Lawmakers demand hearings on insurance rates

Lawmakers and state regulators are calling on the insurance industry to explain

why promised premium cuts haven't materialized.

Article Courtesy of The Miami Herald

Published August 3, 2007

Lawmakers are increasingly demanding answers from the private insurance companies that sell homeowners coverage in Florida.

On Thursday, state Sen. Steven Geller, D-Hallandale Beach, urged Senate President Ken Pruitt to launch hearings, as early as possible, to bring insurance executives to Tallahassee and put them under oath to explain why the promised premium reductions haven't materialized.

''We found that people's stories change when we put them under oath,'' said Geller, recalling the outcome of medical malpractice insurance hearings in 2003.

Like Geller, lawmakers and regulators are miffed that back in January most insurers said higher reinsurance costs were the reason for higher rates on homeowners policies. The new insurance reform bill passed during the January special session allowed insurers to buy lower-cost back-up insurance from the Florida Hurricane Catastrophe Fund. The savings were to be passed on to policyholders, hence the expected rate cuts.

Initially, insurers promised rate reductions in March. But required filings received by OIR in recent weeks are showing hefty increases. Some insurers have used their savings after buying cheaper reinsurance from the state to buy additional coverage in the private market.

Geller said he has discussed this issue with Gov. Charlie Crist, and believes ``if we could come up with new legislation by the time of the special session, the governor would love to include it.''

That could be a challenge since the 14-day special session is set to begin Sept. 18.

Already on Wednesday, House Democratic Leader Dan Gelber asked the governor to add insurance to the special session agenda.

But some insurance executives will be trekking to the state capital nonetheless to do some explaining to regulators.

At least seven insurers will face the Office of Insurance Regulation in less than two weeks to explain to regulators why their initial estimates of rate reductions, ranging from 6.5 percent to 35 percent, have turned into requests for rate hikes of as much as 49 percent.

The companies scheduled for hearings include Amex Assurance, Capitol Preferred, IDS Property Casualty and Metropolitan Casualty.

On Aug. 14, State Farm officials have been subpoenaed to explain the company's ''ambiguous'' criteria for not renewing some 50,000 policies the company deems are in risky coastal areas of the state.

Tom Zutell, an OIR spokesman, said while the department doesn't have the power to keep State Farm from not renewing policies, the manner in which the firm does it and the criteria used does fall under the department's preview. He said underwriting criteria is required to be extremely clear and precise so there ``is no chance of discrimination or misapplication.''

Rep. Dennis Ross, former head of the House Insurance Committee in Tallahassee and one of the two lawmakers who voted against the special session insurance reform bill, said in a letter to Insurance Commissioner Kevin McCarty that expanding the state's catastrophe fund and the state-run insurer, Citizens Property Insurance, weren't the solution to lowering rates.

''These, however, are nothing more than price controls, and history has painfully taught us that this practice will not work in a capitalistic economy,'' he said in his letter.

Insurance relief is also a topic in Washington D.C.

Today, U.S. Reps. Ron Klein and Tim Mahoney plan to introduce a bill in the U.S. House that could help to provide some rate relief by allowing state-sponsored insurance funds to voluntarily pool their catastrophe risk and eventually transfer that risk to the private reinsurance markets.

This isn't the only idea floating around Washington. Last week, a House committee approved a bill that would add windstorm insurance to the national flood program. Under that bill, which hasn't been set for a vote by the full House yet, the hurricane coverage would be available only to homeowners who already have flood insurance.