begins special session on hurricane insurance
Article Courtesy of The Sun Sentinel
Published January 16, 2007
TALLAHASSEE -- Angry and worried homeowners and businesses
who can't afford doubling and tripling premiums for property insurance may
get some relief, as lawmakers begin a weeklong special session Tuesday
aimed at lowering rates.
The problem has been growing since 2004, the first of two bad hurricane
seasons that cost insurers more than $30 billion in Florida. But lawmakers
have resisted measures in recent years that would quickly cut rates, which
the industry says could simply exacerbate the problem by driving more
companies out of the state.
Several big insurers have already shed hundreds of thousands of policies,
leaving many Floridians with only one option. That option is the state's
expensive last resort insurance company, Citizens Property Insurance
Corp., which itself hasn't had enough money to pay its claims and has seen
its own rates spiral beyond affordability for many customers.
Lawmakers this time are promising to cut rates for at least some
customers, after months of bombardment from homeowners angry about
spiraling rates even after the calm 2006 hurricane season and worried they
won't be able to continue to afford to live here.
"Remember those old black and white movies _ 'Frankenstein' _ where
the villagers with the pitchforks and the torches were marching on the
castle?'' asked Sen. Steve Geller, D-Cooper City. "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.''
In fact, about 100 angry homeowners showed up Tuesday for a rally in
Tallahassee to urge lawmakers to help them, albeit without pitchforks. For
Key West resident Terry Eibert, the rising cost of staying in her island
home has meant sacrifices in other areas.
``We've had to go down to one car, we had to cut some health insurance
benefits,'' said Eibert, who has seen her Citizens annual premiums rise
from $3,000 to $10,000 for $250,000 worth of coverage.
The Republican-dominated Legislature is also under pressure from Florida's
new governor, Charlie Crist, who has said that any bill lawmakers pass
must appreciably lower rates. Crist has forcefully criticized insurance
companies and campaigned on the issue last year.
"I'm optimistic that by the end of this session we'll have lower
rates for the people of our state,'' Crist said Tuesday. Under plans
lawmakers will consider this week, Citizens customers would get a rate cut
for sure. Separate bills written by the House and Senate both call for
Citizens to skip a planned rate increase and roll back one customers were
hit with this year. The plan would put Citizens rates at last year's
levels for at least another year.
Also under consideration is a proposal to put the state, rather than
private insurance companies, more on the hook for the biggest losses.
Under a Senate proposal, the state would guarantee that it would pick up
more of the risk if there is a huge storm like Hurricane Katrina. That, in
theory, would let insurers know what their ultimate risk would be and spur
them to stay in the state and keep rates lower because they wouldn't have
to be prepared for an enormous loss.
Other proposals would allow homeowners to lower premiums by buying less
coverage. For example, they could insure the home only to the value of
what they owe the bank, rather than the full replacement cost. Or they
could choose a much larger deductible.
Another plan being pushed in the House would prevent national insurance
companies from setting up Florida-only subsidiaries. The Florida-only
companies have been able to raise rates based on Florida losses without
consideration of the national company's profits.
The House also proposes to require companies that sell homeowners
insurance in other states but not Florida to sell it here if they want to
sell other types of coverage such as auto insurance.
Also on the table is a proposal to make it easier for insurance companies
to tap into an existing state backup fund, the Florida Hurricane
Catastrophe Fund. The fund provides reinsurance _ backup coverage they buy
to protect them against giant losses _ at a much lower cost than private
reinsurance. Insurers say reinsurance is one of the biggest things driving
Meanwhile, in Washington, two Florida congress members are pushing an
effort to create a federal catastrophic backup fund, which would provide
additional reinsurance to insurers, also at a lower cost than what they
pay in the private market. U.S. Reps. Ginny Brown-Waite, R-Brooksville,
and Vern Buchanan, R-Sarasota, say the savings would have to be passed on
to consumers under the plan.
That is similar to the state Legislature's proposal, which would require
companies that save money on reinsurance by getting more coverage from the
Catastrophe Fund to pass on the savings to their customers.