The Insurance Mood in Tallahassee

Lawmakers Have Insurance Concerns But Will They Act in 2013?

When you ask experts in Florida to describe the mood of state lawmakers about insurance reforms in 2013 they use words like “disinterested” and “fatigued.” This despite the fact that traditionally lawmakers tackle the most controversial insurance issues in an off-election year.

Lawmakers have just spent two years and major political capital making sweeping changes to the state’s auto no-fault law, enacting a property bill that included sinkhole reform, deregulating commercial policies and addressing other issues.

As a result, a consensus is emerging that while lawmakers are slated to take up insurance issues, at the end of the day the prospects for getting anything done appear to be slight.

Florida Association of Insurance Agents President Jeff Grady said that the early mood in Tallahassee suggests lawmakers have little interest in weighty insurance matters.

“There is not a lot on the agenda right now,” said Grady. “There will be some clean-up bills, but it seems they are swearing off most controversial issues.”

Lawmakers do seem ready to address some issues, though Grady and others note there is little that has not been debated in previous years.

Topping the list is Citizens Property Insurance Corp., which over the past year has been embroiled in some controversies including the misconduct of executives, reduced coverage, and a mitigation reinspection program that blew-up after a public outcry over lost credits.

Senate Banking and Insurance Committee Chair David Simmons (R-Maitland) wants major Citizens legislation with a focus on depopulation and has called on Citizens and the Office of Insurance Regulation to make recommendations, which they have done.

Florida Insurance Council Vice President Sam Miller said one possibility includes allowing annual rate increases above the 10 percent cap that is currently in place.

“Citizens is too big and shouldn’t be the fast growing insurer in the state,” said Miller. “At the same time you can’t raise rates by 200 percent. It’s going to take a balanced approach.”

But any Citizens bill must navigate through a legislature that has deep regional divisions. South Florida lawmakers are looking to hold down rates and maintain widespread eligibility. But lawmakers from the north and central regions want more restrictions placed on the insurer to spur depopulation and lessen the assessment risk on their constituents.

South Florida lawmakers have already filed a bill to codify that the insurer’s 10 percent annual cap on rate increases applies to new policies or new types of policies. At the same time, lawmakers from north and central Florida want that cap raised to lessen the assessment risk on their constituents.

“In the House Insurance Committee there are different viewpoints that are segmented by regions,” said William Stander, president of WHISPER, Inc., an insurance consulting firm. “In the Senate it is clear there are a lot of people with strong personalities. That makes it unclear what they can do.”

Fred Karlinsky, who represents several Citizens takeout insurers, said the divisions among lawmakers will make it difficult to accomplish any major changes.

“In the companies’ view there need to be continual changes and rates need to go up,” said Karlinsky. “But I don’t think a lot will get done.”

Lawmakers may make another run at restructuring the Florida Hurricane Catastrophe Fund by lowering its capacity to increase its financial stability. Last year, the issue ran aground when concerns were raised that this could increase rates since insurers would have to replace the coverage with more costly private reinsurance.

Insurance Commissioner Kevin McCarty is also calling on lawmakers to address workers’ compensation issues including the cost of physician-dispensed drugs and reimbursements for medical care provided by hospitals and outpatient and ambulatory surgical centers. Trying to address those issues, however, means taking on the powerful medical industry.

There is the also the possibility that any property insurance issue might be overshadowed as the state considers how to implement the federal Affordable Health Care Act.

“It may be the insurance issue that gets the majority of interest, period,” said Miller.

While insurance initiatives gain the spotlight, the majority of the industry’s time is typically spent warding off bills that could prove harmful to the industry. This year that task may take on an urgency given some of the high-profile controversies that have dominated headlines around the state.

Citizens has been caught up in ethical and management issues while last year’s reform of the state’s no-fault law is under scrutiny for not producing the rate decreases some expected.

Combined with the traditional concerns over rates, it makes for a political landscape where it might be in the industry’s best interest to keep as low a profile as possible this year.

Stander said that the industry would be better served to weigh the changes for desired reform against the possibility that lawmakers will enact anti-industry laws.

“There is a great deal of pent-up hostility among the public and legislative members from some regions,” said Stander. “The industry needs to not give those opponents the opportunity to exploit that populist sentiment that is gaining strength.”

Elections Matter

Overshadowing the chances for insurance reform in 2013 are state elections, past and future.

For the first time in years, Democrats in 2012 picked up seats in both the House of Representatives and the Senate. And while the Democrats still do not challenge the Republican majorities, the change in seats does end the Republican supermajorities that gave them important parliamentary advantages such as the ability to cut off debates and force votes.

“Before Republicans could push through anything they wanted,” said FAIA Senior Vice President Kyle Ulrich. “The Democrats have a lot more leverage now.”

That issue aside, the election everyone is focused on is the governor’s race that will culminate in the November 2014 election. This has the industry trying to gauge the prospects of pro-business, but currently unpopular, Gov. Rick Scott winning a second term, while former Gov. Charlie Crist, whom they consider the most anti-insurance governor in recent memory, waits in the wings.

Scott’s popularity ratings have consistently ranked in the low to mid-30s throughout his first two years in office. In a recent Quinnipiac University poll, only 36 percent approved of the job Scott is doing and 52 percent said he does not deserve a second term.

Insurers, however, give Scott high marks for his leadership on insurance issues such as reforming no-fault, pressuring Citizens to depopulate and changing the political landscape to make it more appealing for companies to do business in the state.

Karlinsky said that Scott deserves high marks for creating the conditions that have led to hundreds of thousands of policies being removed from Citizens.

“I think the biggest risk of doing business in Florida was the political risk,” said Karlinsky of the reluctance of insurers in the past to take Citizens policies. “Scott understands the companies and under him more companies think the right thing will be done for consumers and insurers.”

Meanwhile, former governor Crist, one of state’s most popular politicians, is weighing a run as a Democrat after having bolted the Republican Party during his unsuccessful 2010 campaign for the U.S. Senate.

How large is the specter of a Crist run for governor? Said one insurance representative commenting on the mood of the lobbying corps, “Some people are almost resigned to him running and being the next governor.”

Grady said that Crist’s chances may hinge on whether he can get through a primary that could feature other Democrats including former Chief Financial Officer Alex Sink, who lost to Scott by just 60,000 votes in 2010.

There is also the question of whether voters will believe Crist’s political transformation from Republican to Independent to Democrat is just three years.

“There is a truth test of whether he is what he presents himself to be,” said Grady. “But Crist will have ample ammunition and the governor’s numbers are where they are.”

Topics Florida Carriers Legislation