Crist offers freeze of new rate hikes

Article Courtesy of The Palm Beach Post

By Randy Diamond
Published  January 30, 2007

Newly elected Gov. Charlie Crist has submitted an emergency order that would prevent homeowners insurance companies from seeking new premium hikes for as much as five months.

The order, which comes before the state's Financial Services Commission today, is expected to be approved. Crist sits on the commission, along with Florida's attorney general, chief financial officer and agriculture commissioner.


Highlights of Crist's proposed order

Previous emergency orders

Emergency orders regarding insurance are rare. Here are two examples:

Prevents insurers who have not already requested a rate hike from imposing new hikes before upcoming rate cuts.

Restricts non-renewals or cancellations by insurance companies until the new law is implemented, likely by June 1.  In November 2004, after Hurricanes Frances and Jeanne, Gov. Jeb Bush prevented insurers from non-renewing policies on damaged homes until 60 days after repairs were completed.

In October 2005, Insurance Commissioner Kevin McCarty ordered a 90-day freeze on policy cancellations or non-renewals after Hurricane Wilma.

The emergency rule would prevent insurers from instituting premium increases before the rate rollback deadline of June 1. It would not affect more than 40 companies with pending rate-change requests.

The reductions are the centerpiece of the legislature's plan, which coalesced during a special session this month, to cut premiums by an average of 22 percent statewide, except for customers of Citizens and State Farm, who will receive smaller cuts.

Those cuts won't take place until insurers file revised rate schedules that reflect their savings from buying reinsurance - insurance for insurance companies - from an expanded state-funded reinsurance pool.

The order also would stop cancellations or non-renewals of policies before the premium reductions, except where the homeowner had failed to pay his bill or engaged in fraud.

In a letter sent Monday to Kevin McCarty, commissioner of the Office of Insurance Regulation, Crist wrote that allowing rate increases while the new law is being implemented ''threatens the public health, safety and welfare of our residents.''

McCarty could not be reached for comment.

Crist also stated that allowing insurers to continue widespread cancellations could "further destabilize the market." Hundreds of thousands of Floridians have lost coverage in the past few years as companies scaled back or abandoned the Florida property insurance market.

''As the 2007 hurricane season approaches, it is essential that property insurance becomes and remains more available and affordable,'' Crist wrote.

The governor's emergency order would not require insurers to sell policies. Many Florida residents have found no one willing to 

write insurance policies for them, except for the state-sponsored Citizens Property Insurance Corp.

More than 40 homeowners insurers have filed for rate changes in the past month, according to the Web site maintained by the state Office of Insurance Regulation. The companies include Tower Hill Select, Tower Hill Preferred, Universal Property & Casualty and First Floridan Auto & Home.

It was unclear late Monday how many of those were rate increases and how many were requests for approval to impose various surcharges.

A number of surcharges have been levied on policyholders in the past year to offset costs associated with the insolvency of the three insurance companies run by Poe Financial Group, for hurricane losses at Citizens and to bolster the state's Hurricane Catastrophe Fund, which was depleted by the 2004 and 2005 storm seasons.

Rate hikes are subject to rejection by state insurance regulators, though insurers can temporarily bypass the regulatory process and raise premiums without approval.

However, if regulators later determine the hikes were improper, they can order a company to reduce those rates and provide customers with refunds. That provision, known as "use and file," will be suspended for two years once the state's new rate-reduction act goes into effect.

The news was not met with joy by representatives of the insurance industry, some of whom accused Crist of grandstanding.

William Stander, regional executive vice president of the Property Casualty Insurers Association of America, said insurers had not been notified of the emergency order.

''Obviously they are more interested in getting a story in the newspaper than in letting us know about it,'' Stander said. He said insurers know that Crist and the legislature want to reduce rates and are working toward that goal.

Crist's order also does not affect the six insurers whose rate hikes have been rejected by insurance regulators and that have filed for binding arbitration.

Arbitration hearings begin today for the first of those insurers, Home Wise Insurance Co. Under the "use and file" rules, the company put into effect a 75.8 percent rate increase on Aug. 15. The hike was rejected by regulators in October, but Home Wise officials filed for the arbitration, so policyholders have not received refunds.

A three-member arbitration panel will determine whether the rate increase is valid after a multiday hearing.

The plan approved by lawmakers and signed into law by Crist last week also suspends new arbitration hearings for two years. Insurance regulators have maintained the arbitration hearings are biased toward the industry.