Fla. House Passes Bill Intended to Fix Property Insurance Problems

With hurricane season looming just one month away, the Florida House has passed a bill aimed at making sure that if Florida has another bad run of storms there will be insurance companies there to cover people’s homes.

The broad bill is also aimed at encouraging housing upgrades and helping all Florida homeowners absorb the cost of bailing out those who can’t afford private insurance.

Lawmakers say they have been inundated with calls, letters and e-mails from residents who have seen their homeowners premiums spike by double digit percentages. All Florida homeowners are also having extra costs tacked on to their insurance bills to bail out Citizens Property Insurance, the state-created company that covers people who can’t get private insurance.

Going into this year’s legislative session, which ends Friday, lawmakers made finding a solution to the growing insurance crisis one of their top priorities.

They passed the bill 79-40, sending it to the Senate, which has also been working on a solution. The two chambers have some differences in their approaches, but the sponsors of the bills say they’re confident they can work out a consensus by the end of the week.

Backers of the House bill (HB 7225) said it would go a long way toward making Florida a more attractive place for insurance companies, which more and more are refusing to cover property in a state wracked by eight hurricanes in two years and facing the prospect of several more active seasons.

“We know we’re going to be in the line of sight,” said House bill sponsor Rep. Dennis Ross. “We know there’s a limited viable market.”

The measure does several things to make it easier for private insurance companies to do business in the state, primarily by making it easier for them to tap into a state reinsurance pool and easier for them to raise rates.

The prospect that the bill will result in higher rates in the short-term, rather than lower them, was the genesis of most of the opposition to the bill.

Opponents said that for all the bill may do, it doesn’t do the main thing Floridians need: give immediate relief from high premiums.

“The answer to obscene rates can’t be more obscene rate increases,” said Rep. Dan Gelber, D-Miami Beach, who joined other Democrats in calling instead for a statewide hurricane insurance pool to pick up some of the risk of all homes in the state, much the way the federal government insures flood risk. “The one thing we need to do in this legislative session is tell Floridians these obscene rate increases are going to end. This bill isn’t close.”

The insurance industry acknowledges that the measure won’t offer short-term rate relief, but that it may be the only way Floridians will continue to be able to get private coverage.

“They did not pass an affordability bill, they passed an availability bill,” said William Stander, assistant vice president of the Property Casualty Insurers Association of America. “Affordability is still an issue, we know that. But affordability is an issue for down the road.”

Ross also acknowledged that rates in the immediate future will go up whether the Legislature passes a bill this year or not.

“That tide has already turned and it’s happening now,” he said.
But the industry and backers of the bill say that, eventually, more companies doing business here will mean lower rates.

The measure does take one stab at easing the pain for people who are seeing large assessments tacked on to their bills to cover the losses of Citizens Property. When Citizens can’t pay claims, all homeowners get stuck with the bill.

But the House bill would put $920 million of state money into offsetting the Citizens shortfall, meaning lower assessments, about $10 per $1,000 of premium over the next 10 years, instead of assessments that could approach $200 next year alone.

Since people don’t have a choice but to pay that, Ross, R-Lakeland, said the insurance bill was tantamount to a tax cut because of the reduction.

But Democrats argued that it wasn’t much consolation, with underlying premiums likely to continue to head higher.

Gelber pulled out his own insurance bill, and noted that he’ll see a premium increase this year of nearly $7,000.

“The state will cover $973 (of that),” Gelber said. “That’s what you’re calling a tax cut. Look at the rest of it for crying out loud.”

The proposal also would put $500 million into a program to strengthen homes to better be able to withstand hurricane winds.

While Ross said it was unlikely that much of that could be done by the time this year’s hurricane season starts June 1, it was the most critical part of the bill.

Ross said that if Florida homes don’t wilt under hurricane winds, there will be no problem for property insurance companies to do business here because they won’t have to pay out as much in claims.

Stander said that all of the provisions of the bill taken together would eventually bring more companies to the state, although “I don’t know that it will do it tomorrow,” he said.

But it makes the companies already here much more likely to stay, Stander said.

A number of companies have pulled policies out of the state in the last few years, refusing to renew policies even for customers who have never had a claim.

The Senate is expected to take up the bill this week, and then differences would have to be worked out between the two bills by Friday.