Higher risk buys lower premium

Article Courtesy of The St. Petersburg Times

Published  December 7, 2006

TALLAHASSEE - Looking to lower insurance costs, members of the Florida House want to give homeowners the option to take on more risk for rebuilding after a hurricane.

House leaders said Wednesday that they reached a general agreement on three proposals to address the state's insurance crisis, including allowing homeowners to opt out of certain coverage or increase the deductible they must pay after a storm before an insurance company pays a claim.

The House also wants to make it easier for insurers to buy reinsurance from the state and to pump more state money into helping homeowners harden their property against hurricanes.

The House plan offers the first formal glance of what legislative leaders will pursue when they convene in a special session Jan. 16. Neither the Senate nor Gov.-elect Charlie Crist has been as specific.

"People want more options," Rep. Don Brown, R-DeFuniak Springs, said at the conclusion of a three-day House workshop on insurance. Brown will play a key role in crafting the final House plan.

But House leaders wouldn't commit Wednesday to helping to halt a 56 percent rate hike anticipated March 1 for homeowners who buy windstorm coverage from Citizens Property Insurance.

Both Crist and prominent state Sen. Jeff Atwater, R-North Palm Beach, said Tuesday that they want to repeal the state law that requires the hike.

House Speaker Marco Rubio, R-Miami, said Citizens' board, meeting today in Gainesville, shouldn't approve a rate hike request given the upcoming special session.

Rubio stopped short, however, of saying he'd support repealing the state law forcing the hike.

House leaders are more direct, however, in pursuing what they see as a key fix to the crisis: increase insurers' access to the state reinsurance fund.

Reinsurance is an added layer of insurance bought by insurers, and the state fund sells it below market rates. Officials assume greater access would result in lower premiums.

One catch: House members are divided on how much additional reinsurance to offer and at what price. If the cost is higher, fewer savings could be passed on to consumers.

House Democrats on Wednesday outlined an alternative direction, calling for creation of a Hurricane Self Insurance Fund, in which the state would assume part of the risk for all residential and business property.

Republican leaders have countered that they want less state involvement, not more, in the insurance market.