Fla. Senate Proposal Would Give Citizens Customers Relief

Customers of the state’s largest insurer, Citizens Property, would be spared a recent proposed 55 percent increase and see their rates frozen for a year under a massive bill proposed Monday by a state legislative committee.

The measure, written by the state Senate Banking and Insurance Committee, is aimed at reining in some of the spiraling costs of insuring a home that have bombarded Floridians since the back-to-back hurricane hits of 2004 and 2005.

Legislators could pass the wide-ranging bill, or at least some of it, as early as next week when they meet in a special session called specifically to deal with the cost of property insurance. Lawmakers took a swing at the problem last year, but critics said the bill passed then didn’t do enough to help consumers and in some ways made the problem worse.

The new proposal could have big changes for customers of Citizens, a state-created company that is the safety valve for people who can’t find private insurance.

The bill would rescind the latest rate increase for Citizens. It would also require the company to charge customers what they were paying at the end of 2006 for the rest of this year.

The proposal would also repeal a change in law made last year that required Citizens to raise some rates. The resulting increase would have been 55 percent on average statewide.

Another key change would let Citizens cover other perils besides wind damage in certain high risk areas. Currently, the company sells wind-only policies in coastal areas where no private insurers operate. The company would like to be able to spread its risk by covering other less-likely losses – like fire – in those areas and thus reduce its rates, which the bill would allow. Private insurers, however, don’t like that idea at all and are likely to fight hard to prevent it.

The insurance issue is the most pressing in the state – tens of thousands of homeowners have been hit with dramatic rate increases – some have seen their premiums more than triple.

Insurers say rates have been kept artificially low for too long. So when the double-whammy hurricane seasons hit, insurance companies couldn’t pay claims. A large business lobby, which includes several insurers, argued last week that anything that quickly lowers rates substantially would simply chase insurers from the state.

But Gov. Charlie Crist, who will be experiencing his first legislative session as governor, reiterated Monday that he wants lower rates.

“I really think that we’re going to have an opportunity to make a difference to people, and you know what I mean by that, I mean lower rates,” Crist said.

A bill hasn’t been filed yet in the House, but negotiators are trying to line up the two chambers, hoping to pass a bill quickly. They’re getting hammered by constituents fed up with the increases.

Crist didn’t comment specifically on the Senate bill, but he said that his ideas and those being discussed by lawmakers were lining up.

The Senate bill would also let some homeowners insured by private companies go without wind coverage if they choose. While that could cut premiums for people who own their homes, most people couldn’t take advantage of it because mortgage lenders require insurance.

Under the bill, however, homeowners could reject coverage for the contents of their home, which could cut premiums.

The bill also would move the state’s insurance commissioner out of the Department of Financial Services and put it in the Office of Public Counsel, which currently advocates for consumers in utility cases.

One thing the measure doesn’t deal extensively with is trying to harden more homes against hurricane damage in the first place. The industry believes that’s where policy makers can try to stave off future losses, which they say could reduce premiums.

Another critical element of the Senate proposal would expand Florida’s Hurricane Catastrophe Fund and allow it to sell cheaper reinsurance to insurance companies in some cases, as long as those insurance companies return the savings to customers with rebate checks.

Insurance companies have said the cost for them to buy reinsurance – backup coverage against large losses – is one of the primary reasons rates have shot up.

The measure would require a study committee look at what can be
done to provide for more homes to be hardened against future
hurricanes. The panel would provide proposed legislation for
lawmakers to consider later this year.