By S.V. Date, Dara Kam, Michael C. Bender
TALLAHASSEE — The major stumbling block in the state's special session on insurance Thursday appeared to come down to a choice between higher profits for private insurers vs. lower rates for customers of state-run Citizens Property Insurance Corp.
On the third day of a weeklong session, House and Senate leaders appeared close to compromise on most major issues, but remained at odds on a Senate proposal to allow Citizens to write coverage for fire, theft and other risks - so-called "all-perils" policies - in areas of the state where private companies refuse to write hurricane coverage. While Citizens now writes such policies when a homeowner can find no other insurer, the Senate proposal would allow Citizens to compete with private insurers for those policies, which are generally more profitable in areas of high windstorm risk.
The benefit to Citizens policyholders would be enormous. Citizens' actuary has estimated that premiums could be reduced by 20 percent on the windstorm policies. Non-Citizens customers could also save money, because the policy change would reduce the chance Citizens would run out of money and have to levy assessments on all property owners in the state.
Unless Citizens is allowed to write such policies, its 1.3 million policyholders probably won't see any rate reductions. The two chambers, both Republican-controlled, proposed repealing a rate hike approved last year and would freeze other rate increases until 2008. But without the ability to write all-perils policies, Citizens could not share in a rate reduction without violating the company's mandate to remain "actuarially sound."
Balanced against those interests are private insurers, who currently are permitted to write policies that cover everything except hurricanes in the high-risk areas, which include much of lucrative and densely populated South Florida. In Palm Beach County, the high-risk area is east of Interstate 95.
Those companies, backed by their allies in the House, do not want to give up the profitable policies. They argue that private insurers should be encouraged to write whatever insurance policies they are willing to take, with government picking up only the rest.
"We want to keep our customers that we have 'ex-wind,''" said State Farm spokesman Justin Glover, referring to the all-but-windstorm policies in the high-risk areas.
"Citizens is the worst insurance company in the state," said House Speaker Marco Rubio, adding he did not want to give more business to an entity with such poor customer service.
That puts the House at odds with both the Senate and new Gov. Charlie Crist.
While both House and Senate versions of the insurance bills that passed their respective chambers Wednesday require cuts for private insurers who will get cheaper reinsurance from the state, Crist said whatever bill comes to his desk will also need to contain rate reductions for Citizens policyholders - half of whom live in South Florida.
Sen. Jeff Atwater, R-North Palm Beach, said he will not give up on pushing the issue until Monday's session finale. About 70 percent of his district is in the Citizens high-risk zone, including his own house.
"Anybody here that wants to argue that you're expanding government's role in insurance - you've got two choices right now in coastal Florida. Either you're going to expand your role in insurance or you're going to expand homeless shelters," Atwater said. "Either we make Citizens sound by allowing it to write multi-peril or you always make the rest of the state accept the burden for coastal Florida."
Crist would go even further than the Senate, allowing Citizens not just to write comprehensive policies in the high-risk areas, but all over the state. Crist said that letting Citizens write other policies beyond unprofitable windstorm insurance and allowing it to compete statewide would also insulate Floridians from insurers' claims that they will abandon Florida if the state does not accommodate them.
"You know what the threat is all the time? They say, 'Well, we're going to leave,''" Crist said, adding that Floridians would be protected if Citizens were able to step in quickly and write those policies at competitive rates.
Thursday he again hammered the industry for enjoying record profits while simultaneously increasing premiums.
"Let me remind you where we're coming from: This insurance industry this past year has enjoyed a $60 billion profit. $60 billion," Crist said, rapping his finger on the podium for emphasis during a news conference before his first Cabinet meeting as governor. "And I've seen estimates where $3 billion of that money has been made on the backs of Floridians. And they're tired of it. And so am I. Nobody got a refund when we didn't have a storm."