AIA Expects Property Issues to Dominate Florida Legislature

Measures aimed at improving the property insurance market are expected to dominate the insurance agenda when the Florida Legislature convenes on March 7, according to the American Insurance Association. Legislators also will debate whether to allow next year’s statutory sunset of the state’s no-fault auto insurance law to occur as scheduled.

“As with the 2005 session, the lingering impact of last year’s hurricane season is again the driving force behind the property-casualty legislative agenda in Florida,” Cecil Pearce, AIA vice president, Southeast Region said. “Legislative leaders hope to address two key issues: How to attract additional insurance capital into the state to meet the demands of a growing population, and how to improve the operations of and, hopefully, reduce the size of, the residual market (Citizens Property Insurance Corporation). AIA believes draft legislation to be considered by the House Insurance Committee is positive for insurers, with one major exception,” Pearce said.

On the positive side, House PCB IN 06-01 includes important provisions allowing flex rating and a delay in the statutorily required “shrinking” of the Citizens windstorm boundaries.

The rate modernization provision would allow residential property insurers to increase or decrease their filed rates by 10 percent statewide or 25 percent within a rating territory without regulatory approval.

To address the explosive growth of Citizens, which has led to massive claims losses and resulting deficits, the bill requires higher rates on “non-homestead” properties, which are homes that are not primary residences, and prohibits coverage on homes valued in excess of $1 million.

Citizens’ provision opposed

“But AIA strongly opposes another provision that attempts to address Citizens’ customer service problems,” Pearce said. “The bill would mandate that the private market both issue and provide claims service for wind policies in the Citizens High Risk Account.

AIA has and will continue to stress to legislators that such a requirement will cause extreme operational and administrative problems for insurers, according to Pearce. Also, Citizens has recently announced dramatic improvements in its claims servicing record, making this provision far from necessary,” Pearce explained.

No-fault system broken

The other key property-casualty issue facing legislators is whether to allow the state’s no-fault auto insurance law to sunset, as scheduled, in 2007. AIA, with support from other insurer interests, supports the sunset, which would return Florida to a traditional tort system for handling auto insurance claims. “The no-fault system is broken, and it is highly unlikely that the legislature will pass a strong package of reforms,” Pearce said.

The Senate Banking and Insurance Committee will take up the no-fault reform debate in the early weeks of the session, via a series of bills focused on reducing the system’s escalating costs. Intense opposition is expected from the trial bar and health care interests.

Topics Florida Property