Media Coverage of 2010 Florida Property Insurance Omnibus Bill Veto

Jun 1, 2010

Media coverage of Florida Governor Charlie Crist’s veto of SB 2044, an omnibus property insurance package, is reprinted below. 

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William Stander of PCI–Fixing the Florida Insurance Marketplace: We’re All In It Together


TALLAHASSEE-The Property Casualty Insurers Association of America (PCI) issued the following statement in response to today’s announcement of the veto of SB 2044, the property insurance package that easily passed both houses of the Florida legislature. The below statements can be attributed to William Stander, assistant vice president and regional manager for PCI.

“PCI understands the concerns of consumers and public policymakers about the cost of property insurance in Florida, and we want to work with all stakeholders to develop effective long-term solutions that will stabilize the state’s insurance marketplace. This legislation would have been a step toward bringing private marketplace solutions to Florida. Without the bill, we continue to confront the problem of a huge and growing financial risk that Floridians face from the next storm.

“SB 2044 would have delivered common-sense solutions that would have protected insurance consumers and helped control rates by addressing a number of the cost drivers associated with increased premiums. The bill would have made it an unfair and deceptive trade practice for public adjusters to make misleading statements so that people would not be taken advantage of when they need help the most. It also would have capped public adjuster fees-meaning more settlement money in the hands of consumers-while cracking down on wind inspector fraud, creating a transparency website for consumers to shop and compare rates and products, and taking measures to ensure that properties are properly repaired, meaning safer homes and better resale values.

“While we are disappointed that these provisions did not become law, we recognize that many of us want the same thing: a healthy, stable and competitive insurance market that delivers economic security and peace of mind to consumers. We are all in this together.

“We reiterate that everyone-government, industry and the people of Florida-must work together to meet the urgent challenges we face. Eighty percent of all the insured property in the state, worth approximately $2 trillion, is vulnerable to storm losses. And this number continues to grow as development in the highest-risk areas of the state continues.

“The interests of consumers, lawmakers and insurers should not and do not have to conflict with each other. It is imperative that government and our industry work together to benefit consumers. We need to consider common-sense, long-term solutions that bring the private insurance marketplace back in Florida and lead to stronger homes and safer families. We remain committed to working with the state of Florida toward that end.”

PCI is composed of more than 1,000 member companies, representing the broadest cross-section of insurers of any national trade association.  PCI members write over $180 billion in annual premium, 37.4 percent of the nation’s property casualty insurance.  Member companies write 44 percent of the U.S. automobile insurance market, 30.7 percent of the homeowners market, 35.1 percent of the commercial property and liability market, and 41.7 percent of the private workers compensation market.


Governor kills bill sought by insurers

Decision puts Crist at odds with Republican Legislature


By Paige St. John

Sarasota Herald-Tribune

Gov. Charlie Crist on Tuesday vetoed legislation that property insurers argued they need to survive but that Crist said was harmful to consumers.

The governor objected to expedited rate increases included in the bill.

“During these very difficult economic times, Florida’s consumers should not have to be concerned with an additional premium increase to their policy,” Crist stated in a veto message delivered at the official start of the 2010 hurricane season.

His decision puts him at odds again with the Republican Legislature, but also this time with his own insurance commissioner.

Kevin McCarty had declared that rate increases and regulatory tools contained in the Legislature’s insurance bill struck “an appropriate balance” between consumers and insurance companies.

The legislation, however, scored low points with the public. The governor received more than 700 letters or calls regarding the bill. More than four out of five asked him to kill it, citing the potential for rate increases and delays in claims payments.

The bill emerged from a three-year press by the insurance industry to win back ground lost in Crist’s first year in office, and it entailed a fierce behind-the-scenes battle with the Florida trial lawyers association. Crist also vetoed last year’s version, which went even further in deregulating insurance rates.

In preserving the status quo, Crist’s veto leaves a major consumer protection in danger.

In 2007, lawmakers temporarily banned insurance companies from increasing rates then seeking state approval for the increase after the fact. The freeze expires Jan. 1.

To preserve the ban, Crist must bring the matter back before the Legislature. The governor already has said he intends to call a special session later this summer to address offshore oil drilling. The ban on unapproved rate increases could be extended during that session.

Without the ban, “insurance companies will take advantage of Floridians,” said Sen. Mike Fasano, R-New Port Richey, who said he voted for the 110-page insurance bill only because it extended the freeze.

