The larger the Citizens Property Insurance Corp. becomes, the greater the financial crisis that could occur when a major storm hits Florida, insurers cautioned this week.
That message from the Property Casualty Insurers Association of America didn’t keep the Senate Banking and Insurance Committee earlier this week from approving SB 2498, a bill which makes it easier for the state-run Citizens to compete with the private insurance market.
Senate Bill 2498 would make it easier for Citizens to compete with the private market by allowing consumers to be covered if a private insurer is more than 15 percent higher than comparable coverage from Citizens.
Additionally the bill seeks to prohibit insurers from establishing wholly owned subsidiaries that operate only in Florida. The bill would allow existing Florida-only subsidiaries to continue doing business until their certificates of authority expire.
PCI testified against the bill, highlighting the potential consequences that are associated with what it says is a short-sighted, quick-fix approach to the state’s property insurance crisis.
“We hear the same concerns the governor is hearing and respect him for wanting to address these issues, but with the state’s response we are now heading down a path that could result in all Floridians bearing a much greater cost through assessments and higher taxes,” said William Stander, assistant vice president and regional manager for PCI.
As in the special legislative session in January, Gov. Charlie Crist is seeking to bring lower premiums to consumers by putting Citizens in direct competition with the private market. The governor has said he is intent upon changing the nature of Citizens which was established as the market of last resort.
“Insurers don’t mind competition, but oppose operating in an environment where the state does not have to play by the same rules as private market insurers,” Stander said. “Through its tax-exempt status and artificially suppressed rates, Citizens can undercut the private market. This environment does not encourage insurers to come back into an already troubled market. We are also opposed to the prohibition on the Florida pup companies.
“This operating model has enabled major national insurance writers to continue doing business in the state. By doing away with the pup companies, the state will only make the insurance marketplace less competitive and potentially more expensive for consumers.”
Source: Property Casualty Insurers Association of America
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