The Florida Legislature begins its spring sessions today with insurance-related topics expected to take the limelight with several dozen proposals being discussed by the governing body. Topics range from giving consumers more tools with which to navigate the complicated world of insurance, to making it easer for insurers to access cheap reinsurance through the Catastrophe fund and trying to fix Citizens Property Insurance Co.
The Joint Committee on Insurance will present at least 20 recommendations, many of which were proposed by the Citizen’s Task Force. The most important include an evaluation of how Citizens sets rates, pays bonuses to agents and if it should continue to insure some of the most expensive coastal property in South Florida. Recommendations by the joint committee are also expected to be used as a starting point to decide how to make property insurance more affordable.
Top proposals include:
• Lowering the losses companies must endure before they can collect backup money from the state catastrophe fund. That would protect insurers’ reserves, but might require charging slightly higher rates to adequately supply the pool.
• Enacting a schedule of reasonable construction costs as guides for insurance companies and contractors. That would keep insurers’ losses from inflating in months following a storm and take pressure off consumers to mediate disagreements over costs.
• Petitioning the U.S. Congress to approve tax-free “hurricane savings accounts.” These would encourage policyholders to save enough cash for their deductibles, making repairs easier to handle and lessening conflict over settlements.
• A proposal suggesting a “quota share” under which Citizens would cover most wind risk for windstorm customers. Private insurers would assume part of that risk and would handle front office and other tasks, such as dealing with claims and customer service.
• Private insurers would receive less money for taking policies out of Citizens — an incentive created to reduce its size — and would be required to hold the policies longer to get the money. More than 158,000 policies were taken out of Citizens’ homeowners’ and windstorm accounts in 2004.
• Citizens’ rate-making rules would be changed. Instead of automatically charging the highest rates in an area, past and future losses in that region would be considered before a decision is made on what the rate would be.
“Citizens … is probably the foremost issue that this committee will address this year,” Rep. Dennis Ross, R-Lakeland, chairman of the House Insurance Committee told the South Florida Sun-Sentinel. “… And we have to act quickly, because we’re getting ready to head into another hurricane season.”
After months of waiting for claims to be settled, more than 7,200 Citizens customers complained to the state. They griped about being put on hold for too long and waiting days, even weeks, for claims adjusters to survey damaged homes.
Many of Citizens problems, according to the Sun-Sentinel, stem from being pulled two ways. At one time, it was designed to essentially disappear — come 2012 the company is supposed to cut in half its exposure to losses by shedding clients. Meanwhile, despite its rates being the highest, Citizens is growing, on the verge of becoming the state’s largest property insurer.
“This is an entity that isn’t going away,” Pete Dunbar, general counsel to state Chief Financial Officer Tom Gallagher said.
“Streamlining two insurers into one didn’t solve a deeper problem. Citizens mission “is almost conflicted on its face,” Dunbar said. “The company must cover homeowners who can’t get insurance elsewhere, but at the same time is told it must get smaller.
“You ended up creating a business model that ran with very few people in hopes that there would soon be a need to have no people at all,” he said.