Fla. Legislature Slates January Meetings to Discuss Five Insurance Changes

December 17, 2004

Five major changes in insurance provisions will be examined in January by the Florida Legislature during special joint committee meetings to bolster the homeowner insurance market.

Legislative leaders announced they will consider the following topics: Changing the Hurricane Catastrophe (Cat) Fund to permit insurers to tap the fund sooner; let policyholders choose their hurricane deductible; examine how companies set rates; rein in the growth of the state-backed Citizens Property Insurance Corporation; and how to encourage more private companies to write policies in Florida.

Legislators said the goal of the meetings will be to make sure that the four hurricanes that hit Florida this year won’t drive up insurance rates and hit homeowners in the wallet as happened after Hurricane Andrew.

“There is likely going to be upward pressure on insurance rates in the coming year,” Senate President Tom Lee told the Fort Lauderdale Sun-Sentinel. “This next couple of months is going to be all about trying to figure out how to keep that down to a bare minimum.”

Legislators already have dealt with one post-hurricane problem — that of multiple storm deductibles. Under legislation passed Thursday, the state will set aside $150 million from the catastrophe fund to partially reimburse the more than 29,000 Floridians who paid more than one hurricane deductible.

In addition, the Legislature eliminated multiple deductibles for future storm seasons.

The Department of Financial Services will have rules in place by Dec. 27 on how that money will be given out, Tami Torres a DFS spokesperson said.

Those who paid at least two deductibles will be eligible for up to $10,000. Those who paid three or four deductibles will be eligible for up to $20,000 under the aid package legislators passed Thursday. The application deadline is March 1.

The aid package sailed through the Senate and the House of Representatives, despite objections from some legislators that the money to offset the cost of deductibles came from the catastrophe fund, which will result in all Florida homeowners seeing a .5 percent increase in their insurance premiums for the next five years. For someone with a $2,000 premium, it would mean a $10 increase annually.

That’s on top of an expected rate increase of between 1 and 3 percent that industry officials estimate will be needed to offset the cost of eliminating multiple deductibles.

Now larger, more complex insurance issues loom for legislators. One of those issues, lowering the amount of insured losses that insurance companies are required to sustain before they can use money from the catastrophe fund — also known as the “cat fund” — is a priority for Lee and for House Speaker Allan Bense.

Insurance companies use the catastrophe fund to buy reinsurance, which is coverage insurers buy to help them pay claims after a disaster. But some companies didn’t have enough losses to allow them to tap the catastrophe fund after this season’s storms, so claims were paid from companies’ reserves rather than with catastrophe fund money.

“The Cat fund is proving to be a help, but maybe not enough of a help to keep them from losing [money],” Lee said.

Citizens Property Insurance will also get attention as legislators seek to keep it from growing and find private companies willing to take up the risk it now insures.

The state-backed insurer that writes windstorm policies for those living in coastal areas and also covers those who can’t find insurance on the private market now has more than 882,000 policies and is getting bigger. Sen. Ron Klein, D-Boca Raton, said he hopes to get other insurance topics addressed, such as requiring full public disclosure and justification of insurance company rate increases and making insurance policies easier to understand.

While in the past, such issues may have languished in the Legislature, Klein said he thinks that will change in the coming year.

“This may be a window of time, a window of opportunity, because you’re going to have over the next year or two people from all over the state shaking in their boots and complaining [about their insurance],” Klein said. “It won’t just be a South Florida problem.”

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