A proposal which would create a single Florida-wide territory map and eliminate individual rate territories based on predicted hurricane risks and expected loss models was removed from House hurricane legislation last week, but the provision remains in the Senate version.
The provision of a state-wide map was suggested because none of Florida’s estimated 200 insurance companies use the same map to determine their rates. Legislators feel that standardizing the rate map would make it easier for consumers to compare insurance coverage from one company to another, and eliminate the current situation in which one homeowner can obtain a standard policy, while his next-door neighbor’s only choice is a policy with Citizens Property Insurance Corp., the state-run insurer of last resort.
According to Dennis Ross, chairman of the House Insurance Committee, the Senate’s version of the bill, which still includes the creation of a state-wide territory map, is a priority. “No one came forward and said we need to keep rating territories in there. It was a clear indication to me that we probably ought not to include it in the bill,” Ross told the Fort Myers News-Press.
The Senate legislation would eliminate the present system, under which insurance companies use proprietary maps to set rates, based on predicted hurricane risks and expected loss models.
Tom Gallagher, chief financial officer, has championed the territory idea.
“I’ve always been in favor of it because it truly gives the consumer an opportunity to compare and it also makes it a lot easier for us to publish what rates are in certain territories. It’s absolutely impossible for us to that now,” Gallagher said.
Industry lobbyists said the proposal is unfriendly to consumers and that it could result in higher rates for some.
“We build our own mousetrap because we think it makes us more competitive. With a standardized, cookie-cutter system, you’re going to take competition out of the system,” Mark Delegal, a lobbyist for State Farm, Florida’s largest property insurer, told the House committee.
Gallagher said there’s no reason for that to be so.
“My attitude is, don’t tell anybody how you do your territories, do ours,” Gallagher said. “We’ll tell you what the territories are and then you price them. We’re trying to give the consumer a fair leg up.”
A single territory map also would make it easier for regulators to see where companies are not writing policies.
The Senate Banking & Insurance Committee meets Tuesday afternoon and is scheduled to vote on its hurricane insurance bill. The House bill was passed by its Insurance Committee last Thursday.
Among other proposals listed by the News-Press in House and Senate committees are:
• Lower the Hurricane Catastrophe Fund deductibles for insurance companies to an aggregate $4.5 billion for any year’s two biggest storms and a third of that for all other storms. The House bill lowers the deductible to $4 billion.
• Set up an expanded low-interest loan program for people to protect their homes from hurricane damage.
• “Clarifies” legislative intent of the state’s valued policy law to indicate a total loss of an uncovered peril pays losses only on the percentage caused by a covered peril.
• Requires insurance companies to reveal to regulators all its assumptions used in computer models involved in rate cases.
• Requires public hearings for any rate increase of 15 percent or more, up from the 25 percent increases that now require public hearings.
• Numerous changes to Citizens Property Insurance, including a $1 million cap on the value of dwellings covered by wind insurance and a provision to set Citizens’ rates actual risk in some cases.
• Creates a commission to study requiring a single “basic” hurricane policy.
• Establishes criteria for regulators to reject property policy forms.
• Requires a checklist on policies spelling out what’s covered.
• Requires insurance companies to offer a 1 percent hurricane deductible among a range of offering and increases the maximum deductible allowed to 10 percent.
• Requires companies to pay replacement costs, when that coverage is included, without depreciation.
• Extends the state’s mediation process to commercial lines.
• Requires companies to tell consumers how they can get discounts for hurricane mitigation efforts.
• Requires companies to make prompt, full payment of claims, within 30 days after proof of loss statement are complete.
• Requires an Auditor General audit of Citizens.
• Clarifies legislative intent in the state’s valued policy law.
• Gives $350,000 for more staffing in the Office of Consumer Advocate.
• Insurance companies that do not “honestly, timely and fairly” take part in alternative dispute methods are guilty of “unfair trade practice.”
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