Senate expands Citizens insurance, freezes rates

The Senate amended a bill to expand the state-run insurer,

adding back the provision to freeze rates through 2008.

Article Courtesy of The Miami Herald

By Beatrice Garcia
Published May 2, 2007

As the debate opened in the Senate on a bill to allow the state-run insurer to expand its operations, lawmakers added a provision that would freeze rates through 2008.

Continuing the rate freeze that's now scheduled to end Jan. 1 would be a good turn of events for policyholders of Citizens Property Insurance.

''The Florida Senate has stepped up to the challenge to provide affordable insurance,'' said Sen. Rudy Garcia, the Hialeah Republican who sponsored this bill.

But a few senators worried that the insurer would take in less in premiums and possibly have lower reserves with which to pay claims after a massive storm.

Extending the rate freeze for another year could cost Citizens about $350 million, according to Citizens' spokesman Rocky Scott. But he warned the final number could be higher as Citizens takes on more policies.

Another change in the bill is to allow homeowners to choose a Citizens policy if their coverage by a private insurer is at least 15 percent higher than the state-run company. Both changes were approved by the Senate Banking and Insurance Committee Tuesday. Senators hope to send the bill to the House.

A number of state senators as well as representatives have been keen on requiring the subsidiaries of national companies that operate only in Florida-based insurers to consider their parent companies' profits in rate filings here.

There was an attempt to take this provision out of the bill, but it failed.

''This is the heart and soul of the bill,'' said Garcia.

The Senate bill also now requires insurers to pay all claims in 90 days, including those from small businesses.

This bill has the backing of Gov. Charlie Crist, who believes that giving Citizens the ability to compete more readily with private insurance firms would eventually lead to lower insurance rates. Crist is betting that private insurers might be inclined to nudge their rates down to keep from losing policyholders to Citizens.

Sen. Carey Baker, R-Eustis, pushed forward an amendment that would make it easier for homes valued at more than $1 million to find coverage with a private insurer or in the surplus lines market, which isn't regulated by the state.

If these homeowners are turned down by one private insurer and three surplus lines companies, they could remain with Citizens.