Florida legislative measures would allow insurance rates to rise

TALLAHASSE, Fla. – April 6, 2009 – Lawmakers have begun work on two major property insurance bills that aim to fix current problems in Florida’s insurance market.

One certain result: higher rates for homeowners, especially those covered by Citizens Property Insurance, the state-run insurer.

A bill in the state House of Representatives would allow rates to rise no more than an average 20 percent a year. A similar bill in the Senate, where debate will continue Monday, allows for increases of no more than 10 percent a year for any homeowner.

Gov. Charlie Crist, who championed insurance rate declines in the past two years, has acknowledged that rates need to rise. Some lawmakers are grudgingly moving in that direction as well.

After two hours of discussion on more than a dozen changes and revisions, the House bill moved forward Friday with approval from the Insurance, Business and Financial Affairs committee. Among the amendments shot down quickly was one from Rep. Richard Steinberg, D-Miami Beach, which would have Citizens freeze rates for one more year. Citizens’ rates have been frozen since the start of 2007.

Outside of South Florida, where Citizens has about half of its 1,066,304 policies, there is little sympathy for the insurer’s policyholders.

David Daniel, director of government relations for the Florida Chamber of Commerce, in urging the committee to pass the insurance bill, reminded the House committee that Citizens does not cover the majority of Florida homeowners.

Higher surcharges

Besides higher rates, Citizens policyholders could face higher surcharges if the insurer runs a deficit. The House bill would allow Citizens to surcharge its customers up to 25 percent first. If the insurer still has a gap, it can tax all policies in the state – including its own policyholders again. The Senate bill doesn’t contain this provision.

Right now, Citizens customers face a 15 percent surcharge first.

Both the House and Senate bills offer changes to reduce the state’s exposure to hurricane risk by shrinking the size of the Florida Hurricane Catastrophe Fund. The CAT fund provides lower-cost backup insurance to insurers working in Florida.

The House bill is more aggressive, reducing the fund’s capacity to cover losses and reducing the amount of reinsurance it can sell, noted Sam Miller of the Florida Insurance Council.

Some ambiguity

Some provisions of the bills remain a bit ambiguous, even to regulators. One amendment tacked onto the House bill baffled Deputy Insurance Commissioner Belinda Miller, who said she wasn’t sure whether the provision was meant to prevent the Office of Insurance Regulation from having input in the setting of agent commissions.

Ed Domansky, an OIR spokesman, says the amendment could be a way to undermine the agency’s conditional approval of State Farm’s plan to stop writing homeowners coverage in Florida in three years.

OIR is requiring that State Farm agents be allowed to write policies for other insurers.

Right now, they can only write State Farm policies.

Copyright © 2009 The Miami Herald