The House has begun began debating a hurricane insurance bill in Tallahassee, Fla. with an admission that with 13 million Floridians living in coastal counties, there’s no easy solution to the thorny situation and no assurance the plan will solve the problem anytime soon.
The problem is the spiraling cost of getting coverage for property threatened by the prospect of more active storm seasons after being battered by eight hurricanes in two years.
Nearly every legislator has heard from constituents who have complained about 50, 60, 100 percent spikes in their annual premium.
The bill the Legislature is expected to pass sometime in the next week is at best a beginning, with even supporters acknowledging it won’t quickly lower premiums dramatically, although it would ease the pain of assessments Floridians are paying to bail out Citizens Property Insurance, the state’s insurer for those who can’t get private coverage.
The legislation also might not be able to encourage more private insurers to do business in the state, the bill’s primary aim. The hope is that if more private companies will write policies, the rates will come down.
“This is a very tenuous step of trying to bring back a market … with no guarantees,” said the bill’s House sponsor, Rep. Dennis Ross, R-Lakeland, as the House began floor debate. “We take the first steps with this bill of trying to entice a market back.”
Senate President Tom Lee also expressed this week what few lawmakers have been willing to admit publicly about one of the biggest public policy problems facing Florida:
“It’s really important for us to not raise expectations too high,” Lee said. “There are no panaceas to this problem.”
Ultimately, the difficulty is largely this: the Legislature can’t control the weather.
“We’re going to need a break from the meteorology,” Lee, R-Valrico said.
Lee said that if Florida continues to see four storms each year costing insurance companies $15 billion, government may not be able to do much to convince them to stay.
But the Legislature is trying.
The measure makes it easier for private insurance companies to tap into the state’s Hurricane Catastrophe Fund, a backup account that can be used when losses are above a certain amount. It also provides for a fast and large cash buildup of the Catastrophe Fund.
The intention is to signal to insurance companies that if they do business here, they’ll have a fallback if they get hit hard.
It also makes it easier for companies to raise premiums, another enticement to taking on the risk of selling insurance in a hurricane-prone state.
The bill (HB 7225) would let property insurers raise their premiums by 5 percent on average statewide, or 10 percent on average in any one area, without having to get approval from regulators. Ross pointed out that many insurers are getting approval for far larger increases.
The House discussed the wide-ranging bill aimed at solving the insurance crisis for several hours Thursday, but didn’t take a final vote. The measure also still needs Senate approval.
A central theme of the bill is that something must be done about Citizens Property Insurance Corp., which was created by the state after Hurricane Andrew hit South Florida in 1992. It was intended to be an insurer of last resort, to close some gaps in what the private insurance companies just couldn’t cover. But it has become the second largest provider of property coverage in the state.
And when Citizens can’t cover its obligations, all Florida homeowners bail it out with an assessment that’s tacked on to insurance bills, driving up already increasing premiums.
All Florida homeowners are currently paying a 6.8 percent assessment for the company’s 2004 shortfall and with Citizens having a shortfall for 2005 losses, those assessments could be headed higher.
The part of the House bill likely to resonate immediately with most Florida residents is a provision that would put $920 million in state tax dollars into bailing out Citizens. Then, to cover the remaining shortfall, the bill would stretch out the payments over a decade, which would allow assessments to be about $10 a year for the average homeowner, instead of $200 a year.
The bill also seeks to reduce Citizens’ exposure by allowing it to charge owners of certain homes, mainly second or vacation homes, higher rates. It also would exclude homes with replacement values of $1 million or more from Citizens.
Private insurance companies who want to pick up coverage of the excluded non-homestead homes or million dollar homes could charge whatever they want for those policies without state review.
Ross, who is chairman of the House Insurance Committee, said that in the long run, the most important thing government may be able to do is to reduce the losses.
To that end the bill establishes a $500 million endowment to provide grants and no-interest loans to strengthen homes to better stand up to hurricanes.
Democrats were shot down when posing their solution: a complete scrapping of Citizens in favor of a state insurance company that would cover the first $100,000 of risk in all Florida homes, similar to the way the federal government provides all flood insurance since private companies won’t.
Meanwhile, residents of condominiums and homeowners associations that get their insurance from Citizens became the latest to face an insurance increase.
Citizens’ Board of Governors voted to seek a higher rate for condo and homeowners association insurance. It’s not clear what the rate increase will be until the company files for the increase with the state.
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