House and Senate leaders are moving toward agreement on legislation that would:
- Allow the state-backed Citizens Property Insurance Corp. to raise its rates annually by by as much as 10 percent for some individual policyholders. Lawmakers imposed a Citizens rate freeze in 2007.
- Reduce the size of the state hurricane catastrophe fund by $12 billion, returning it to the $16 billion level of 2007. Lawmakers had nearly doubled the so-called CAT fund in 2007 in effort to drive down rates by providing cheaper backup insurance to private companies. The reduction could lead to rate hikes up to 3 percent for many Floridians.
- Allow state officials to use pension funds to buy bonds if the CAT fund cannot raise money otherwise following a major hurricane.
The bottom line means higher property insurance rates for many Floridians, although the state will reduce its risk - as well as the taxpayers' - in the event of a catastrophic storm season.
For the more than 1 million Citizens customers, they will face annual rate increases up to 10 percent beginning on Jan. 1, although the statewide average is expected to be in the range of 5 percent.
Customers of private insurance companies will pay as much as 3 percent a year in higher rates as the state reduces the size of the CAT fund over the next six years.
Rates will rise because the insurers will have to buy more costly reinsurance from the private market to replace the CAT fund backup.
Sen. Mike Fasano, R-New Port Richey, who supports keeping the Citizens rate freeze, said he would oppose the bill if it allows the company to raise its rates by as much as 20 percent.
"The constituents in my area could not afford a 20 percent rate increase," Fasano said.
The Senate bill filed late Tuesday capped the Citizens rate increases at 10 percent, with industry officials saying that should translate into a statewide average increase of about 5 percent.
But the bill would allow Citizens to raise its rates annually until they become "actuarially sound."
UNREALISTIC?
Citizens' current rates have been criticized by others as being unrealistically low, meaning that if Florida were hit by a big storm, Citizens' deficit would have to be made up by state taxpayers or by surcharges on private insurance policies - which is what happened following the hurricane seasons of 2004 and 2005.
Rep. Ron Reagan, R-Sarasota, who has been involved in the insurance bill negotiations, said lawmakers were keeping the "ultimate cost to our consumers" in mind as they put together the bill.
But the legislation is also driven by the belief that neither Citizens nor the CAT fund could pay off their claims after a major storm.
Questions about the CAT fund - which may be as much as $18 billion short if it had to pay out $28 billion - have been raised by rating agencies putting into question the viability of many Florida insurance companies that rely on the fund for their backup coverage.
"The reality is simply this: we're in a position if we were to have a catastrophic storm today, we can't pay the bill," Reagan said. "We need to get ourselves into a position where we can pay people's claims."
INDUSTRY SUPPORT
Insurance industry lobbyists said they supported the efforts to make Citizens and the CAT fund more financially viable.
"Everyone knows what the Legislature has to do," said Sam Miller, a spokesman for the Florida Insurance Council. "The CAT fund needs to be made real again. "
Miller called the emerging insurance bill "a comprehensive effort of dealing with the crisis that we are in."
For some, the Legislature's move to scale back the 2007 property insurance reforms - which were aggressively pushed by Gov. Charlie Crist in his first month in office - is a vindication of their argument that lawmakers pushed the state too far into the private insurance market.
ROSS PRAISES MOVE
Former state Rep. Dennis Ross, a Lakeland Republican, who was stripped of his post as House Insurance Committee chairman in 2007 after he opposed the legislation, said he welcomed the moves to increase Citizens' rates and reduce the size of the CAT fund.
Rate increases are to be expected with the end of the freeze, but they will go down, Ross said Tuesday.
"Anytime you remove price controls the cost will spike," Ross said, "but as more companies move in those prices will drop because of the increased competition."
"That has been the gist of my argument all along," said Ross, who currently is running for Congress. "The hardest thing politically is that prices may have to go up initially as the economic cycle rights itself."
COMMENTS
1. People that choose to live on the beach should pay their on way. I know one thing I won't be voting for this governor in the next elections.
2. Even inland, people pay outrageous rates while the insurance companies get richer and richer. Insurance companies shouldn't be allowed to have special FL divisions. If they are a nationwide carrier, Florida should be part of the rest of the nation since they don't have special NH divisions or CA divisions.
3. Nice to see Dennis Ross is finally being recognized for being right all along. If another major storm hits or if three hit during a six week period like Jeanne, Francis and that other guy, Florida taxpayers would be on the hook like you wouldn't believe. Mr. Ross was absolutely correct. Governor Crist was dead wrong. People who think insurance companies are getting rich are just plain ignorant. Let State Farm raise their rates as much as they want. If people choose to pay the higher rates and stay with State Farm, let them. If you let the insurance companies set their own rates, the ensuing competition would actually drive rates down. There are many good companies still writing homeowner's policies in Florida that have rates well below State Farm and Citizens. Let the consumer decide. Also, can we do away with the special Florida divisions of insurance companies? A previous poster was correct. The insurance companies should put all of their claims into one big pot. Sure am glad Mr. Ross is running for Congress. Probably kept Paula Dockery out of it and that's a good thing.
4. So you would be happy to pay for the california mudslides & earthquakes, the midwest ice storms and tornados as well as the northern blizzards, and the hurricanes that can hit the carolinas, the flooding in places like ND and other places in the midwest? On top of the Florida hurricanes?You would have no problems with this? One argument people here use is that before 2004, there were very few hurricanes. So why did rates go up? (despite the fact that property appraisels also went up. But why introduce logic to people who think something should be free or close to it) But imagine if your rates went up because of a mudslide in California, or a atornado that flattened a town in Oklahoma or a flood that washed away parts of Missouri. Some people here would be crying 'But why should my rates go up because of something that didnt happen to or near me?'. Wah wah wah.You dont like it, then except in cases where it is illegal to do so, dont get insurance. Or get the base minimum. Put all that money youre saving into something like stocks or some other money making fund, and handle your own disasters yourself.Or feel free to go to Billy Bob's insurance world, who is brand new in the state and taking on more policies then it can handle. Then if something occurs, you can hope you actually get paid in a timely fashion.
5. So what do they intend to do with this $12 billion? There's no mention of this in the article. Things that make you go hmmmm...
6. Attorney retainers for all the lawsuits people will file when they dont get paid for their damage.
7. Good point. However, I've always been in favor of a National Catastrophe Fund.
Timeliness of payouts isn't an issue anymore - Emporer Crist instituted a law a couple years ago that requires insurers to pay all claims within 90 days of being reported, or pay interest on what should have been paid (unless the claim is out of the insurer's control, i.e. the policyholder hasn't gotten estimates or moved forward with his/her claim).I agree - go to Billy Bob's Insurance World while you're at the flea market buying your flip-flops, and see if Billy Bob is there with his checkbook when a storm tears off your roof.
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