State Cabinet issues emergency order freezing home insurance rates for 90 days

Article Courtesy of The Sun Sentinel

By Mark Hollis
Published  January 31, 2007

TALLAHASSEE Throwing another hard jab at the property insurance industry, Gov. Charlie Crist on Tuesday persuaded his fellow Florida Cabinet members to pass an emergency order preventing homeowner insurance companies from canceling policies before December.

The emergency rule also freezes insurance rates for the next 90 days while companies prepare rate adjustment requests that take into account the steep savings they should get under a insurance law Crist signed last week.

The rate freeze most immediately affects more than 250,000 customers of Nationwide. The company -- with more than 29,000 policies in Palm Beach County and another 13,000 in Broward county -- has an arbitration hearing pending because state regulators rejected its request for a 71 percent rate increase last year. Lobbyists for Nationwide said it now appears the company will have to keep existing premiums as they are until at least December.

The order was approved despite strident objections raised by insurance industry lobbyists and concerns from state Chief Financial Officer Alex Sink and Agriculture Commissioner Charles Bronson, who both said the rule could put some insurance companies in too much of a financial bind.

But Crist argued forcefully for the order, saying that without it, he feared some property insurers might hurriedly ask state insurance officials for massive price increases or leave policy holders stranded without coverage before legislation he signed last week takes effect in June. That law gives insurance companies access to more and cheaper reinsurance -- money they can use to help pay claims after a major storm -- from the state.

In exchange, the insurers are required to pass along savings to customers. The law is predicted to cut annual property insurance premiums by an average of 22 percent statewide, though the savings will vary greatly depending on the insurance carrier and where a policy holder lives.

The order Crist and Florida Cabinet members put into effect Tuesday stops cancellations or nonrenewals of residential insurance policies before premium reductions from the new law take effect. It allows cancellations only in cases where homeowners fail to pay their bill or engage in fraud.

Crist's push for the immediate ban on policy cancellations comes just days after his retirement-age parents received written notice from their insurer, Tower Hill, that their property coverage would be canceled in April.

"If we don't pass an emergency rule, people are going to get gouged again," Crist said. "Companies could cancel policies, like Allstate did."

Earlier this month, Allstate announced that it would not renew 106,000 Florida policy holders effective in mid-April.

Meanwhile, Sink, a Democrat, and Bronson, a Republican, warned that the emergency order might dissuade private insurance companies from doing business in Florida. But they eventually sided with Crist and Attorney General Bill McCollum, over objections from industry lobbyists.

Guy Marvin, president of the Florida Insurance Council, an industry trade group, said the action will have a "drastic negative impact on the financial statements" of several large insurance carriers. He said insurers occasionally need to cancel policies to avoid carrying too much risk in a given region so that they can offer policies in other parts of the state.

Mark Delegal, a lobbyist for both State Farm Florida and Nationwide insurance companies, told reporters: "These kinds of measures are destroying the insurance market, what's left of it, piece by piece."

Delegal set off a terse exchange with Crist when he told the Cabinet that insurance companies should enjoy "nice profits" so they have the money to pay claims after a storm.

"We don't have a problem with nice profits," Crist shot back. "We have a problem with egregious profits."