Insurance mess brings conflict to
Article Courtesy of The Orlando Sentinel
Kennedy and Jason Garcia
Published January 17, 2007
-- Florida lawmakers opened a special session Tuesday to tackle the
state's property-insurance crisis, but proposed solutions quickly opened a
deep political divide between new Gov. Charlie Crist and fellow
Republicans in the House.
Crist, backed by Senate Republican leaders, is pushing a plan to
dramatically cut homeowners' premium costs by making state taxpayers pick
up the costs of rebuilding if a mega-hurricane hits.
House Speaker Marco Rubio, R-Miami, signaled he is unwilling
to consider the plan during the weeklong session, warning
that it involves "incalculable risk" and creates a
"scenario that would require massive tax
"It's an idea that threatens to
transfer a significant amount of risk onto the
Tuesday during a special legislative session, dozens gather on the
steps of the Old Capitol to protest the soaring cost of homeowners
of taxpayers, and anything that does that should be considered over weeks
and months, not hours and days," Rubio said in an interview.
its heart, the clash is not only a struggle over dollars but also
philosophy, with Crist and Senate leaders favoring what critics call a
big-government approach to easing insurance costs.
"I don't know if it's un-Republican," said Senate President Ken
Pruitt, R-Port St. Lucie, who supports the plan. "If you look back in
time and history, it's government's role to stabilize. And that's what
you're seeing here."
While shaded by politics, this week's battle in Tallahassee also has
tremendous pocketbook implications for Florida homeowners.
Ernest Bach of Largo was among three dozen or so Floridians who traveled
to the Capitol to plead with lawmakers for help after watching the cost of
insurance on his condo climb more than 500 percent during the past three
"You need to save Florida's citizens. We're counting on you,
please," Bach told members of the Senate's Banking and Insurance
Senate Democratic Leader Steve Geller of Hallandale Beach also warned that
tangible results were needed.
"Remember those old black and white movies --Frankenstein -- where
the villagers with the pitchforks and the torches were marching on the
castle?" Geller said. "If we don't pass something to reduce
insurance rates this week, they're going to march on Tallahassee. And you
know something? We would deserve it."
Few good options
Two weeks after being sworn in as governor, Crist, a moderate Republican,
clearly is intent on making good on his campaign pledge to cut insurance
But he also faces few good options.
In perhaps his most controversial move, Crist has said he would support
the Senate approach of capping insurance-industry hurricane costs at about
$26 billion, making state taxpayers stand by to pick up any higher
Hurricane Katrina recovery has cost a total of about $40.6 billion so far.
Under the Senate plan, a similar Florida catastrophe could easily empty
the state's $6 billion reserve fund and possibly force a temporary
statewide sales-tax increase, lawmakers conceded.
But in exchange for taxpayers assuming such risk, State Farm Insurance and
other major underwriters have said homeowners' windstorm-insurance costs
could be cut by one-third -- with lawmakers wanting such reductions
carried out within at least six months.
Another dramatic provision of the Senate plan, also endorsed by Crist,
would allow Citizens Property Insurance Corp. to begin competing with
private insurers for customers.
Citizens, established as the insurer of last resort for Floridians denied
private coverage, now has 1.3 million policies, making it the state's
Crist said that making Citizens more competitive makes economic sense and
could yield premium reductions for all of those currently in the high-cost
But Crist also ducked when asked whether expanding state government's role
fit with the conservative principles he espoused during last fall's
"It fits with Florida principles," Crist said Monday night after
a ceremony commemorating the Rev. Martin Luther King Jr. at the Governor's
Mansion. "We've got this Citizens insurance company that already has
1.3 million customers. This is where we are.
"Let's have this be a company that can compete," he added.
"Let it be a company that gets a fair shake . . . and gets the
opportunity to go toe-to-toe with the private sector to make the people
get the very lowest rates possible."
Crist's office also began shopping around what he considers his
legislative priorities this week, which include a prohibition on national
insurers setting up Florida subsidiaries to reduce risk and forcing them
to continue writing homeowners' policies if they also offer other
insurance lines in the state.
Another Crist provision would prohibit insurers from canceling policies in
most cases, an idea that even Senate leaders balked at.
But Rubio, who already has positioned himself as a potential Crist
political rival by hiring many of former Gov. Jeb Bush's staff, turned the
coldest shoulder to the governor's plan.
Rep. David Rivera, R-Miami, one of Rubio's closest allies, called the
approach favored by Crist and the Senate "reckless."
"I have a lot of concerns that the plan would bankrupt the state and
provide a bailout to the insurance industry, to put it really
simply," Rivera said.
Instead, the House would offer insurance companies more state-subsidized
reinsurance -- which these firms rely on for help after catastrophic
storms. Insurers say rising reinsurance costs on the private market are
one of the main reasons they have increased the rates charged homeowners.
Under current law, insurers have to pay out a cumulative amount of more
than $5 billion worth of claims before they can tap into the state's
reinsurance fund. The state also caps the amount of damage it will cover
at $15 billion.
The House wants to lower the initial threshold to $2 billion and raise the
maximum payout to $20 billion for two years. The Senate also wants to
expand the use of the state's reinsurance fund, though not to the House
Both plans also include measures to roll back and temporarily freeze rates
for Citizens customers.
But the pitch expanding Citizens' role to make it a competitive Florida
carrier appears dead-on-arrival in the House.
"The comfort level of many members is not there on expanding the role
of Citizens," Rubio said.
"And certainly I think there is a sense in the House that there are
some structural changes that have to happen to Citizens as to how that
company operates before it's allowed to continue to go out and write more