Lawmakers zero in on insurer's profits


Article Courtesy of The NEWS-JOURNAL 

By
Published  May 1, 2007

TALLAHASSEE -- Property insurers had a good year in 2006 -- a very good year. But as insurance companies brought in billions of dollars in profits, Florida homeowners and businesses saw their rates soar and, in many cases, lost coverage.

Now, as state lawmakers enter the final days of the annual legislative session, they are ready to debate a controversial bill that includes targeting insurer profits.

The bill, pushed by Gov. Charlie Crist, would prevent national insurers from setting up new subsidiaries to sell property insurance only in Florida.

Subsidiaries already in Florida, such as offshoots of State Farm and Allstate, would have to include information about their parent companies' profits if they seek rate increases.

Senate Banking and Insurance Chairman Bill Posey, R-Rockledge, said the measure is aimed at preventing insurers from sending profits out of the state and then leaving a "shell here to collapse" if a catastrophic hurricane hits.

But insurance-industry officials said the measure could prevent private insurers from coming into Florida, because they don't want to risk their national finances in the hurricane-prone state.

Sam Miller, executive vice president of the Florida Insurance Council, also defended the industry's profits. While companies made about $2.75 billion in profits selling homeowners insurance in Florida last year, he said, they lost a total of $15 billion as hurricanes pounded the state in 2004 and 2005.

"If they don't make money in the good years, they won't be around to pay their claims in bad years," Miller said.

Senators are slated to take up a bill today that deals with the subsidiaries and another Crist proposal that would allow the state-backed Citizens Property Insurance Corp. to compete more freely with private insurers.

The Citizens changes have drawn most of the attention as lawmakers have debated the bill in committees. But the issue dealing with subsidiaries reflects the frustration of many property owners and lawmakers as insurance rates have soared.

Crist has tapped into that frustration, regularly criticizing the insurance industry.

Last week, for example, he said the industry is "very tenacious, and they are relentless."

"They work very hard, to their credit, but not necessarily to the people's credit, to try to get an opportunity to raise rates, to make more money," Crist said, "and they've made a lot of money."

Factoring in property insurance and a variety of other types of coverage, such as auto and workers'-compensation insurance, companies nationwide made $63.7 billion in profits in 2006, according to a recent report from the industry-backed Insurance Information Institute.

Crist proposed cracking down on Florida-only subsidiaries when lawmakers met in a special session earlier this year to deal with insurance issues. But lawmakers did not ban the creation of the subsidiaries, which are known in the Capitol as "pup" companies.

Legislative staff analyses echo some of the arguments of insurance-industry officials, with a Senate analysis saying a ban on new pups "could limit the availability of residential property insurance in Florida."

But Sen. Rudy Garcia, a Hialeah Republican who is sponsoring the Crist-backed bill, questions the industry's claims that national insurers would not come into the state.

"If they would respond or make that statement under oath, then I would believe it," Garcia said.


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