Legislature passes bill to lower insurance rates
Article Courtesy of The Sun Sentinel
Kleindienst and Kathy Bushouse
Published January 23, 2007
-- Almost unanimously, the Florida Legislature on Monday voted to give
homeowners a break from soaring property insurance premiums, promising
rate cuts between 10 and 55 percent on their hurricane coverage.
South Florida home and condominium owners are expected to see some of the
biggest reductions, but the amount of rate relief will depend on where you
live and your insurer.
Gov. Charlie Crist, who pushed legislators during the
seven-day emergency session for meaningful rate reductions
statewide, sent signals he expects to would sign the
legislation into law and commended Republicans and Democrats
for reaching the final compromise.
"It's amazing to see what you can
accomplish when you don't care who gets the credit,"
Gov. Charlie Crist shakes hands with Senate President Ken Pruitt
told legislators. "They said it could not be done, but you did
House was first to approve the broad 167-page compromise, finalized during
marathon weekend negotiations, passing it 116 to 2 at 5:15 p.m. The Senate
followed 14 minutes later with a 40 to 0 vote. All South Florida
legislators voted in favor of the reform package. Approval came on the
final day of the session called to address the state's property insurance
woes, which are threatening to force Floridians out of their homes because
of double- and triple-digit insurance premium increases.
"We tried to stop the bleeding," Senate Banking and Insurance
Committee Chairman Bill Posey, R-Rockledge, said. "But we don't claim
the bill is perfect and we don't claim the work is done."
Although no hurricane made landfall in Florida in 2006, the insurance
companies have blamed skyrocketing rates on the disastrous hurricane
seasons of 2004 and 2005, when eight storms, including Katrina, ravaged
"If we hadn't passed the bill, we would have been in terrible
shape," said Senate Democratic Leader Steve Geller of Hallandale
Beach. "The economy of the state was grinding to a halt."
Homeowners, including condominium residents, will see some relief when
their policies renew during the next several months. Businesses will also
see some relief, although not as much. Rates will fall, under the plan
approved, by allowing the private insurers to buy cheaper reinsurance from
the state, and requiring they pass along the savings to consumers.
South Florida customers of Citizens Property Insurance Corp., the
state-backed insurer for homeowners who can't get private insurance, could
see up to a 10-percent immediate rate reduction and possibly up to an
additional 10 percent cut. Roughly half of Citizens' 1.3 million
policyholders live in Broward, Palm Beach and Miami-Dade counties.
The legislative package rescinds a 21-percent Citizens' rate hike that
took effect on Jan. 1 - promising refunds for any customers who have
already paid it - and cancels a 56-percent increase that was set to take
effect in March.
"For too long now, Floridians covered by Citizens have been paying
too much premium for too little service," said Rep. Ellyn Bogdanoff,
R-Fort Lauderdale, whose windstorm insurance is with Citizens.
But Rep. Susan Bucher, D-West Palm Beach, said lawmakers acted too late
and have done too little.
"What happened this weekend was cosmetic surgery when we needed to
perform heart surgery," she said. "In reality, what we're
offering … is maybe as much as 20-percent savings to our rate payers
when they have been hit with triple-digit increases."
Homeowners covered by private insurance, about two out of every three
policies in South Florida, could see a wide range of reductions on their
hurricane (windstorm) coverage, possibly some as high as 55 percent.
State Farm, the state's largest private insurer, on Monday projected that
its windstorm rates could drop by a statewide average of 19 percent. That
figure could be as high as 25 percent in South Florida.
Forecasters have predicted above-average storm activity during at least
the next decade. If the state gets hit by a major storm or several
hurricanes in one season, the Legislature's insurance fix would put
Floridians on the hook for billions in damages. Deficits at Citizens would
be repaid through extra charges on everyone's property and automobile
policies, with life and health and medical malpractice and worker
compensation policies exempted. If those assessments don't cover the red
ink, state taxpayers would have to pick up the tab.
"But if the big one doesn't come for 50 years, there's probably $200
billion (in premiums) that will be saved," said Posey, adding the
ultimate solution is the reinforcement of Florida homes against the ravage
The insurance industry has blamed the high cost of private reinsurance -
coverage insurers buy to help pay claims in the event of a catastrophic
storm - for driving up rates again last year.
Insurance lobbyists mostly sat on the sidelines during the weeklong
session, as Crist and legislators worked to help consumers and agreed to
stop the practice of letting insurance companies raise their rates up to
10 percent before getting state approval.
"There's not a lobbyist within 50 miles of the Capitol that supports
anything that we've done, and that's a good thing," said Rep. Adam
Hasner, R-Delray Beach.
Lawmakers also opened the door for Citizens to expand its coverage,
allowing the insurer to sell fire and casualty coverage to customers in
high-risk coastal areas that now have its windstorm coverage. The theory
is the competition from Citizens will help bring down everybody's rates.
"If the private carrier can't sharpen its pencil and come down in
rates, the consumer will have a choice," said Sen. Jeff Atwater,
R-North Palm Beach, who pushed hard to reduce Citizens' rates.
Within 30 days, Citizens will have to give the Legislature, the governor
and Cabinet a business plan on how it would offer expanded insurance
William Stander, assistant vice president of the Property Casualty
Insurers Association of America, warned the Legislature's actions will
"lead the property insurance market in Florida down a path of
deterioration." Allowing Citizens to expand, he said, will cause it
"to become a giant, lumbering beast that will threaten to financially
ruin every man, woman and child in the state of Florida."
SENATE INSURANCE BILL