News Details
Legislature OKs insurance bill
05/02/08 -
TALLAHASSEE, Fla. – May 2, 2008 – Faster payments of undisputed claims and an extension of the freeze on rates paid by customers of state-run Citizens Property Insurance Corp. are among the mandates contained in a property insurance deal between House and Senate Republicans.
Described as “consumer defense” legislation, the measure cleared the Senate on Thursday and was sent to Gov. Charlie Crist, who is expected to sign the bill into law.
In addition to increasing the state’s regulatory grip on private insurers, the measure would help private companies by offering them $250 million in matching funds for taking policies out of Citizens, thus reducing Citizens’ exposure.
The bill’s strongest consumer protection, however, may be the requirement that it pay the undisputed portion of a claim within 90 days, said Sen. Jeff Atwater, R-North Palm Beach, the bill’s Senate author. Companies that don’t pay on time could then be sued by the homeowner.
Insurance companies “have historically held out, hoping the person would give up or get tired and just take a lower amount,” Atwater said. “Now there’s going to be pressure to get that check in their hands.”
Pressuring private insurers
Under the bill, the freeze on Citizens’ rates would be extended through the end of 2009. Last year, the Legislature and Crist froze Citizens’ rates through the end of this year, a move designed to pressure private insurers to lower their rates.
But Citizens’ rates aren’t high enough to pay the claims resulting from a major hurricane. Extending the freeze for another year would expose all Florida policyholders to further assessments should a major hurricane hit the state. That’s because when Citizens runs a deficit, the loss would be made up through assessments on all auto and homeowners policies in Florida.
The risk of “tremendous” assessments led Sen. Jeremy Ring, D-Fort Lauderdale, to vote against the bill.
“Citizens’ rate freeze means Citizens, for another year, is not actuarially sound,” Ring said. “We’ve already had a two-year bet that we’re not going to have a big catastrophic event. I’m not willing to take that bet for a third year.”
The bill also bans the use of an arbitration panel, which companies have used to bypass regulators to get higher rates, Atwater said. Eliminating the arbitration option “places that ratemaking decision back in the hands of the regulator,” he said.
In the past, national insurance companies have raised their rates based on hurricane-loss models not approved by the state. Atwater’s bill would prohibit that practice.
“The largest national players utilized models that weren’t approved by the state,” he said. “They submitted rate requests that were far beyond what the models allowed for.”
In the long run, the bill would lead to lower premiums, Atwater said.
“We didn’t force a mandated rate rollback,” he said. “But if you force the models that have to be used and you eliminate arbitration, you’re going to see lower rates.”
Increasing fines, notification
Sen. Al Lawson, D-Tallahassee, said the bill would discourage private insurers from writing new policies and shouldering more hurricane risk. He criticized a provision that allows Citizens to insure homes worth up to $2 million, properties the private market could be writing policies for.
“There are a number of companies that would like to come to Florida and only write high-end policies – $1 million and above,” Lawson said. “How will those companies be able to compete against Citizens? Citizens is not charging actuarially sound rates.”
But high-priced homes represent a stable source of income for Citizens because those customers pay bigger premiums and report fewer losses, Atwater said.
“What we’re trying to do is make Citizens more self-reliant,” he said. “These homes have a far less loss ratio than more modestly insured homes.”
In addition, the bill would:
• Double the fines regulators can levy against insurers.
• Prohibit insurers from rejecting or adjusting claims based on a customer’s race, education, income level and other personal characteristics.
• Increase the notice companies must give to policyholders they plan to drop, from 100 days to 180 days.
Originally, the Senate bill would have prohibited companies from establishing rates and seeking approval from state regulators months or even a year later, which is allowed under Florida law. But the provision was removed during negotiations with the House. Atwater pledged to reintroduce the provision next year.
Copyright © 2008 Tampa Tribune, Fla., Russell Ray. Distributed by McClatchy-Tribune Information Services.