Lawmakers freeze Citizens rates, tighten insurance restrictions

May 2, 2008

Daytona Beach News-Journal--May 02, 2008

Tallahassee Bureau Chief

TALLAHASSEE — With Florida’s insurance market still unsettled, lawmakers gave final approval Thursday to a plan that would extend a rate freeze for hundreds of thousands of homeowners and tighten restrictions on private insurers.

Senators voted 33-5 to approve the wide-ranging plan, which unanimously passed the House late Wednesday. It now goes to Gov. Charlie Crist.

The bill, which emerged after behind-the-scenes negotiations, prevents rate increases until January 2010 for customers of the state-backed Citizens Property Insurance Corp.

Lawmakers last year approved a Citizens rate freeze that was scheduled to expire in January 2009. Citizens officials have said ending the freeze could cause rates to soar next year.

Along with extending the freeze, the bill offers $250 million in low-interest loans to try to attract more private insurers to the state. Also, it would beef up some insurance regulations, including doubling potential fines against insurers.

Senate sponsor Jeff Atwater, R-North Palm Beach, said the bill is aimed at making sure consumers get a “fair shake” from insurance companies.

But some lawmakers said the bill would not directly lead to lower insurance rates across the state.

“It is not a bill designed specifically to reduce premiums,” said House Insurance Chairman Don Brown, R-DeFuniak Springs.

Senate approval of the bill came on the next-to-last day of the annual legislative session. Lawmakers have repeatedly struggled with property-insurance issues since eight hurricanes blew into the state in 2004 and 2005.

In the aftermath of the hurricanes, private insurers sought rate increases and dropped policies in many areas as they tried to reduce financial risks. That has helped turn Citizens — which was created as an insurer of last resort — into the state’s largest property-insurance company with about 1.2 million policies.

Among Volusia and Flagler lawmakers, only Sen. Tony Hill, D-Jacksonville, voted against the insurance bill this week.

The bill includes a mixture of issues, such as using money from Citizens to loan up to $250 million to private insurers that want to write homeowners’ policies in the state. Lawmakers hope the program ultimately will result in fewer policies with Citizens.

But insurance-industry spokesman Sam Miller said the bill doesn’t address critical questions about the state’s financial risks if Florida gets hit by hurricanes.

Citizens and the Florida Hurricane Catastrophe Fund — a state program that sells a crucial form of backup coverage to insurers — likely would have to pay out billions of dollars after major storms.

But with the nation’s credit markets in disarray, many officials worry it would be difficult to borrow enough money to meet the programs’ obligations.

“They (lawmakers) ignored the real crisis,” said Miller, executive vice president of the Florida Insurance Council.

The Senate and state regulators have increasingly tangled with insurance companies in recent months. That includes an ongoing effort by regulators to block Allstate from selling new policies because the company did not fully comply with state subpoenas about its property-insurance business.

The bill tightens restrictions on insurers, including increasing fines if insurers violate state regulations or engage in unfair trade practices. As an example, fines for willful violations would double from $20,000 to $40,000.

Also, the bill would eliminate an arbitration process that critics say has favored insurance companies during disputes about rate increases.