Lawmakers wrangle more Citizens rate relief

TALLAHASSEE – Jan. 22, 2007 – Lawmakers turned their attention to Citizens Property Insurance Corp. on Sunday, wringing some additional rate relief for customers in the state pool after reaching a broader agreement over the weekend to roll back private homeowners’ insurance rates.
A House-Senate compromise bill goes to the full Legislature today, the last day of the special session tackling runaway rates. It then goes to Gov. Charlie Crist, who on Sunday expressed optimism but didn’t tip his hand as to whether he intended to sign or veto the bill. A breakthrough in negotiations late Saturday brought a deal indicating that Floridians can expect to pay roughly 25 percent less on their insurance bills beginning this summer, although the amount could vary widely depending on location and which company provides the coverage. A cross-section of sample companies that the state Office of Insurance Regulation tested with provisions of the new legislation reported that rates would fall anywhere from single digits to more than 30 percent. When it appeared Sunday that Citizens’ customers wouldn’t do as well, lawmakers went back at the legislation and tweaked the bill to provide a rollback of about 20 percent for those in the state pool. “We’ve delivered very, very substantial rate relief – higher rate relief than any of us thought possible a month ago,” said state Sen. Steven Geller, D-Hallandale Beach, an architect of the Senate bill. Late-night and weekend arm-twisting settled a key provision of the bill – expanding the Florida Hurricane Catastrophe Fund to provide more and cheaper state-backed reinsurance. The cost of reinsurance in the private markets had been identified as a key driver in Florida’s soaring rates. Lawmakers were clearly pleased with the outcome of the special session. “In seven days, this is as good a work product as you could produce in that period of time – one that exceeds all expectations,” House Speaker Marco Rubio, R-Miami, told members of the conference committee that reconciled the chambers’ separate bills. “It is meaningful, and it is responsible.” Homeowners say it’s not enough. But a Pasco-based organization of Citizens customers said the “volleyball games” being played in Tallahassee were falling short. The group Having Affordable Coverage said early Sunday that it would lobby Crist to veto the legislation “and send them back to work on a plan that provides ‘meaningful’ decreases like he promised.” Even Sunday’s effort to increase the rollback for Citizens customers “isn’t really enough to help these people whose bills have jumped 300 percent,” said Imogene Arnold, an HAC member from Port Richey. The insurance industry, meanwhile, also weighed in against provisions in the legislation. Justin Glover, spokesman for State Farm, said the company applauded the effort to provide additional catastrophe fund reinsurance, but criticized what he called “punitive” measures such as those that prohibit excess profits and require more detailed information about premiums and profitability for customers. “To the extent you’re taking punitive steps to an insurance market that paid $37 billion worth of claims over the last two devastating hurricane seasons, we think you’re looking at the wrong enemy,” Glover said. “The enemy is the weather, it’s not insurance companies.” $16 billion more in ‘cat fund’. Both chambers had their own proposals to provide additional reinsurance, a backstop for private insurers for catastrophic damages. Currently, private insurers are on the hook for the first $6 billion in storm damages. Then the state catastrophe fund kicks in, covering losses to $16 billion. The new legislation provides a potential $16 billion more in “cat fund” coverage, which can be purchased by insurers at below-market rates. The savings from buying state-sponsored coverage must be passed along to consumers under the new law. In settling another impasse between the two chambers, lawmakers also allowed Citizens to write multiperil policies in its high-risk account areas. That is expected to allow the state-backed insurer to spread its risk to other lines and lower rates. Citizens customers benefited further from Sunday’s wrangling, as lawmakers lowered a threshold of catastrophe fund coverage required in the state pool; broadened the base of policies that will be required to make up any Citizens shortfall; and eliminated a cash buildup program. Those measures yielded modest rate rollbacks from a single percent to 5 percent, but as a whole, they pushed the expected savings on Citizens’ policies from 10 percent to nearly 20 percent. “I didn’t think that went far enough,” said state Rep. Jack Seiler, D-Wilton Manors, who pushed to increase savings to Citizens customers beyond the 10 percent level achieved Saturday. “I was very adamant that we needed more rate relief.”
The legislation also repeals a 25 percent Citizens rate increase that took effect Jan. 1, and a 56 percent increase scheduled to come in March. Ambition met reality. Lawmakers arrived in Tallahassee on Tuesday of last week with grand visions of massive rate rollbacks. Their populism was tempered by the reality of cause-and-effect in the extremely complicated insurance industry. Some consumer-friendly measures, such as forbidding companies from running Florida-only subsidiaries, were eventually dropped.
Under other provisions of the bill:
• Homeowners can exclude windstorm coverage from their policies with the approval of their mortgage holder. And they can reject coverage for the contents of their homes.
• Insurers cannot deny coverage based solely on the age of a home; it would require consideration of wind resistance.
• Insurers who offer auto insurance in Florida and homeowners insurance elsewhere also must provide homeowners’ coverage in Florida.
• Hospitals and community associations could pool and self-insure.
*Information provided by the Tampa Tribune and the Florida Association of Realtors®