Laboring to comply with Gov. Charlie Crist’s call for lowering Florida insurance costs by at least 25 percent during a quick, seven-day special session, both the House and Senate have passed bills promising to do just that and more.
In a 10:30 a.m. conference session today, the Senate bill and five House bills will be placed side by side and lawmakers will proceed with efforts to marry them into one- a process likely to continue through the weekend and into early next week.
Lawmakers have until Monday to come to an agreement; that’s when the special legislative session ends. However, issues could be revisited when the regular session convenes in March.
Both branches have agreed to cut rates by about 25 percent, allow homeowners to reject some coverages and enforce stronger building codes. The also appear to be united in requiring any insurer selling auto coverage in the state to also sell homeowners coverage if they sell homeowners coverage in other states.
The House and Senate have agreed that Citizens should be blocked from raising rates for one year, which would nix both a Jan. 1 hike of 25 percent and a proposed 56 percent increase later in the year. Citizens would also be permitted to charge rates below those of private insurers for the first time.
But they differ over whether and how to expand Citizens Property Insurance Corp., the state-created insurer of last resort that is in fact the largest property insurer in the state, and they approach reinsurance issues a bit differently.
The Senate appears more willing to expand Citizens and let the government assume more risk than the does the House, which appears more worried about preserving private insurance markets.
In terms of reinsurance, the House would make less expensive coverage available to insurance companies on a temporary basis though the state’s Hurricane Catastrophe Fund. To access this cheaper reinsurance, insurers would have to cut rates by 25 percent and pass along any additional savings to policyholders.
The Senate would free private insurers from having to buy some reinsurance by capping their losses at $23 billion, at which point state funds would kick in.
Echoing Gov. Crist’s oft-stated complaint, the House would like to somehow tie Florida rates of national insurers to their national financials, rather than to only their Florida subsidiary’s results. The Senate has shied away from any such provision.
The House also wants more changes to the operations of Citizens than called for by the Senate, including requiring the Department of Financial Services to review the insurer’s insurance agent commission structure and make recommendations for commission standards.
Some insurer representatives, including a senior official of the National Association of Mutual Insurance Companies who said the proposals would only make the situation worse, skewered the efforts of legislators.
“In a desire to find rate relief for homeowners, Florida lawmakers may have unwittingly enacted bills in their respective chambers this week that are possibly illegal and certainly will do nothing to keep some insurers from wanting to leave the state,” said Neil Alldredge, vice president of state and regulatory affairs.
Alldredge said provisions requiring insurers writing homeowner’s insurance in other states to write the same coverage in Florida or requiring auto insurance-only companies to now write homeowners is “absurd” and “may be unconstitutional as well.”
“This is like suddenly telling an electrician that he now also has to become a plumber,” Alldredge said.
Alldredge also objected to other provisions, many of which are contained in the House bills. They include forcing insurers to place a 90-day time limit on paying claims after a storm, prohibiting insurers from denying coverage based solely on the age of a home, or requiring insurers to factor the profits of national affiliate companies into rate filings and prohibiting “excess” profits by property insurers.
“This everything-but-the-kitchen-sink approach is no way to legislate,” Alldredge said.
“The best outcome would be for lawmakers to throw away their special session bills and agree instead to come back when their regular session begins in March with a plan to formulate a long-term solution instead of this hurried approach,” Alldredge said. “Rome wasn’t built in a day, and solving Florida’s insurance market problems will take longer than a seven-day special session.”
Heading into the legislative session, the Property Casualty Insurers Association of America (PCI), whose members serve nearly two million Florida homeowners, came out in support of some of the proposals that seem to now unite lawmakers, including those to strengthen building codes, broaden the state’s hurricane catastrophe fund, and offer consumers more coverage options.
William Stander, Tallahassee-based assistant vice president and regional manager for PCI, noted at the start of the week that lawmakers are under tremendous pressure to deliver tangible solutions to voters.
“But given the complexity of the issues and the scope of the problem, that will be difficult to accomplish,” he cautioned. “There are no quick fixes to what we are facing.”
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