senate bill would allow insurers to quit covering sinkholes, which would force those in sinkhole prone areas into state-backed Citizens Property Insurance.

For the insurance industry, the measure is a major priority. A wide-ranging property insurance bill passed last year that was aimed at helping reduce industry losses, but it was vetoed by Gov. Charlie Crist.

The companies say they simply can’t afford to pay out claims the way they do in Florida, which is different from other states because there is always the possibility of a big hurricane season that could wipe out reserves.

“This bill is a small, but important step toward making progress on the solutions we’re all trying to reach,” said William Stander, assistant vice president of the Property Casualty Insurers Association of America. “The entirety of this bill is directed at trying to get a handle on cost drivers that are out of control.”

Opponents agree that it’s meant to help insurers, but disagree that it’s a good thing.

“It’s a giveaway,” said Rep. Evan Jenne, D-Dania Beach. “This is the insurance industry’s will come to fruition.”

And it helps the industry at the expense of consumers, opponents of the bill, some Democrat, some Republican, said Tuesday.

“Floridians are going to have to pay through the nose,” Jenne said, while insurance company investors make profits.

But the House appears to have the votes to pass the bill, and is expected to do so as early as today. Whether it can get the Senate to pass the same bill, or reach an agreement on a compromise by Friday then becomes the question if the industry is to get help from lawmakers this year. Industry lobbyists seemed confident Tuesday that a deal was either settled or in the works.

But Sen. Mike Fasano, R-New Port Richey, said Tuesday he doesn’t like the overall proposal, thought he said it has been made more friendly to consumers, which he favors. “When the bill gets over here we will have several amendments to offer. Let’s see what happens,” Fasano said. He said there will be about 15 amendments – which also stand to slow the bill down.

“I hope to have amendments that make it more consumer friendly and less for the insurance industry,” Fasano said.

Wood said Floridians have a vested interest in the health of the private insurance market because without it residents have to be covered by Citizens. And if Citizens can’t pay claims, everyone in the state is on the hook.

Wood acknowledged that individual rates may not go down, even if insurers get what they want, but says the aim is a stable industry with predictable losses.

“Whether we can decrease rates I’m not sure,” said Wood. “But we’re in an untenable situation right now with Citizens. That is a major, major risk for the people of Florida.”