Outlook dim for across-the-board

25% cut in home insurance rates

Article Courtesy of The Sun Sentinel

By Mark Hollis and Linda Kleindienst
Published  January 19, 2007

TALLAHASSEE · Whether to expand Citizens Property Insurance Corp. and also guarantee its policyholders a major rate reduction was the major sticking point Thursday as Florida lawmakers eased into final negotiations on measures to stop the state's insurance crisis.

The keenest debate as the Florida Legislature's special session moved into its decisive days was over a plan to freeze Citizens rates at the Dec. 31, 2006 level for all of 2007.

The proposal delivers at least 25 percent savings for Citizens customers living in "high risk'' zones east of Interstate 95 in South Florida. But other Citizens customers -- mainly those west of I-95 -- might see a rate cut only half that size.

Gov. Charlie Crist was pushing for a minimum guarantee of a 25 percent drop in the premiums of all Citizens' 1.3 million policyholders, in addition to similar savings for Florida homeowners covered by private insurers.

"I must sound like a broken record but that's the thing I'm most concerned about, that we have broad, sweeping lower rates," Crist said Thursday. "However we get there, I just want lower rates for the people.''

But some high-ranking legislators questioned whether such savings were possible under the bills being considered in the House and Senate that would rescind two separate price hikes by Citizens.

"The governor is saying he wants 25 percent across the board [rate cuts for every Florida homeowner] and my assumption is he wants that for Citizens, too,'' Rep. Ellyn Bogdanoff, R-Fort Lauderdale, said. "We'd have do more than we currently have on the table to accomplish that.''

Slashing Citizens prices, according to some legislators and lobbyists for private insurance companies, could leave the state-run insurer dangerously underfunded if another hurricane were to slam into Florida. Lowering prices now, they warned, would only make a far bigger rate increase necessary in 2008.

"It would be like holding our breath for a year,'' said House Democratic Leader Dan Gelber of Miami Beach. "It's very dicey policy.''

Besides balking at guaranteeing savings for Citizens customers on the scale sought by Crist, Republican and Democratic leaders in the state House of Representatives were fretting over proposals that would likely swell the ranks of homeowners covered by the state-run insurer.

Such expansion would almost certainly result from those Senate plans, supported by Crist, that would revoke a current legal requirement that Citizens rates be higher than the premiums charged by the state's top 20 private insurers. The new plans would allow Citizens to sell more types of coverage in high-risk zones, including areas in South Florida near the ocean. Currently, Floridians there can only buy insurance from Citizens for windstorm damage, and must go to private insurers for policies against fire and theft.

"The more we make Citizens competitive, the more we give them an opportunity to have lower rates, not be the insurer of last resort or the one with the highest rates, to be more competitive, to offer other types of insurance…the better off it's going to be for the people,'' Crist said.

State Sen. Jeff Atwater, R-North Palm Beach, said Citizens officials had told him that if they sell "multi-peril'' policies, they can drop premiums in South Florida by 20 to 29 percent.

But Sam Miller, executive vice president of the Florida Insurance Council, an industry trade group, objected that the changes would spell lower earnings and profits for private insurers, making the Florida market even less attractive for the companies he represents.

Many Florida House members, including House Speaker Marco Rubio, R-West Miami, and Rep. Jack Seiler, D-Wilton Manors, said they think the idea of allowing Citizens to sell more policies ought to be further studied and considered during the regular legislative session that begins in March.