Article Courtesy of The Sun Sentinel

By Mark Hollis and Kathy Bushouse
Published  May 5, 2007

Rates for Citizens Property Insurance Corp. policy holders will be frozen until January 2009, and more people could opt for Citizens' coverage under legislation passed Friday.

But the savings enjoyed by Citizens policy holders might mean big increases in the future for all insured Floridians. The legislation essentially raises the risk that all Floridians would pay an extra charge on their home and auto policies to bail out the state-backed company should a major hurricane hit Florida, a scenario that worries some state officials, including state Chief Financial Officer Alex Sink.

The changes, backed by Gov. Charlie Crist, accomplish one of the governor's goals for this legislative session: making Citizens more competitive in the hopes of saving Floridians more money on their property insurance.

Citizens' customers will pay rates set at December 2006 levels for at least another year, extending a freeze enacted during January's emergency session on property insurance. It also means customers with private insurance companies can opt for a Citizens policy if their premiums are at least 15 percent more than what Citizens charges -- a lower figure than the 25 percent threshold legislators enacted during January's session.

The bill also accomplishes another Crist pledge to prohibit national insurance companies from creating new Florida-only subsidiaries. The legislation also requires existing subsidiaries of companies such as State Farm, Allstate and Nationwide to report their parent companies' profits as part of a rate increase request.

The legislation, passed Friday by the House of Representatives after the Senate voted on it earlier in the week, is now on its way to Crist for his signature.

The Legislature's action is "huge," said Crist, who took the rare step of testifying before the Senate in favor of the plan.

Citizens is already the largest insurance company in Florida, with almost 1.3 million policy holders -- almost half of them in South Florida. Letting Citizens become more competitive with the private market "was the second half of finishing the job" that legislators started during the January emergency session on property insurance, Crist said.

Crist told legislators after the session ended Friday afternoon that they "put the nail in the coffin" on the insurance industry with their vote allowing Citizens to be more competitive. More people would be able to switch into Citizens to avoid major rate increases by private insurers. Until this year, people could only get a Citizens policy if no private companies would take them.

"That was right, and just, and fair, and important, and you did it. God bless you for fighting for the people of Florida," Crist said. "I heard some groans from insurance lobbyists. Tough. ... There's a new day in this place."

Industry officials countered that the move simply put more Floridians in financial peril should hurricanes hit. "The governor got everything he wanted, again, which means we're now one step closer to the financial catastrophe we've predicted," said William Stander, assistant vice president of the Property Casualty Insurers Association of America.

Citizens officials said Friday they're still not sure how the rate freeze will affect the state-backed company, nor do they know how many new policy holders to expect because of the lower threshold to get a Citizens policy. Sink said that while rate relief is needed, she's concerned about what will happen if a hurricane hits the state in the next two years.

"We needed rate relief. But to go another 24 months without evaluating what a sound rate would be [for Citizens] is not a good fiscal idea at all," Sink said. "The more they get in a hole about the rates they charge, then the higher the risk [of assessments] when a storm comes."

Florida's property insurance policy holders paid extra charges on their insurance bills after Citizens ran out of money in the wake of the 2004 and 2005 hurricane seasons. The company had a $516 million deficit in 2004, and a $1.7 billion shortfall in 2005.

And because of changes the Legislature made in January, automobile insurance policy holders also will pay to make up future Citizens' deficits.

Before voting on the Citizens bill Friday, some Central Florida legislators sought an end to such assessments, a move that sparked a 40-minute debate.

Allowing other insurance customers to pay assessments for Citizens "is as close to a socialist policy that we've ever come to," said state Rep. Dennis Ross, R-Lakeland, who sponsored an amendment to bar the practice.

The amendment failed. State Rep. Julio Robaina, R-Miami, urged colleagues to reject it, saying it would not help in offering rate relief to their constituents.

"We have a governor in this state who's made a commitment that [lower premiums] is something that we must give people this year," Robaina said. "What are we going to do? Are we going to go home and say we did nothing else to better the insurance situation in the state of Florida?"

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