Lawmakers pass hurricane insurance bill; Florida homeowners should see savings

Gov. Charlie Crist congratulates House Speaker Marco Rubio after Monday's session closed. House of Representatives photo by Mark Foley.

TALLAHASSEE — Relief is on its way to Florida’s long-suffering insurance customers. Maybe.

A nearly unanimous Legislature Monday passed a massive insurance reform bill that provides some help for insurers and some heartburn as well, while promising rate cuts to consumers. The bill now goes to Gov. Charlie Crist for his signature.

Legislators say the bill should reduce homeowner insurance premiums by an average of 21.8 percent for customers of most private insurance companies; the savings drops down to an average of 7 percent for State Farm customers. Customers of Citizens Property Insurance Corp., the state’s insurer of last resort, should see cuts of 17.7 percent to 18.7 percent on average.

“This is meaningful rate reduction,” said Rep. Jack Seiler, a Democrat from Wilton Manors who was one of the members who presented the bill on the House floor.

Other lawmakers weren’t convinced that bill, the product of negotiations between the House and Senate that ran Saturday, Sunday and early Monday,  will deliver any help at all.

“What happened this weekend was cosmetic surgery when we needed heart surgery,” said Rep. Susan Bucher, a Democrat from West Palm Beach. “What this offers is maybe 5 percent, maybe as much as 20 percent of savings to rate payers when they’ve been hit with triple-digit rate increases. I guess it’s better than nothing.”

Rep. Dick Kravitz, a Jacksonville Republican, said he had “major philosophical problems” with the bill, especially with the prominent role state-run Citizens is given. And it may not offer quite the relief that homeowners might like. But in the end he defended the bill as a “major step in the right direction.”

Others said more needs to be done when the regular legislative session begins in March. “I hope as we go through the next session, we don’t sit on our laurels and think we’ve solved the problems,” said Sen. Durell Peaden Jr., a Republican from DeFuniak Springs. “Certainly, we shouldn’t wait until the next big disaster to make the progress we were to do this week.”

On the positive side for insurers, the bill expands the use of the Florida Hurricane Catastrophe Fund, a pool of money that insurers can tap in order to pay storm-related claims. Because the state runs the pool, it’s cheaper than the reinsurance carriers buy in the market. That’s also where the bulk of the projected savings come from for consumers.

On the other hand, the bill temporarily denies insurers the ability to raise rates through what’s called use-and-file, where companies put the higher premiums into effect before regulators have the chance to review them. Typically, the process works the other way around, where companies get state approval before billing customers with the new the rates.

The bill also prohibits “cherry picking,” where companies that sell both car insurance and homeowners policies nationally only sell car insurance in Florida. Under the new those companies will have to sell both lines in Florida or leave the state altogether.

Under the bill, consumers will have more flexibility to tailor their policy to their liking. They can, if they chose, not have the contents of their homes covered. They can choose higher deductibles or they can chose not to have any hurricane coverage at all.

What the bill does:

• Makes it easier for insurance companies to tap the Florida Hurricane Catastrophe Fund by reducing the industry’s retention, or deductible, to $3 billion. The Cat Fund is a essentially a pool of money that provides insurers cheaper money to pay claims than they can get in the private market and is key to lowering rates.
• Expands the amount of coverage available through the Cat Fund to $28 billion; the state can up that amount to $32 billion.
• Prohibits companies from so-called cherry picking, where companies sell auto and homeowners insurance in other states but only sell auto coverage in Florida. Under the bill, those companies will be required to sell homeowners in Florida if they want to continue selling the more profitable auto coverage.
•   Suspends for two years so-called use-and-file rate increases, where insurers implement rate hikes before they’re approved by state regulators.
• Suspends for two years the use of arbitration as an avenue of appeal for insurance if state regulators reject or reduce a request for a rate hike. Historically, arbitration has favored insurers.
• Gives consumers flexibility in setting higher deductibles.
• Allows consumers to go eliminate coverage on a home’s contents as another means of reducing premiums.
• Allows consumers to go without hurricane coverage if they choose.
• Prohibits companies from earning “excess” profits.
• Requires an “oath of truth” from insurance companies when they make a rate filing. The document must be signed by a company’s chief executive or chief financial officer and its actuary.
• Makes $350 million in grants available for homeowners to strengthen their homes against hurricanes, an increase of $100 million over the amount now available.
• Repeals a 56 percent rate hike that Citizens Property Insurance Corp. enacted late last year in response to a legislative mandate. It delays a second Citizens hike until 2008.
• Allows Citizens to offer full homeowner policies in high-risk, coastal areas. Citizens now offers only windstorm coverage.
• Requires Citizens to set rates that are “actuarially sound.” Now, Citizens must charge rates are higher than what private companies offer.
• Allow condo, homeowner and mobile homeowner to form self-insurance pools.
• Requires insurers to give a minimum of 100 days notice when they decide not to renew a customer’s policy.