Insurers contended Senate Bill 2044 was a must for their survival, and lobbied for it on several fronts, including through a public relations firm that promoted the industry’s point of view to the media.

The bill sought to address issues the industry argues have forced rate hikes and insurance company failures. It included controls on public adjusters — private businesses that recruit policyholders to reopen claims. It also would have allowed insurers to offset state-mandated discounts for hurricane-hardened homes by charging extra to owners who do not upgrade.

But the bill, objectionable to Crist as well as hundreds of property owners who e-mailed the governor, allowed insurance companies to raise rates 10 percent a year with minimal review.

McCarty said the legislation only “expedited” approval for rate hikes of 10 percent or less annually. Opponents, including Sen. Rhonda Storms, R-Brandon, have argued the review requirements are so minimal they equate to automatic approval.

The veto leaves Floridians without several major reforms to a struggling industry.

McCarty has been dogged by insurance company failures despite a four-year break from hurricanes, and has come under increased public pressure to account for how well he is regulating the industry.

He had promised to seek more control over how insurance companies divert profits into side ventures, and to increase the minimum capital an insurance company needs to operate in Florida.

The bill included measures for both, but in forms watered down from what regulators originally proposed.


Florida Gov. Crist Vetoes Property Insurance Bill


Insurance Journal

As he hinted he would do, Florida Gov. Charlie Crist has vetoed an omnibus property insurance bill (SB2044) that the industry and even the state’s insurance commissioner had urged him to sign.

Crist, who was elected governor as a Republican but who is running for the U.S. Senate as an independent, said he vetoed the bill because he believes it would have made it easier for insurance carriers to get rate hikes to cover reinsurance costs up to 10 percent a year. The insurance commissioner still would have had to approve these hikes but the process would have been streamlined under the bill.

In his veto letter, Crist said he was “most concerned” about this expedited rate filing procedure. “During these very difficult economic times, Florida’s consumers should not have to be concerned with an additional premium increase to their policy,” Crist stated.

Crist apparently discounted the advice he got from Insurance Commissioner Kevin McCarty, typically an ally of his, who had urged him to sign SB2044. The bill will make sure that “all potential rate increases are reviewed and approved or rejected by OIR [Office of Insurance Regulation] prior to one penny being paid by consumers,” McCarty had written to the governor.

In vetoing the bill, however, Crist actually allows insurers to go ahead and implement new rates before getting state approval under a use-and-file system. The bill would have required approval before use.

Crist also said he opposed the bill’s provision reining in premium discounts for homeowners who strengthen their homes against hurricanes. A state audit had found this mitigation program riddled with fraud and overly-generous discounts. But Crist said he was troubled that honest policyholders who took responsible steps to fortify their homes would be penalized under the tighter rules.

The bill, sponsored by Sen. Garrett Richter, R-Naples, also would have addressed solvency concerns by imposing a higher capital requirement of $15 million for a new home insurer.

It also would have more closely regulated the transactions between carriers and their affiliated companies, a reform Crist said he supported at a Cabinet meeting earlier this year.

Crist released his veto message just a few hours before the midnight deadline after which the bill would have become law without his signature.

The insurance industry had backed the bill as one way to get at some the forces driving up costs, including rising sinkhole claims and millions of dollars in claims from Hurricane Wilma that are being re-opened by claims adjusters five years after the storm. The bill would have more closely regulated public adjusters and their fees. It also would have allowed insurers to retain a portion of replacement cost claims payments until there is proof repairs are being made.

The veto was disappointing for insurers.

The Florida Property & Casualty Association, a group of Florida-based insurance companies and consultants, said SB2044 would have reduced fraud and claims abuse, making insurance more affordable and accessible.

“Unfortunately, it was erroneously portrayed by critics as a bill that would have raised rates without regulatory oversight. Nothing could be further from the truth. The veto of this bill will ultimately saddle all insurers with continued escalating losses resulting in less availability and higher rates,” the group said in a statement.

William Stander, assistant vice president and regional manager for the Property Casualty Insurers Association of America (PCI), said the legislation would have been a “step toward bringing private marketplace solutions to Florida.”

Stander said there were a number of consumer-friendly provisions in the bill Crist vetoed including a new web site to help homeowners shop for insurance.

“SB 2044 would have delivered common-sense solutions that would have protected insurance consumers and helped control rates by addressing a number of the cost drivers associated with increased premiums,” said Stander.

“While we are disappointed that these provisions did not become law, we recognize that many of us want the same thing: a healthy, stable and competitive insurance market that delivers economic security and peace of mind to consumers. We are all in this together.”

