Insurance crisis will be a tough test for legislators

Lawmakers will head back to Tallahassee in January to seek solutions to the

state's insurance crisis in a special session, but rate relief isn't yet on the agenda.

Article Courtesy of The Miami Herald

Published  November 30, 2006

Lawmakers will trot back to the state capital in January, aiming to craft some fixes for Florida's widening insurance crisis.

The special legislative session will likely be the first big test for Florida's next governor, Charlie Crist.

But consumers and business owners, struggling with soaring property insurance rates and limited options, are not sure that real relief will emerge.

''People will not be able to afford the maintenance on their homes and condos, business owners will not be able to carry insurance, and banks will foreclose on many properties,'' said Denis Weinberg, a cardiologist in Miami Beach. ``We need relief.''

Weinberg has been searching for two months for a young doctor to fill a slot in his medical group, but none can afford to live in South Florida.

So far, Crist's insurance reform proposals, such as requiring all insurers to offer homeowners coverage, haven't found much traction in Tallahassee. But Erin Isaac, a spokeswoman for Crist, said the governor-elect was open to other ideas.

Gov. Jeb Bush, who will have ended his eight-year reign two weeks before the session starts Jan. 16, already has put out a 180-page bill that embraces many of the solutions proposed by an insurance reform task force earlier this month. They include allowing higher deductibles and letting homeowners go without hurricane coverage if they can't afford it.

House Speaker Marco Rubio, who spoke briefly Wednesday to 50 House members gathered for training, told them that he hopes that Democrats and others will come to town armed with their own ideas on what to do.

''Now is the time to say something or forever hold your peace,'' Rubio said.


The Democrats, who have their own competing proposals on how to solve the insurance crisis, applauded the planned special session -- but questioned why lawmakers have to wait until January.

''This is ridiculous,'' said Rep. Jack Seiler, a Wilton Manors Democrat. ``We've got people waiting for relief. We should be in session next week.''

Homeowners are demanding affordable coverage.

Gary Bellows, a Fort Lauderdale homeowner, said the first step in making insurance more affordable is to ``scrap that insane and outrageous law that was passed last year.''

Yet, in the proposals floated so far, there is no mention of eliminating the problematic provision in Florida's new insurance law that would soon double rates for many policyholders covered by Citizens Property Insurance, the state-run insurer.

Dealing with the insurance law that requires Citizens to increase rates to accumulate enough reserves to cover claims from a once-in-70-years storm will top Bruce Douglas' agenda in January.

Douglas, the chairman of Citizens' board of governors, would like to see legislators change or eliminate that provision.

Without any action, Citizens could raise rates nearly 56 percent on all of its windstorm policies starting in March. That's on top of another increase already approved for January.

The task-force recommendations are likely to be discussed during the session, legislators say. Several of the measures could make insurance more affordable -- but they would also transfer more risk to homeowners.

Among them are allowing homeowners to set their own deductibles, possibly considerably higher than the 10 percent maximum now permitted; letting consumers buy just enough insurance to cover their mortgages; and selling policies without windstorm coverage, which is the most expensive portion of coverage nowadays.


But the solutions put forth so far fall short of dealing with massive policy cancellations. Since June, insurers have dropped thousands of business policies, and for most businesses, there is no insurer of last resort.

Insurance industry officials generally welcome a proposal to allow insurers to buy more reinsurance -- basically insurance for insurance companies -- from the Florida Hurricane Catastrophe Fund.

Yet, having the catastrophe fund take on a bigger role, or creating a state fund to cover an initial layer of losses, as the Democrats propose, means that the state government takes on more insurance risk and could lead to higher future assessments, said Mark Delegal, a Tallahassee lobbyist for State Farm.

After the 2005 hurricanes, the catastrophe fund suffered a $1.35 billion shortfall. Making it up fell to nearly all policyholders in the state.

''There are no easy fixes,'' Delegal said.

Coming just 14 days after Crist's swearing in, the special session will amount to the first big leadership test for the new governor, as well as for new legislative leaders and the incoming chief financial officer, Alex Sink.

The stakes are high. A political moderate who takes few risks, Crist is plunging into one of the most high-profile and complicated issues facing the state. He has little choice. Poll after poll shows that hurricane insurance tops voters' list of worries.

During the campaign, Crist offered proposals that sounded appealing to many voters: Require companies that offer auto insurance to also sell homeowners policies, and stop insurers from creating financially vulnerable Florida-only subsidiaries.

Those proposals never made it into the task-force recommendations.

Legislative leaders insist that they haven't ruled out all of Crist's ideas. But Sen. Bill Posey, a Rockledge Republican who has been tapped to lead the Senate Banking and Insurance Committee during the special session, cautioned: ``I don't think in special session we will be able to wade through and get consensus on every item.''

Posey said there are some items that he believes legislators are ready to move on right away, including a statewide building code.

Indicative of the monumental task ahead of them, Rubio called all House members to a three-day ''insurance conference'' next week so they can be grounded on the insurance business that he conceded he knows little about.

Insurance proposals

Among solutions that could be discussed at a special session on the insurance crisis that starts Jan. 16:

 Eliminate a problematic provision in Florida's new insurance law that would substantially increase rates for Citizens Property Insurance policyholders in March.

 Let homeowners forgo hurricane insurance if they wish and buy just fire, theft and liability coverage.

 Allow higher deductibles and let consumers buy just enough insurance to cover their mortgages.

 Make insurers provide uniform discounts for hurricane mitigation measures.

 Allow insurers to buy more reinsurance from the Florida Hurricane Catastrophe Fund, which is cheaper than the private market. Pass savings to consumers.

 Require companies that offer auto insurance to also sell homeowners policies, and stop insurers from creating financially vulnerable Florida-only subsidiaries.

 Adopt a strict statewide building code similar to what South Florida already uses.