House proposals would lower rates

Legislators offer increased subsidies to private insurers to revive the battered property insurance market.

Article Courtesy of The Miami Herald

Published  January11, 2007

Property insurance rates will drop for the first time in years and lawmakers will offer record levels of government subsidies for private insurance if Florida legislators fulfill the promise of the proposals they announced this week.

House leaders unveiled six bills Wednesday that follow the Senate's lead and freeze rates for customers of the Citizens Property Insurance for one year while offering private companies easier access to state-subsidized backup insurance. Insurers claim easier access will allow them to reduce rates by as much as 25 percent.

In the Senate, Minority Leader Steve Geller of Hallandale Beach announced a bipartisan plan that aims to lower rates by 33 to 40 percent by having taxpayers pay for unprecedented hurricane losses in which damage exceeds $20 billion.

The proposals will be taken up in a seven-day special session to deal with Florida's insurance crisis that begins next week.

They are a major about-face for the Republican-led Legislature, which has opposed expanding state subsidies for insurance, paid for by assessments on insurance policies. A similar proposal offered by Democrats in October 2005 was derided by House Majority Leader Andy Gardner as 'socialization of homeowners' hurricane insurance.''

Now both the House and Senate plans use the state Hurricane Catastrophe Fund to provide insurance at below-market prices to private insurers after they pay some claims on their own -- up to $2 million in the House bill and $3 million in the Senate's.

The House would require any company buying the low-cost state reinsurance to pass on savings to consumers by lowering rates at least 25 percent. The Senate requires that companies also pass on the savings after a formal rate review.

House Speaker Marco Rubio conceded that the House proposal was ''80 percent from the Democrats'' and the shift in thinking is a product of changing times.

''We are looking at a time of extraordinary crisis in property insurance and the impact this has on the economy is widespread,'' Rubio said. ``We meet every year. Things change. Circumstances change.''

Gov. Charlie Crist, who has said he would veto any insurance bill that does not lower rates, said he was optimistic by the new approaches.

''I'm very encouraged by the shift in the tone that I've seen, too,'' he said.

The draft House bills are a hybrid of proposals that have emerged from House Republicans, House Democrats, as well as suggestions pushed by Crist or the insurance industry.

Absent from the House plan is a Senate proposal to expand Citizens, the state-run insurer, so it could spread its risk and better compete with the private insurance market by letting it write more than just windstorm insurance.

Citizens officials said policyholders could save about 25 percent if the company was allowed to write expanded coverage.


Another provision -- eliminating the requirement that Citizens charge premiums that are above rates charged by the top 20 private insurers in Florida -- also could lead to lower rates, they said. Crist said he is leaning toward supporting the Senate approach. But Rubio was adamant that the House is not ready to go that direction -- at least next week.

''Before you expand the scope of what Citizens can do, first you've got to fix the inherent problems,'' Rubio said. ``I'm not sure a seven-day special session gives us enough time to do that.''

Rep. Dan Gelber, the House Democratic leader from Miami Beach, said he was ''heartened and encouraged'' by the House plan. ``There really doesn't seem to be a philosophical divide right now. . . . This is a pretty good first step.''

Unlike the Senate, the House embraces two ideas pushed by Crist during his election campaign in a bill that will be sponsored by Miami Rep. David Rivera and Rep. Denise Grimsley of Lake Placid.

They want to require insurance companies to factor in national profits when their Florida subsidiary requests a rate increase and prohibit the creation of future ''pup'' companies, in which national companies create subsidiaries that can isolate their losses to Florida.

''Those are pro-consumer issues, and they are important to the governor,'' Rubio explained. He added that while they may not encourage new companies to come into Florida, they are among the ideas intended to provide a short-term fix in a crisis situation.

''Our goal is 10 years from now, you won't need a Citizens anymore,'' he said.

The House plan also adopts Crist's proposal to ban the practice of ''cherry-picking,'' when an insurance company writes homeowners policies in other states but only writes other lines of insurance in Florida.

Both the House and Senate includes provisions to allow homeowners to receive credits on their insurance bills for strengthening their homes from wind damage and include the Panhandle in the statewide building code.


While the Senate expands Citizens, the House saved it harshest criticism for the state-run company.

''Citizens has been so mismanaged that it has lost sight of its responsibility to the people of the state of Florida,'' said Rep. Ellyn Bogdanoff, a Republican from Fort Lauderdale who is sponsoring the Citizens package. She called for a ''top-to-bottom reorganization'' that will begin with dismantling the agency's board and top management.

Both the House and Senate also propose a rollback of Citizens rates to 2006 levels through January 2008 and would remove the requirement that Citizens have the highest rates in the region. The House would also ban Citizens from covering homes in wind-prone coastal areas.