Governor Still Unresolved on Open Rating Bill; Receives FHCF-Related HB 569 for Action
May 27, 2009
While addressing media members prior to a Cabinet meeting held this morning, May 27, 2009, Governor Charlie Crist commented on House Bill 1171, which is expected to reach his desk by the week of June 1. The Governor stated that he has “not made up his mind” on whether he will sign HB 1171 and added that an unregulated insurance industry is “not very appealing” and “unfriendly to consumers.” The Governor also affirmed his support and confidence in Florida Insurance Commissioner Kevin McCarty after Senator Mike Bennett, the Senate sponsor of the companion bill to HB 1171, had asked for Commissioner McCarty’s resignation in a letter to the Governor last week.
Known as the “Open Rating” bill, HB 1171 would essentially deregulate Florida property insurance rates for certain large insurers.
Media coverage by National Underwriter Magazine that details several national consumer advocacy groups’ objections to HB 1171 is reprinted below.
HB 1171 Related Items of Interest:
- Consumer Federation of America: State Insurance Commissioners to Consider Dropping Consumer Protections in Favor of Industry-Supported Deregulation , 04/14/09
- Sun-Sentinel May 6, 2009 Blog: Consumer advocates ask Gov. Crist to veto home insurance deregulation
Governor Receives FHCF-Related HB 569
Meanwhile, Florida Governor Charlie Crist received HB 569 for action on May 26, 2009. He will have 15 days to sign or veto the bill, otherwise it will become law effective on July 1, 2009 without his signature.
HB 569, which relates primarily to financial instruments insured by the Federal Deposit Insurance Corporation (“FDIC”), also extends the availability of an additional amount of Florida Hurricane Catastrophe Fund (“FHCF”) reimbursement coverage up to $10 million until December 31, 2011 for limited apportionment companies, insurers that purchased such coverage in 2008, and for insurers that qualified for Florida’s Insurance Capital Build-Up Incentive Program. Without this extension, the availability of this coverage would cease on May 31, 2009.
The insurance portion of HB 569 also specifies that the optional coverage retention as provided for limited apportionment insurers and others will be triggered prior to the mandatory coverage under the FHCF reimbursement contract; however, once the limit of the optional coverage is exhausted, the insurer’s retention under the mandatory coverage will apply.
Of note: Similar coverage was offered in 2006, 2007, and 2008 that reimburses an insurer for up to $10 million in losses for each of two hurricanes during those years. As it has been in past years, under HB 569 this coverage will be priced at a 50 percent rate on line (e.g., $5 million premium for $10 million in coverage) with a free reinstatement for a second event. An insurer’s retention for such coverage remains at 30 percent of its surplus.
The non-insurance provisions of HB 569 expand the scope of the applicable Florida law by providing an option for state and local government funds to be deposited into money market deposit accounts and other financial instruments insured by the FDIC. The bill also removes a limitation on the conditions under which local governments can deposit surplus public funds in certain depository institutions. As a result, the range of depository institutions available is increased.
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Media coverage from National Underwriter on HB 1171
Fla. ‘Consumer Choice’ Bill Angers Consumer Groups
By PHIL GUSMAN
Published 5/26/200 NU Online News Service, May 26, 3:38 p.m. EDT
A Florida bill that would allow some insurers to charge rates above those approved by the Office of Insurance Regulation provided they meet certain capital requirements has drawn the ire of consumer groups.
In order to charge rates above those approved under H.B. 1171-also called the “consumer choice” bill-a carrier must have a surplus of at least $200 million and a ratio of net written premium to its surplus of no more than 2-to-1.
The consumer groups drafted a letter earlier this month urging Governor Charlie Crist to veto the measure, as did Florida Insurance Commissioner Kevin McCarty.
Commissioner McCarty and the consumer groups contend the bill would not make the Florida insurance market more competitive, and would instead hurt consumers by sending rates spiraling upward.
Commissioner McCarty said the 2004 and 2005 hurricane seasons resulted in dramatic increases in homeowners insurance rates. Since then, H.B. 1A was passed in Jan. 2007, which lowered rates by an average of 15.9 percent.
“H.B. 1171 will reverse the trend begun by H.B. 1A by exempting certain insurers from a determination that their rates are ‘excessive or unfairly discriminatory,'” Commissioner McCarty wrote. He said significant and unpredictable rate increases could result.
He further noted the bill will affect emerging Florida domestic companies by treating them differently than other established companies that meet the bill’s requirements.
“Largely because of this new capital [from new Florida domestics], more than 400,000 policies were taken out of the state-run Citizens Property Insurance Corporation in 2008, reducing its exposure by more than 20 percent,” Commissioner McCarty’s letter said.
The consumer groups-consisting of Consumer Federation of America, Center for Economic Justice, United Policyholders and Consumer Watchdog-said consumers are already at a disadvantage when shopping for insurance. “Normally, if a seller of a product asks too much for it, the consumer can walk away,” they wrote. “But home insurance is not like that. Lenders require maintenance of hazard insurance as a condition of keeping the mortgage effective.”
This bill, they noted, puts them at an even greater disadvantage while allowing insurers to hike rates.
But Julie Pulliam, spokesperson for the American Insurance Association (AIA), said she does not understand how consumers could be hurt because they would have the choice to go with a company that is operating under the bill or one that is not. “So consumers are in the driver’s seat here,” she said.
While the consumer groups argued that, given the option, all insurers would choose to operate under the bill and therefore charge rates that are not regulated, Ms. Pulliam said insurers have to meet certain requirements to operate under the bill, and some companies may choose not to do that. Additionally, she said consumers could always go with Citizens.
A spokesman for Governor Crist said the governor has not yet received H.B. 1171. He said it should reach the governor’s desk in the next week, after which Governor Crist will have 15 days to either sign or veto the measure.
The spokesman said Governor Crist has no position as of yet.
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