Storm brewing over overhauls

Mar 28, 2008

Insurance rates again take up Legislature’s time

By McClatchy Tribune 28, 2008

A year after making sweeping property insurance changes, Florida legislators are divided between maintaining a consumer-friendly face or allowing homeowner premiums to start inching up.

This week, the Senate is considering a slate of policies aimed at holding insurers accountable, and at the same time, they’ll consider an idea supported by House Speaker Marco Rubio to shrink the state’s footprint in the reinsurance business. The move would lessen the blow most policy holders would absorb in assessments after a major storm. The downside: Rates could go up by about 3 percent statewide and probably more in South Florida.

With financial markets riding out a Category 5 lack of confidence, support is building in the Legislature for ideas to lower the state’s exposure in future hurricanes.

A Senate package will include proposals to impose criminal penalties on insurers and raise the fines from $20,000 a day to $100,000 a day for violating state insurance rules.

Insurers would have to file a rate adjustment to lower premiums overall when they shed riskier policies.

Senate leaders also want to abolish the law that let insurers impose automatic rate hikes. The Legislature suspended the so-called “use and file” law last year, along with an arbitration board that heard insurer challenges to rate denials. Both come back in 2009, though, if the Legislature doesn’t act. And homeowner insurance rates would likely start going up.

House Republicans are desperate to shrink the size of state-run Citizens Property Insurance Corp. and shed the risk government took on in a rush to reduce premiums last year.

One such reform was a freeze on Citizens’ rates due to expire at the end of the year. The Senate wants to extend the rate freeze for the 1.3 million homeowners covered by the state’s biggest property insurer.

Without it, homeowners covered by the insurer of last resort could have absorbed a 29 percent increase last year – and possibly as much as a 44 percent spike as the company became a magnet for riskier homeowners jettisoned from private insurers following the 2004 and 2005 hurricane seasons.

House Republicans argue the freeze has fueled a kind of insurance shell game, where rates are kept artificially low until the next big hurricane hits. Then, Citizens won’t have enough reserves to pay claims, will have to issue bonds.