Legislature begins special session on hurricane insurance

Article Courtesy of The Sun Sentinel

Published  January 16, 2007

TALLAHASSEE -- Angry and worried homeowners and businesses who can't afford doubling and tripling premiums for property insurance may get some relief, as lawmakers begin a weeklong special session Tuesday aimed at lowering rates.

The problem has been growing since 2004, the first of two bad hurricane seasons that cost insurers more than $30 billion in Florida. But lawmakers have resisted measures in recent years that would quickly cut rates, which the industry says could simply exacerbate the problem by driving more companies out of the state.

Several big insurers have already shed hundreds of thousands of policies, leaving many Floridians with only one option. That option is the state's expensive last resort insurance company, Citizens Property Insurance Corp., which itself hasn't had enough money to pay its claims and has seen its own rates spiral beyond affordability for many customers.

Lawmakers this time are promising to cut rates for at least some customers, after months of bombardment from homeowners angry about spiraling rates even after the calm 2006 hurricane season and worried they won't be able to continue to afford to live here.

"Remember those old black and white movies _ 'Frankenstein' _ where the villagers with the pitchforks and the torches were marching on the castle?'' asked Sen. Steve Geller, D-Cooper City. "If we don't pass something to reduce insurance rates this week, they're going to march on Tallahassee. And you know something? We would deserve it.''

In fact, about 100 angry homeowners showed up Tuesday for a rally in Tallahassee to urge lawmakers to help them, albeit without pitchforks. For Key West resident Terry Eibert, the rising cost of staying in her island home has meant sacrifices in other areas.

``We've had to go down to one car, we had to cut some health insurance benefits,'' said Eibert, who has seen her Citizens annual premiums rise from $3,000 to $10,000 for $250,000 worth of coverage.

The Republican-dominated Legislature is also under pressure from Florida's new governor, Charlie Crist, who has said that any bill lawmakers pass must appreciably lower rates. Crist has forcefully criticized insurance companies and campaigned on the issue last year.

"I'm optimistic that by the end of this session we'll have lower rates for the people of our state,'' Crist said Tuesday. Under plans lawmakers will consider this week, Citizens customers would get a rate cut for sure. Separate bills written by the House and Senate both call for Citizens to skip a planned rate increase and roll back one customers were hit with this year. The plan would put Citizens rates at last year's levels for at least another year.

Also under consideration is a proposal to put the state, rather than private insurance companies, more on the hook for the biggest losses. Under a Senate proposal, the state would guarantee that it would pick up more of the risk if there is a huge storm like Hurricane Katrina. That, in theory, would let insurers know what their ultimate risk would be and spur them to stay in the state and keep rates lower because they wouldn't have to be prepared for an enormous loss.

Other proposals would allow homeowners to lower premiums by buying less coverage. For example, they could insure the home only to the value of what they owe the bank, rather than the full replacement cost. Or they could choose a much larger deductible.

Another plan being pushed in the House would prevent national insurance companies from setting up Florida-only subsidiaries. The Florida-only companies have been able to raise rates based on Florida losses without consideration of the national company's profits.

The House also proposes to require companies that sell homeowners insurance in other states but not Florida to sell it here if they want to sell other types of coverage such as auto insurance.

Also on the table is a proposal to make it easier for insurance companies to tap into an existing state backup fund, the Florida Hurricane Catastrophe Fund. The fund provides reinsurance _ backup coverage they buy to protect them against giant losses _ at a much lower cost than private reinsurance. Insurers say reinsurance is one of the biggest things driving up premiums.

Meanwhile, in Washington, two Florida congress members are pushing an effort to create a federal catastrophic backup fund, which would provide additional reinsurance to insurers, also at a lower cost than what they pay in the private market. U.S. Reps. Ginny Brown-Waite, R-Brooksville, and Vern Buchanan, R-Sarasota, say the savings would have to be passed on to consumers under the plan.

That is similar to the state Legislature's proposal, which would require companies that save money on reinsurance by getting more coverage from the Catastrophe Fund to pass on the savings to their customers.