Florida homeowners could see property insurance rates cut by as much as 40 percent under a plan finalized by lawmakers hoping to reverse hurricane-fueled increases many residents say have threatened to price them out of their homes.
Lawmakers said the wide-ranging proposal is expected to provide savings of up to 20 percent for many of the coastal customers of Citizens Property Insurance Corp., the state-created company that has become Florida’s largest property insurer.
Getting the 20 percent rate reduction would require a number of factors, and the only guaranteed savings across the board appeared to be closer to 5 percent. But many customers will see much larger reductions, lawmakers said.
Rates for property owners insured by private companies are also expected to come down under the plan, which would still need approval from Republican Gov. Charlie Crist.
Crist has demanded that lawmakers send him a bill that will provide meaningful rate relief. He hasn’t specified exactly how much savings the plan would have to provide for him to sign the bill, but he hinted that the proposal that emerged Sunday evening was likely to be up to par.
Noting that his bottom-line standard has been “meaningful lower rates across the board,” Crist said he was “encouraged that’s what we’re going to see.”
Republican Sen. Jeff Atwater, an author of the bipartisan plan, said he was confident that Citizens customers in the high-risk coastal areas of the state would see 15 percent to 20 percent rate cuts when they renew their policies. In addition, lawmakers canceled a 56 percent average rate increase that Citizens customers would have been hit with this year, and they rolled back a recent 21 percent rate hike.
Much of the proposal was hashed out over the weekend, and it was mostly finished Saturday night. But lawmakers worked Sunday to find a way to provide more relief to customers of Citizens Property, which provides the wind coverage for many on Florida’s coasts.
The state-created company was envisioned as a last-resort insurer for those who can’t get private coverage, but it has grown to be the state’s largest property insurer with 1.3 million customers.
Insurers including Allstate Corp., Nationwide Mutual Insurance Co., MetLife Inc. and State Farm have canceled or limited homeowners policies or significantly raised rates in an effort to reduce exposure to future catastrophes since the devastating hurricane seasons of 2004 and 2005, in which insurers lost $36 billion in Florida.
It was unclear how much of a break customers of private insurance companies would get, with wide variations based on where the home is and which company insures it.
State Farm, the state’s second-largest property insurer, said the proposed changes would allow it to offer customers an average savings of more than 14 percent on the wind portion of their premiums. Customers near the coast would see the largest savings because wind coverage is a bigger portion of their premiums.
Insurance industry officials have called many parts of Florida’s proposal “anticompetitive,” saying it makes it harder for private companies to charge rates they need to make it worth doing business in the state.
The industry also says the plan is a quick-fix bailout that puts more risk on the government. The plan increases the amount of backup coverage, or reinsurance, available to private insurance companies through the state’s Hurricane Catastrophe Fund.
“In an effort to deliver on promises of 25-30 percent rate cuts, this reform package transfers the cost of paying for future hurricanes to generations of taxpayers, mortgaging our economic future on the hope that a major storm won’t strike anytime soon,” the Property and Casualty Insurers of America said in a letter published Sunday in several Florida newspapers.
If the catastrophe fund or Citizens Property were to come up short and be unable to pay claims, it would be nearly everyone with an insurance policy who would be hit with an assessment under the proposal.
“No question that we are going to have more risk in the system,” said Democratic Rep. Jack Seiler. “But … with that risk comes greater reward. So if you look at the purpose for which we were sent up here and that was to reduce rates, we’re going to accomplish that.”
The industry has pushed for a plan that relies more on long-term fixes, such as strengthening buildings and houses to reduce losses.
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