Legislators narrow proposals in hopes

of reining in costly home insurance

Article Courtesy of The Sun Sentinel

By Mark Hollis
Published  January 11, 2007


TALLAHASSEE--Florida lawmakers came closer than ever Wednesday to agreeing on an exit strategy from the state's property insurance crisis: legislation that would deliver potential savings to homeowners, but also force taxpayers to shoulder more risk of massive hurricane losses now assumed by private insurance companies.

Gov. Charlie Crist will unveil his own proposals this morning. They are expected to mimic many of the Legislature's recommendations.

While much uncertainty exists about what savings would reach consumers' pocketbooks from any of the proposals, one likelihood is the state's Hurricane Catastrophe Fund will be substantially expanded and new financial relief will go to insurers and then could be passed along to consumers.

But none of the legislative proposals being readied for a seven-day special session on insurance that is to begin Tuesday guarantees a rate cut for the four out of five homeowners statewide covered by private insurers.

Whatever is approved, South Floridians are likely to be among the chief beneficiaries. With about half of its customers in Broward, Palm Beach and Miami-Dade counties, Citizens Property Insurance Corp., the state-backed insurer of last resort, could be reorganized and its rates frozen.

House Republicans have filed bills that would oust members of the oversight board of Citizens and halt major price increases. They also would freeze Citizens' rates at 2006 levels and revoke changes legislators made last year that would drive Citizens rates even higher.

Key to a group of House bills is a proposal requiring private insurance companies that purchase low-cost reinsurance from the state to pass along savings to consumers. House leaders said the measure would mandate at least a 25 percent overall savings for those consumers, but the proposals include a number of loopholes that could reduce those savings or block them altogether.

Overlooking those loopholes, Rep. David Rivera, a Miami Republican who represents parts of Broward County, said legislators are "calling insurance companies' bluff. Now they (insurance companies') have to put their money where their mouth is.''

Without being specific, House Speaker Marco Rubio acknowledged there probably are shortcomings with the House legislation but said there are enough pro-consumer elements to the property insurance package to please Floridians who have suffered double- and triple-digit premium increases in recent years.

"We understand some of the risks inherent in some of the measures that we're taking,'' said Rubio, a Republican from West Miami. ``But we understand the realities of what this (insurance crisis) is doing to our economy, if we do nothing or we allow what exists now to continue.''

A new Senate proposal unveiled Wednesday calls for a cap of about $20 billion on claims insurance companies would be required to pay, if a big storm hits the state. Taxpayers would be responsible for picking up the tab if the costs rise above the cap. Computer models used by the Senate indicate a storm that big is expected only once in 50 years.

"What insurance companies need is predictability. If we tell them we are capping their maximum exposure for the storm that is unlikely to ever hit in anybody's lifetime, they indicated they are willing to come up with dramatic rate reductions,'' said Senate Democratic leader Steve Geller, of Hallandale Beach, who proposed the liability cap.

Senate leaders say a state promise to help pay for a big storm would lower the amount of expensive reinsurance that insurance companies now purchase, bringing down rates for homeowners and encouraging more private insurers to return to the state.

"Insurance companies are tripling their rates because they're afraid of the big one," said Senate Insurance Committee Chairman Bill Posey, R-Rockledge.The insurance lobby reacted guardedly to the proposals, offering few public comments. But Guy Marvin, president of the Florida Insurance Council, an industry trade group, warned against any action by the Legislature that could punish insurance companies.

"The insurance industry is not the enemy,'' he said. `"Hurricanes are the enemy. ... Insurance companies met their end of the bargain by paying out $35 billion in claims (after the 2004 and 2005 hurricanes).''

Earlier in the week, Sam Miller, also from the state insurance council, cautioned against legislative strategies to lower premiums, saying consumers could face higher costs after a catastrophe if special assessments on insurance policyholders are needed to make up a deficit in Citizens' accounts or the Florida Hurricane Catastrophe Fund.

Provisions in the Senate bill would slice 25 percent off Citizens customers' insurance bills, said company spokesman Rocky Scott. One of those provisions would allow the state-backed insurer to issue full homeowner policies in "high-risk'' areas, which in South Florida generally include people living east of Interstate 95.

Customers living outside the high-risk area also could save money on their premiums, though the company does not have estimates on their potential savings should the Senate bill pass, Scott said.

Major components of the House and Senate bills would eliminate many of the provisions of the insurance law passed in the final minutes of the 2006 legislative session last May. For instance, a provision of the Senate bill would remove the legal requirement that Citizens raise rates dramatically by March so it would have cash on hand to pay future claims from storms.

"Circumstances have changed dramatically,'' Rubio said, referring to the turnabout by the Legislature.

Democrats, who are in the minority in both chambers, gave tentatively rosy assessments of the proposals.

"There really doesn't seem to be a philosophical divide,'' House Minority Leader Dan Gelber, D-Miami Beach, said. "What you have here (in the House plan) are a number of things we (Democrats) have been talking about ... It's a pretty good first step.''