Neil Alldredge, senior vice president of State and Policy Affairs for the National Association of Mutual Insurance Companies (NAMIC), expressed the frustration of his group’s member companies.

“Florida Governor Charlie Crist just doesn’t get it. Florida needs to create a business climate and competition-based pricing in which the free market is alive and well for the purchase of insurance. Such a market helps build a clear understanding of the true cost of risk, which would promote wiser decisions with a long-term view regarding land-use planning and resource management. Only then will consumers have plentiful and sustainable choices for coverage,” said Alldredge.

“But the governor decided to begin hurricane season by vetoing SB 2044 – legislation that would have continued the slow but steady progress that had been occurring for insurance consumers and companies in Florida.”

Jeff Grady, president and CEO, Florida Association of Insurance Agents, anticipated the veto. “It does appear likely that he will veto the bill. If so, bad day for Florida,” he told Insurance Journal the morning before the veto happened.



Sunshine State News/THE NEWS SERVICE OF FLORIDA:  Crist Vetoes Property Insurance Legislation


By Michael Peltier

News Service of Florida

Calling the measure unfriendly to consumers, Gov. Charlie Crist on Tuesday vetoed legislation backed by the insurance industry that, among other things, things would have allowed property insurance companies to more easily raise rates by up to 10 percent a year without going through the lengthy regulatory process.

Crist’s decision came despite calls from two top state officials to approve the bill (SB 2044) that backers say would have strengthened the state’s property insurance market by requiring more financial backing for new and existing insurers while requiring that most rates be approved before they are put in place, rather than allowing companies to implement new rates and then seek approval later.

The bill, one of seven vetoed Tuesday night by the newly independent governor, would have allowed companies to put in place higher rates to account for inflation and rising reinsurance costs up to 10 percent a year without having to go through the full rate filing process with regulators.

“I am most concerned about the expansion of the current expedited rate filing procedure for property insurers that makes it easier to increase Floridians’ premiums,” Crist said in his veto message. “During these very difficult economic times, Florida’s consumers should not have to be concerned with an additional premium increase to their policy.

“Additionally, the bill makes troubling changes to the way mitigation discounts are applied,” Crist continued. “Specifically, responsible Floridians who have already made investments to harden their homes could be unfairly penalized.”

Ash Williams, executive director of the State Board of Administration, and Insurance Commissioner Kevin McCarty had both urged Crist in separate letters to sign the measure, saying on the whole it would help stabilize the property insurance market that has been on shaky ground following back-to-back hurricane ravaged seasons beginning in 2004.

But the bill was a major priority for the insurance industry, not simply because of the changes to rate filing procedures. The measure also sought to make it harder for some “public adjusters,” to help homeowners pursue old claims against insurers. The industry has said the number of reopened claims from as far back as 2005 has caused heavy losses, and that public adjusters are sometimes reopening claims that were rightly rejected long ago.

The Senate sponsor of the measure, Sen. Garrett Richter, R-Naples, called Crist’s action politically motivated and said the veto would slow efforts to get the state’s private insurance market back on its feet. Crist is running for the U.S. Senate and opponents have said the veto was simply populist pandering in search of votes.

“Based on what the bill does, there is no other reason to veto it other than a political motivation,” Richter said.

Crist, however, has always been vocally opposed to anything that raises rates for customers of big service providers, from phone companies and electric utilities to insurers. A couple of years ago, when State Farm, then the state’s largest property insurer, said it wouldn’t be writing new policies here, Crist said essentially, “go ahead and leave,” though state regulators later worked out a deal to raise State Farm rates some and keep the company in Florida.

The veto was unusual, however, in that Crist ally McCarty was in favor of it. As insurance commissioner McCarty has frequently battled the industry, but this time urged the governor to go along with the measure, which had broad support among insurers.

Speaking before the Cabinet in May, McCarty suggested Crist should sign the bill.

“Some have characterized this as deregulation bill,” McCarty said. “Nothing could be further from the truth. There are provisions in the law that allow for an accelerated review process but all rates would be approved by the agency.”

The bill also contains a number of provisions including allowing insurers to withhold portions of claims until repairs are completed.

The measure also would have continued a law that that required companies to seek rate approval before passing the premium hikes onto consumer. With the veto, property insurance companies can now raise rates on consumers while they are seeking state approval, a procedure known as “use and file.”

