Work begins on major insurance bill

Published: Tuesday, January 25, 2011 at 8:55 p.m.
Last Modified: Tuesday, January 25, 2011 at 8:55 p.m.

TALLAHASSEE -- For the third year in a row, Florida lawmakers are looking to help the state's property insurers. And this time -- with a more business-friendly governor in office -- they could succeed.

How far lawmakers will go is unclear, but this week they began work on a major insurance bill, with more likely to follow between now and the end of the 2011 session in May.

Many GOP legislators argue that former Gov. Charlie Crist opposed the "free market" and that the state's insurance market remains battered and fragile because insurers cannot charge what it really costs them to do business.

Sen. J.D. Alexander, R-Lake Wales, says Crist and state regulators "suppressed" rates the last four years.

"We have overregulated in this particular area," said Sen. Ellyn Bogdanoff, R-Fort Lauderdale. "The only thing I can really say is that the ratepayers of this state will only benefit if the free market returns. What we are doing is not working."

A yearlong Herald-Tribune investigation found that the huge price increases paid by Florida homeowners have little to do with regulation. Instead, the cost of insurance has been driven largely by an increasing reliance on offshore reinsurance — coverage insurers buy to cover their own losses — that is largely unregulated and untaxed.

The Herald-Tribune reported in its series last year that reinsurance companies use a pricing system designed to thwart market competition.

Many Florida insurers have been allowed to operate with so little capital of their own that they are completely at the mercy of reinsurers and what those companies charge.

After two straight years of hurricanes, state lawmakers in early 2007 enacted broad changes intended to stabilize the market and prevent skyrocketing hikes in property insurance costs. But attempts to roll back some of those changes later were blocked by Crist.

Crist vetoed two insurance-backed bills, including one that would have deregulated rates nearly entirely for large insurers such as State Farm. Last year he vetoed a bill that would have allowed insurers to raise rates up to 10 percent to cover costs for reinsurance and inflation.

So far, the first major insurance bill this year does not include similar rate measures. But it includes plenty of other items intended to help keep down costs for insurers. The bill had its first committee hearing on Tuesday, but not a final vote.

This year's comprehensive insurance bill would allow insurers to increase rates to help pay for discounts paid to homeowners who add shutters and other features to withstand hurricanes. The measure, SB 408, would let insurers cancel or non-renew policies with no more than three months notice, compared with six months now, and would let insurers change how much they must pay homeowners if their homes are damaged.

The bill would require homeowners to pay for repairs, or pay to replace their personal contents before they could get the full amount paid back to them.

Insurers are also pushing this year for sinkhole insurance changes, saying that claims that started in just a handful of counties north of the Tampa Bay area are spreading across the state. Many of these claims don't involve the loss of a home, but cracks in foundations, walls and ceilings.

Insurers assert that many homeowners are using sinkhole claims to pay off their mortgages instead of repairs. A recent report by regulators, however, found little evidence of fraud.

Sen. Mike Fasano, R-Spring Hill, contended that some of the changes that lawmakers are considering will result in insurers dropping sinkhole coverage completely. He said he was skeptical that many of the legislative changes would help insurers enough that they would start writing more policies in Florida.

"Don't fool yourself," Fasano said. "They will not come back. They will use another excuse, they will use another reason."

Gov. Rick Scott says he wants to fix Florida's insurance market, but he has not issued any substantial proposals. During his campaign Scott said that he wants to scale back the size of Citizens Property Insurance Corp., the state-created insurer that has 1.28 million policies.

Scott also wants to end the authority of both Citizens and a state-created reinsurance fund to add charges to nearly all insurance bills, including auto insurance bills, to pay off major losses after a hurricane.

Sen. Alan Hays, R-Umatilla, said he will likely introduce legislation that would allow private companies to raise their rates without regulatory review and may also push a bill that would make significant changes to Citizens.

"The time has come when the people of Florida have to be told the truth about the property insurance gamble that they have been let into," Hays said.

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