Cabinet issues emergency order freezing home insurance rates for
Article Courtesy of The Sun Sentinel
Published January 31, 2007
· Throwing another hard jab at the property insurance industry, Gov.
Charlie Crist on Tuesday persuaded his fellow Florida Cabinet members to
pass an emergency order preventing homeowner insurance companies from
canceling policies before December.
The emergency rule also freezes insurance rates for the next 90 days while
companies prepare rate adjustment requests that take into account the
steep savings they should get under a insurance law Crist signed last
The rate freeze most immediately affects more than 250,000 customers of
Nationwide. The company -- with more than 29,000 policies in Palm Beach
County and another 13,000 in Broward county -- has an arbitration hearing
pending because state regulators rejected its request for a 71 percent
rate increase last year. Lobbyists for Nationwide said it now appears the
company will have to keep existing premiums as they are until at least
The order was approved despite strident objections raised by insurance
industry lobbyists and concerns from state Chief Financial Officer Alex
Sink and Agriculture Commissioner Charles Bronson, who both said the rule
could put some insurance companies in too much of a financial bind.
But Crist argued forcefully for the order, saying that without it, he
feared some property insurers might hurriedly ask state insurance
officials for massive price increases or leave policy holders stranded
without coverage before legislation he signed last week takes effect in
June. That law gives insurance companies access to more and cheaper
reinsurance -- money they can use to help pay claims after a major storm
-- from the state.
In exchange, the insurers are required to pass along savings to customers.
The law is predicted to cut annual property insurance premiums by an
average of 22 percent statewide, though the savings will vary greatly
depending on the insurance carrier and where a policy holder lives.
The order Crist and Florida Cabinet members put into effect Tuesday stops
cancellations or nonrenewals of residential insurance policies before
premium reductions from the new law take effect. It allows cancellations
only in cases where homeowners fail to pay their bill or engage in fraud.
Crist's push for the immediate ban on policy cancellations comes just days
after his retirement-age parents received written notice from their
insurer, Tower Hill, that their property coverage would be canceled in
"If we don't pass an emergency rule, people are going to get gouged
again," Crist said. "Companies could cancel policies, like
Earlier this month, Allstate announced that it would not renew 106,000
Florida policy holders effective in mid-April.
Meanwhile, Sink, a Democrat, and Bronson, a Republican, warned that the
emergency order might dissuade private insurance companies from doing
business in Florida. But they eventually sided with Crist and Attorney
General Bill McCollum, over objections from industry lobbyists.
Guy Marvin, president of the Florida Insurance Council, an industry trade
group, said the action will have a "drastic negative impact on the
financial statements" of several large insurance carriers. He said
insurers occasionally need to cancel policies to avoid carrying too much
risk in a given region so that they can offer policies in other parts of
Mark Delegal, a lobbyist for both State Farm Florida and Nationwide
insurance companies, told reporters: "These kinds of measures are
destroying the insurance market, what's left of it, piece by piece."
Delegal set off a terse exchange with Crist when he told the Cabinet that
insurance companies should enjoy "nice profits" so they have the
money to pay claims after a storm.
"We don't have a problem with nice profits," Crist shot back.
"We have a problem with egregious profits."