THE NEWS SERVICE OF FLORIDA: Insurers to Try Again to Soften Regulation

Jul 27, 2010

The following article was published by The News Service of Florida on July 27, 2010:


THE CAPITAL, TALLAHASSEE, July 27, 2010……Legislation seeking to make it easier for property insurers in some cases to raise rates without a drawn-out regulatory case will return next year, and backers are hopeful that with a new governor it will become law.

An industry-backed bill that passed the Legislature earlier this year would have allowed property insurance companies to increase rates up to a certain percentage in some cases without a full review by the Office of Insurance Regulation, but was vetoed by Gov. Charlie Crist.

Crist is running for the U.S. Senate and will leave the governor’s office in January.

“The governor that vetoed the measure won’t be here next year, so I think that we have a good shot,” Sen. Garrett Richter, R-Naples, said Tuesday. He sponsored the bill last session and will likely again carry the proposal. It has been a top priority of major insurers, who say that in many cases the rates they’ve been allowed to charge for property insurance in hurricane-prone Florida don’t match their risk and claims, which they say are rising again despite several hurricane free years.

It will again be a top priority for insurers.

“We have to repass that bill,” said Sam Miller, spokesman for the Florida Insurance Council. “We will be working as hard as we can to repass it and doing a better job of convincing whoever is the new governor that it’s a good bill.”

The measure that Crist vetoed was actually supported by the state’s top insurance regulator, Insurance Commissioner Kevin McCarty, even though his boss, Crist didn’t ultimately. McCarty wants to see lawmakers broadly try to address insurers rising costs this year, and would again support the regulatory change.

Whether the next governor would support the legislation looks likely to depend on who wins the November election. Democrat Alex Sink has suggested she might come down where Crist did, although she hasn’t fully spelled out what she would do on the issue.

“We should not have deregulation in the insurance market, the role of the insurance commissioner is critical,” Sink said at a campaign appearance before newspaper editors earlier this year.

McCarty, obviously would agree about his role, but he contends that the bill Crist vetoed didn’t fully deregulate the market, only allowing companies to seek non-regulated rate increases under certain parameters defined by the agency – in effect simply a streamlining of the approval process by pre-approving certain rate hikes.

The leading Republican candidates for governor, Rick Scott and Bill McCollum, don’t include property insurance rates or availability among the issues they discuss on their campaign Web sites, despite it being often discussed at the Capitol as one of the most pressing issues facing Florida. And neither campaign responded to a request from the News Service for comment on how they would address the issue.

Independent candidate Bud Chiles likely would have vetoed this past year’s bill, a campaign spokesman said. The bill “contained some anti-consumer measures involving the mitigation credits and discounts, and eliminating the prompt payment requirement,” said the spokesman Jim McClellan.

That said, “we do need to attract private insurers into the market and spread the risk outside our state,” McClellan said. “The challenge is to do that in a way that doesn’t strip consumers of the very protection they are paying for.” Last session’s bill, Chiles believes, didn’t meet that test.

McCarty said in an interview this week that he hopes lawmakers will try to reduce some of the cost pressures that are making property insurance more expensive beyond simply allowing companies an easier path to higher rates in some cases.

If you don’t get at the cost drivers … all you’re doing is putting a Band-Aid on the problem,” McCarty said.

McCarty identified several of those, including some that last session’s legislation sought to solve, such as limiting new claims on old storm damage, which the industry has blamed for a big run-up in costs lately. The industry – and McCarty agrees – says that public adjusters have been persuading homeowners to re-open old claims.

McCarty identified continuing costs from 2005’s Hurricane Wilma as one of the biggest problems facing property insurers in the state at the moment.

“We need limitations on new claims, and reopened claims, and to put some parameters on public adjusters,” McCarty said. This past year’s vetoed legislation sought to do that with a three year statute of limitations on claims.

McCarty said another priority of his office in the coming year is to help the industry get a handle on sinkhole losses.

“I don’t know how we cannot address (sinkhole claims) next year,” McCarty said. He said he wants there to be a balance that allows homeowners whose property is legitimately damaged by sinkholes to be paid, but notes that the claims seem to be spreading. McCarty suggested that because of the potential for litigation over the claims, lawyers may be trying to drum up cases.

The rise in sinkhole claims “is most assuredly being driven by other non-geological factors,” than just an actual increase in sinkholes, he said.

“The problem is, the cost of investigating and determining whether the sinkhole exists … is costing the companies a lot of money,” McCarty said.

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