Law strives to please all sides

The generally consumer-friendly insurance bill that was passed Friday also contains a few good tidbits for insurers.

Article Courtesy of The Miami Herald

Published  May 8, 2007

By most measures, the insurance bill lawmakers passed Friday is consumer friendly.

But there are a few provisions in the new law that make insurers happy -- and some they really don't like.

Insurers, especially companies with national operations, aren't thrilled that the state will prohibit the future formation of Florida-only subsidiaries after Jan. 1, 2008. The existing subsidiaries, such as Allstate Floridian and State Farm Insurance of Florida, are grandfathered in.

But starting next Jan. 1, these existing subsidiaries will have to include information about the profits of their parent companies in their rate filings.

''No other state has made such a requirement,'' said Sam Miller with the Florida Insurance Council. ``Unfortunately, the Legislature and Gov. Crist see the industry as the enemy. In other states, lawmakers are working with the industry.''

Still, the bill offers ''a few technical goodies,'' said Mark Delegal, lobbyist for State Farm Insurance.

For instance, the law reinforces lawmakers' and consumers' wishes to make sure residential claims are paid in 90 days.

The requirement now includes claims from condominium unit owners and associations.

But insurers did get a break on commercial claims. Small businesses -- those with under 10,000 square feet -- must have their claims adjusted in 90 days as well. But companies have more time to work on claims from small outlets of national chains or larger businesses.

Small insurers, usually those with less than $25 million, once again can buy additional back-up insurance from the Florida Hurricane Catastrophe Fund. The additional reinsurance would allow these firms to maintain their current book of business.

The new insurance law gives Citizens Property Insurance, the state-run insurer, leeway to more directly compete against the private insurers. And homeowners can choose to stay with Citizens if they received a new policy or a renewal from a private insurer whose rates are more than 15 percent higher than the state-run company.

Private insurers aren't keen on losing business to Citizens.

''We're criticized for not writing policies. But we're writing where we can,'' said Miller.

Indeed, there are about 6 million homes in Florida. Citizens has nearly 1.3 million policies on its books. The rest are insured by private companies.

Lawmakers as well as industry officials worry that allowing Citizens to take on more policies -- at a time when its rates will be frozen through 2008 -- could mean greater assessments for all Florida policies if there's a massive hurricane and the state-run insurer's reserves are depleted.

The massive insurance bill passed during the special legislative session in January broadened Citizens' assessment pool to include all property/casualty policies, except medical malpractice and workers comp.

The benefit is that with a big pool, the surcharges tacked on to a policy are smaller. However, the downside is that every policy is hit, so consumers with home policies and auto policies will pay twice. Citizens policyholders are surcharged as well.

''The industry recognizes that some rates are unaffordable and some of this might be unavoidable. But to folks who aren't in Citizens, it's hard to accept,'' added Miller.