In addition to the insurance measure, Crist also Tuesday vetoed another bill (HB 545) that had been sought by Realtors that repealed a law requiring disclosures of residential property windstorm mitigation ratings to purchasers of homes in certain areas.

Other bills vetoed by Crist Tuesday were a measure (HB 569) allowing yard trash to be deposited in certain landfills which are designed to capture methane gas for energy production, a bill (SB 1004) allowing county commissions to negotiate short term leases – up to 5 years – without a bid process, a measure (HB 1385) related to petroleum contamination site cleanup, legislation (SB 1964) that sought to limit tort claims in some cases for engineers, surveyors and other design professionals, and a bill (HB 7203) related to community development districts.


Palm Beach Post:  Insurance bill; Atwater blasts governor saying he “mischaracterized” bill


By Dara Kam and Kimberly Miller

Palm Beach Post

TALLAHASSEE – Deepening an already substantial rift between himself and the legislature, Gov. Charlie Crist tonight vetoed a property insurance bill saying it would likely increase rates.

“I am most concerned about the expansion of the current expedited rate filing procedure for property insurers that makes it easier to increase Floridians’ premiums. During these very difficult economic times, Florida’ consumers should not have to be concerned with an additional premium increase to their policy,” Crist said in a veto message issued with only hours to spare before his midnight deadline. If Crist had not acted on the bill Tuesday, it would have become law without his signature.

Supporters of the bill, including Senate President Jeff Atwater, accused Crist of pandering to voters in an attempt to shore up support for his independent run for U.S. Senate and of, perhaps inadvertently, playing into the insurance industries’ hands.

“He yet again has found a way to mischaracterize the substance of legislation to advance his own political career,” said Atwater, R-North Palm Beach, who is leaving office to run statewide for chief financial officer. “Once again he is the master of the game.”

Atwater said the veto would likely be a “win” for Crist with uneducated consumers but is really a win for the insurance industry and will place him even more at odds with the legislature.

“On the political front, if he’s able to get people to buy the story that this is for the consumer and create yet again the mischaracterization of this bill to the people of Florida, that would be his objective and his goal to have a political victory, that ‘I came to bat for the little guy.’ That clearly is not what the case is here,” Atwater said.

Consumer advocates had been divided on the bill’s merits, some strongly opposing provisions they said would have given insurers too much control over rate hikes and how claim payouts are made and spent.

Others, including Florida’s top insurance regulator, argued that the claim crackdowns were necessary to reduce fraud and that the bill (SB 2044) would have benefitted consumers, the state and the insurance industry.

“This bill is an important piece of legislation that benefits the people of Florida by protecting consumers from unsupported rate increases and guarding against disruptions in the marketplace,” Office of Insurance Regulation Commissioner Kevin McCarty wrote to Crist last month urging him to sign the bill into law.

A key provision in the bill that had wide support, including McCarty’s, would have extended a law requiring that regulators approve rate increases before insurers can impose them.

Lawmakers barred insurers from the so-called “use-and-file” rate filings in the aftermath of the 2005-2006 hurricane season.

The bill would have extended that prohibition, set to expire at the end of the year, until 2012.

“There were insurance companies saying, ‘Please let the bill die,’ ” Atwater said. “If the governor thinks he can veto this bill and that the next legislature is just going to create a new suspension, I think that’s a big wish. Next year’s legislature is not going to be inclined to recreate the suspension.”

With the bill’s veto, insurers will be allowed to raise fees on the front end, then issue refunds if their requests are ultimately refused.

“Insurance companies will be clapping” over the return of use-and-file, Atwater said.

But Bill Newton, executive director of the Florida Consumer Action Network, said he’s not concerned about the resumption of use-and-file.

“The hidden benefit there is that we’ll see what they really want to charge,” Newton said. “It will be interesting right before the election if they have the guts to levy a rate increase.”

A Florida Association of Insurance Agents executive worried, however, that the veto could cause an insurance “meltdown” in the state.

Scott Johnson, executive vice president for the, said he’s concerned there will be an insurance “meltdown” without the legislation.

“It won’t be a very pretty marketplace. . . . There will be a greater influx of policies into Citizens and there will be more companies becoming insolvent,” association Executive Vice President Scott Johnson said of the veto.

The state-created Citizens Property Insurance Corp. is for people whose homes were rejected by other carriers or for those unable to find affordable coverage. Citizens, the state’s largest windstorm insurance provider, already has 1.1 million policyholders.

