Senate panel urges tough legislation on Florida property insurers

Sweeping changes target rate hikes, dropped policies

Article Courtesy of The Sun Sentinel

By Julie Patel
Published March 14, 2008

A special Senate panel that grilled insurers last month about how rates are set proposed sweeping property insurance changes on Thursday.

Sen. Jeff Atwater, R- North Palm Beach, and Sen. Steve Geller, D- Cooper City, announced 16 recommendations from the Select Committee on Property Insurance Accountability, which was formed earlier this year to investigate why insurance rates have not declined as much as expected in response to massive property insurance changes last year.

The proposals, some already filed as bills, include raising penalties for insurers that violate state laws and holding the industry accountable to state anti-trust laws. Most of the ideas build on last year's changes or close loopholes that became apparent during the February hearings.
"This legislation represents the first steps in a real homeowner's bill of rights when it comes to property insurance in Florida," Atwater said in a statement Thursday. "Changes in insurance are coming, and they are coming fast."

It's unclear how far the proposals will go, as legislators are intensely focused on the budget.

Even Geller concedes some of the recommendations are "controversial."

Sen. Jeff Atwater, R-Palm Beach Gardens (left) and Sen. Steven Geller, D-Hallendale Beach, co-chairs of the insurance regulation committee.

"It is too big a package in my mind to pass," he said Thursday. "But if we can get half of it, I'll be very happy."

The recommendations come as the House insurance committee on Thursday approved a bill, HB 983, which would undo some of the changes passed last year. The proposed legislation, for example, would cut the state's hurricane catastrophe fund, after legislators last year voted to expand it.

Insurance industry representatives say the changes may have the unintended consequence of driving more companies out of Florida, which they already consider hostile to the industry. The recommendations ... fly counter to so-far successful efforts by the state to attract new insurers to Florida," said Sam Miller, executive vice president of the Florida Insurance Council.

The recommendations culminate months of battles between the state and insurers over rates. In December, Gov. Charlie Crist recruited a team of attorneys to explore suing insurers over rates. The next month, Insurance Commissioner Kevin McCarty briefly suspended Allstate Insurance Co. and nine affiliates from doing business in the state; the ban is now pending an appeals court decision. And last month the special Senate committee held three days of hearings to explore why insurers haven't passed savings on to consumers.

"It looks pretty bleak right now," said Mark Delegal, a lobbyist for State Farm, which informed regulators last month that it would essentially stop selling new homeowners policies in the state. "You can make all the rules in the world and business will find a way to survive around them or they'll die."

Atwater said the February hearings demonstrated that insurers were in fact "finding loopholes or ways around laws," such as setting rates based on excessive profit margins and unapproved methods of predicting risk. While the special Senate committee did not vote on a list of proposals, some of the bills Atwater and Geller recommended to Senate President Ken Pruitt on Thursday would:

• Allow regulators to block rate hikes and bar insurers from using arbitrators if they disagree.

• Prohibit insurers from buying more reinsurance, or backup coverage, than they need.

• Require insurers to use risk prediction methods that are approved by the state when calculating rates

• Allow regulators to establish guidelines on what are considered excessive profit margins, a factor insurers use to set rates.

• Impose a moratorium on insurers dropping policies after a hurricane.

Senator Bill Posey, chairman of the Banking and Insurance committee, said he supports most of the reforms, and Pruitt vowed in his opening statement to the Senate to "move aggressively forward" on insurance reform.

"We are going to keep the pressure on, we will continue to get answers, and we will change the law if needed to ensure that consumers in Florida get the rate reductions that we intended for them," Pruitt said last week at the kickoff of the legislative session.

On the other side of the Capitol, proposals backed by key leaders such as House Speaker Marco Rubio, R- West Miami, focus less on rate relief than on saving consumers money later, if major hurricanes strike, wipe out state insurance funds and leave Florida residents to foot the bill.

Ideas that have bipartisan support include loans, grants and sales tax exemptions to help consumers hurricane-proof their homes and loans to small insurers to help them grow to replace some of the major companies retreating from Florida.

More than 219,000 homeowner policies with Allstate Floridian, State Farm Florida and Nationwide or their affiliates were canceled or not renewed last year, according to reports from the Office of Insurance Regulation.