Fla. Legislators Hammering Out Property Insurance Regulations, Changes

March 25, 2005

Major changes in Florida’s property insurance system are being mulled over by Florida lawmakers after the House and Senate have both been wrestling with the topic and have now hammered out changes to tighten up the insurance regulations and requirements.
Holding down rates and at the same time making sure insurance companies continue to sell policies in the state are a priority according to Senate Banking and Insurance Chairman Rudy Garcia, R-Hialeah.

“Affordability and availability is the driving force” of what legislative leaders want, Garcia told the Daytona Beach News-Journal.

Some of the proposals would directly affect policyholders, such as offering a choice of deductibles and changing the rate-setting process for the state-run Citizens Property Insurance Co., a last-ditch program for homeowners who can’t find private insurance. Other proposals, however, are more arcane, such as making it easier for insurers to tap into the state catastrophe fund.

One of the most difficult issues likely will be reforming Citizens Property Insurance, which has more than 800,000 customers in high-risk areas. Volusia and Flagler counties have a relatively small number of those customers, about 22,000, but that amount has grown during the past year.

Hurricane damages last year caused Citizens to run up an estimated $525 million deficit, according to a recent analysis. That likely will lead to insurance customers throughout the state — not just those with Citizens policies — getting hit with higher insurance bills to make up the deficit.

House and Senate proposals released this week call for revamping the way Citizens’ rates are set in parts of the state where private insurance companies have stopped selling policies. Currently, Citizens is required to charge higher-than-market rates as a way to try to attract private insurers into those areas.

But the House and Senate proposals would scrap that requirement in areas where it is clear private competition doesn’t exist. Garcia and other lawmakers argue that Citizens customers should not be forced to pay more if private insurers won’t come into the areas.

The insurance industry, however, objects to the idea, saying it goes against the state’s long-running effort to get customers covered by private companies. Also, lobbyists said Citizens could face even larger deficits after future hurricanes if it lowers rates.

“Why would we encourage more policies to go in?” asked George Grawe, a lobbyist for Allstate Floridian.

Along with trying to reform Citizens, lawmakers also are considering changing the system of hurricane deductibles. That became a controversial issue after the hurricanes as many homeowners discovered that they faced 2 percent deductibles, as opposed to flat amounts such as $500.

A Senate proposal released this week would require companies to offer hurricane deductibles of 1 percent, 2 percent, 5 percent and 10 percent to most homeowners. But insurance companies said offering 1 percent hurricane deductibles would increase their financial risks, likely causing them to sell fewer policies.

According to the News-Journal, lawmakers also are considering proposals unrelated to the hurricanes, including setting up a system to deal with sinkhole claims. Sinkhole damages have driven insurers out of some areas north of Tampa and have become a high-profile issue in Southwest Volusia, where at least six sinkholes have opened over the last few months.

A House proposal spells out a detailed process for evaluating sinkholes and resolving disputes between homeowners and insurance companies. Garcia said the Senate also is working on a sinkhole-related bill.

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