The bill had been aimed in part at stabilizing the insurance industry in Florida by requiring stronger insurance company finances so that fewer would default and by allowing companies to file for expedited rate hikes of up to 10 percent to meet inflation and emergency demands.

McCarty said it also included a provision meant to help companies that have recently lost money even in the absence of catastrophic storms. The Hurricane Catastrophe Fund has been forced to issue more than $700 million in bonds recently to pay claims from 2005’s Hurricane Wilma and virtually every claim filed four to five years after Hurricane Wilma involved a public adjuster, McCarty wrote to Crist.

To limit such claims, the bill would have required claims to be made within three years and limited the money that public adjustors could make to 20 percent of the reopened or supplemental claim payment.

Without those provisions, Johnson said, “If we have a hurricane, it’s Katie bar the door.”

Critics, though, have argued that some damage, such as mold, may take many years to appear.

Newton also said that the bill also would have prevented regulators from seeing the actual financial records of an insurance company. Instead regulators would have had access only to summary reports of financially struggling companies.

And he noted a Sunday report by the Sarasota Herald Tribune that some of the bill had been written by insurance lobbyists. The story was based on e-mails from the Office of Insurance Regulation to industry consultants.

“That’s just disgusting, awful,” Newton said.

But some consumer advocates remained a fan of the bill.

“While the measure is not the perfect solution to the property insurance crisis, it is a first step and includes many provisions that protect consumers,” said Walter Dartland, executive director of the Consumer Federation of the Southeast, who supported the legislation.

And state Insurance Consumer Advocate Sean Shaw said, “People call this a rate increase bill, but I don’t think it is. It started out with a lot of bad things for consumers, but where it is now is a decent place.”


South Florida Sun-Sentinel/Orlando Sentinel:  Crist vetoes bill allowing certain property insurance rate hikes


By Julie Patel

Sun Sentinel

Gov. Charlie Crist late Tuesday vetoed a broad property insurance bill that would have made it easier for insurers to raise rates and reduce claims costs.

Insurance industry officials said the bill was needed to strengthen property insurers battered in recent years by higher costs for non-catastrophe claims and higher discounts to policyholders who fortify their homes against hurricanes. But Crist told the Sun Sentinel last month he was leaning toward vetoing it because of the potential impact on customers’ rates.

“I am most concerned about the expansion of the current expedited rate filing procedure for property insurers that makes it easier to increase Floridians’ premiums,” Crist said in his veto message late Tuesday. “During these very difficult economic times, Florida consumers should not have to be concerned with an additional premium increase to their policy.”

Crist championed measures a few years ago to expand state insurance programs to help lower premiums. He said some insurers “want to charge you every single year as though [a major hurricane] hits every year.”

“The approach that we have taken and in order to be able to reduce your rates is say, ‘We won’t do that to you unless that happens,’ ” he said. “They want to do that to you regardless if it happens because they want more money in their account.”

Among other things, the bill would have:

Allowed insurers to raise rates if they show the “mitigation” discounts were too high and to pass to customers the costs of advertising and agent commissions without interference from regulators.

Expanded a provision from last year allowing insurers to raise premiums by up to 10 percent a year for certain back up coverage costs without full oversight from regulators. The bill this year would have allowed inflation and other costs to be included in the provision.

Limited the time policyholders have to file a windstorm claims to three years after a hurricane, down from five years, and allowed insurers to withhold part of most claims until the homeowner has a contract to make repairs and “as the work is performed.”

Florida Insurance Commissioner Kevin McCarty told Crist in a letter last month that he supports the bill because it would have helped lower claims costs for insurers; required home insurers to have $15 million in claims-paying reserves by mid-2020 – up from $4 million now; extended a provision requiring insurers to have approval from regulators for rate hikes before implementing them, instead of potentially providing refunds later.




The Associated Press:  Crist Vetoes Insurance Bill


TALLAHASSEE | Florida Gov. Charlie Crist has vetoed a property insurance bill.

Crist vetoed the bill (SB 2044) Tuesday. He said in a memo that he was concerned the legislation would make it easier for insurers to increase residential premiums in Florida.

He said he also had a problem with changes to mitigation discounts, meaning homeowners who have already made improvements to harden their homes against hurricanes could by unfairly penalized.

Florida Insurance Commissioner Kevin McCarty has said the bill would add more regulatory tools to ensure the solvency of private insurers.

Florida’s property insurance market has been propped up for years by the state-backed Citizens Insurance and the Florida Hurricane Catastrophe Fund.