Insurance reforms advance in Legislature


Published: Thursday, January 18, 2007 at 6:01 a.m.
Last Modified: Wednesday, January 17, 2007 at 11:57 p.m.

TALLAHASSEE — With unanimous votes masking a "cross your fingers" future, lawmakers trudged toward a revolutionary expansion of the state's involvement in the property insurance business Wednesday.

None of the 160 lawmakers in the House or Senate voted against the complex plans that will likely reduce property insurance rates in the near future, but will also put the state in a precarious position of paying billions if major storms hit Florida.

House and Senate leaders now will meet to hash out differences for a final vote by the scheduled end of this special session on Monday. Most of the differences are technical, but others centering on how deeply the state should get into the insurance business are more complex.

The Senate and Gov. Charlie Crist want to allow state-run Citizens Property Insurance more freedom to sell policies around the state, including profitable areas like fire and theft that would allow Citizens to make money and offset its current debt.

The House has only agreed with the Senate to freeze Citizens' rates, repeal pending rate hikes and repeal the law requiring Citizens to have rates higher than private insurers.

House Speaker Marco Rubio, R-West Miami, said that Citizens was only intended to be the insurer of last resort for a few Floridians, not the largest insurer in the state that it has become. And Citizens' previous problems in paying claims, dubious business practices and lackluster customer service make expanding the business a hard sell in the House.

"If you believe that the model you have is a broken one, how can you add on to it," Rubio said.

The other major difference centers on the state's Catastrophic Fund, a pool of money filled by all property insurance customers that is used to pay insurers during times of major storm damage and losses.

Currently, the fund begins paying insurers if damages hit $6 billion in one year and will pay up to $22 billion.

The Senate, with the approval of Crist, wants the state to keep the $22 billion cap and pay for most damages up to $45 billion. Taxpayers would have to cover up to about $17 billion in costs from a mega-hurricane, without charging insurance firms a fee. Senators say that plan could save homeowners roughly 30 percent.

The House has countered with a plan to raise the $22 billion cap to $28 billion and allow insurers to tap the fund when losses hit $3 billion if state officials and lawmakers agree. House members say that would allow for a 30 percent-plus reduction of property insurance rates.

Early in the day, senators mocked the House's claim that it would reduce the windstorm portion of insurance by 65 percent for some.

"I have no comprehension of that," said Sen. Steve Geller, D-Hallandale Beach, who put together parts of the Senate plan. "If there's something that they know that we don't understand, we're in."

But there was little acrimony that is usually part of House and Senate tussles, with the highly unusual act of unanimous votes in both chambers from both parties on a controversial issue. "There's massive confusion right now," Geller said of remaining differences. "What's encouraging is we now are on the same page."

Whatever compromise is reached, all of the state's taxpayers and property insurance policyholders will face more risk of paying billions of dollars in case of a major storm season.

But lawmakers, bolstered by Crist's promise to cut rates, say the choice was necessary.

"What you're faced with is really a choice between definitely paying higher premiums and potentially paying higher assessments if you get hit by a storm," Rubio said. "Given those choices you're always going to choose what you're potentially going to have to pay."

Crist downplayed the risk of billions of dollars in taxpayer obligations in case of a major storm, saying such losses were unlikely. Asked if the plans put the state "on the hook" for massive payouts in the future, Crist said that property insurance policyholders are "on the hook now and we need them off the hook. They are suffering extreme rate increases and we have a duty and an obligation to give them relief."

Lawmakers are close to agreement on two of Crist's campaign proposals. One would force insurers that offer property insurance in other states but only offer policies such as auto in Florida to also offer property insurance in Florida.

Not everyone agreed with the plan.

"You do something wild and crazy and you end up with a property insurance crisis and an auto insurance crisis," said Sen. Bill Posey, R-Rockledge.

The other Crist proposal would eliminate Florida-only subsidiaries owned by national insurers that set rates in the state without factoring in national profits.

Lloyd Dunkelberger of the Sun Tallahassee Bureau contributed to this story.

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