Filed Under:Risk, Captives

Candidates Offer Change for Florida's Insurance Industry

The person who will be sitting in the governor's chair this coming January will face a myriad of challenges, not the least of which is Florida's troubled property insurance market and other insurance-related issues.

The two main candidates seeking to replace Gov. Charlie Crist have made it clear that neither of them plans to be as confrontational with Florida's insurance industry as the current chief executive. Crist, who campaigned on a promise of lower insurance rates, clashed with some of the state's largest carriers and once famously said "good riddance" after State Farm Florida said it was going to pull out of the state.

That does not mean, however, that Chief Financial Officer Alex Sink and Naples businessman Rick Scott are in lockstep on either state or federal insurance issues.

Both Sink and Scott, for example, have starkly different positions on health insurance changes, suggesting that the winner of the election will react differently on how to deal with some of the requirements mandated under the federal overhaul.

Florida Underwriter asked Sink and Scott to answer specific questions covering everything from property insurance to whether auto insurers should be able to use credit scoring. Our goal was to present to our readers a formalized Q&A in which the candidates' positions could be compared side-by-side.

The two campaigns declined to directly answer some of our questions, including what appears to be the "third rail" of political insurance queries: Whether current Insurance Commissioner Kevin McCarty should be retained and whether Florida's chief insurance regulator should be an elected or appointed official.

They did, however, communicate many of their positions to us. What follows is an overview based on the letters they provided and their previously stated platforms. (To see the complete list of questions we sent the candidates, read the extended "From the Editor" online at floridaunderwriter.com.)

Scott: End Citizens and Cat Fund Assessments

In September, political newcomer Scott unveiled a 16-page booklet that outlines his positions on what should be done to Citizens Property Insurance Corp. as well as the Florida Hurricane Catastrophe Fund.

"The current property insurance system is broken and is putting us all at risk,'' Scott's proposal states.

The main thrust of Scott's plan is that the current system -- which allows Citizens and the Cat Fund to place assessments on most insurance policies in the event of major hurricane losses -- is a danger to the state's economy.

"Politics as usual has driven out private insurers and places Florida in a position that, if hit by one big hurricane, could bankrupt all insurers, further damaging -- perhaps beyond repair -- our economy,'' Scott's proposal states. "I want to open the property insurance market back up in Florida so that financially solvent private insurers can compete, allowing consumers to choose what they want from a free market. I want to ensure that Floridians have that choice and not force them into a system that may ultimately not be there to protect them."

Scott said he would like to "eventually" eliminate the assessments for both Citizens and the Cat Fund, although he does not say how long that would take. Scott's plan also does not spell out how either Citizens or the hurricane fund will function without the assessments.

He does call for returning Citizens, which has more than 1 million policyholders, to its role as an "insurer of last resort." Scott said that in order to attract more private insurers back to the state Citizens must not be allowed to compete with private carriers as it does now.

His plan does not list what changes should be made to Citizens. In recent years, the GOP-controlled Legislature gave Citizens the ability to sell both multi-peril and wind-only policies. Lawmakers also eased restrictions on who could buy a Citizens' policy.

Scott said that Citizens should be allowed to charge higher or actuarially sound rates. Currently, Citizens cannot raise its rates more than 10 percent a year for individual policyholders.

In contrast to his statements regarding Citizens and the Cat Fund, Scott has not said much about private carriers. Earlier this summer he told Florida Underwriter that he does not support eliminating review of proposed rates, but he has not said whether he would have supported allowing insurers to raise rates to cover the cost of inflation or reinsurance. Gov. Crist this year vetoed a bill that would have allowed insurers to do that.

Scott's campaign would not give a firm position on the legislation, saying that Scott had "not read the entire bill." They added that there were several items in the bill that Scott thought were "good," but there were also some items that "gave us heartburn."

Scott is recommending lawsuit restrictions, or tort reform, in a number of areas. He wants to limit so-called "bad faith" lawsuits against insurers when they defend or settle claims, insisting that the change will result in lower insurance premiums.

He also wants limitations on product liability lawsuits and on lawsuits against Medicaid providers and doctors who do work on behalf of county health departments.

Sink: Rate Review Is Too Politicized

During her time as chief financial officer, Sink has also raised warnings about Florida's heavy reliance on the Cat Fund and has backed efforts to scale back the size of the fund in order to reduce its exposure.

"I have been an active, vocal advocate as CFO and a Cabinet member for a more comprehensive, responsible approach to lower our state's exposure to risk, encourage more private capital in our state, and better protect Florida consumers,'' Sink wrote in her letter to Florida Underwriter.

But her campaign insists that Scott's plans on both Citizens and the Cat Fund would go too far and would allow unacceptable rate hikes. Sink spokesperson Kyra Jennings said that Scott's plan will hurt families and help big business. Even though Scott's plan is silent on rate regulation for private insurers, Jennings said it would result in higher insurance premiums for everyone.

"It simply boils down to whose side you're on: the consumer's or the insurance industry's -- and Rick Scott is clearly with the big companies," said Jennings in a statement. "In a nutshell, his plan would turn the insurance companies loose to raise rates as high as they want on Floridians."

Sink, however, said that there is still "too much risk concentrated" in Citizens and that it has "grown into a large multi-line insurance company that competes with private companies.

"I will continue to work for the creation of a robust, competitive private property insurance market so that Citizens can return to its place as an insurer of last resort,'' wrote Sink. "This remains an area of concern and an ongoing problem in Florida. I am intent on making sure that the Cat fund and Citizens supplement the insurance market in Florida instead of replace it."

Regarding private insurers, Sink said that rate review has become "far too politicized over the last four years." However, Sink added that she does not believe that rates should be left entirely up to "whatever rate the market will bear."

Instead, Sink said that the Office of Insurance Regulation needs to make fair decisions on rate increases and decreases, to "aggressively monitor solvency," and make its decision-making process "completely transparent." She said she will support removing "regulatory hurdles" so that companies can apply for rate changes and new products in a "timely fashion."

"If we create a regulatory environment that is stable and certain, we can more easily attract new insurance companies into the Florida marketplace,'' wrote Sink.

The Sink campaign has also come out in opposition to Scott's proposal on lawsuit restrictions. Jennings said that Scott's "so-called reform plan would close the door to the courthouse for too many Floridians."

Different Positions on Health-Care Reform

The biggest differences between Sink and Scott appear to be over how to handle and regulate health insurance.

Before Congress passed the federal health-care overhaul, Sink was cautious in answering questions about it. She consistently said health-care insurance was expensive and too hard to obtain.

After health-care reform passed, Sink praised it and said it could help lower the number of uninsured in Florida. Latest figures from the U.S. Census show that as many as 24 percent of Floridians under the age of 65 do not have insurance.

Scott is adamantly opposed to health-care reform. Scott, the former CEO of Columbia/HCA, created a national organization in 2009 to oppose federal health-care reform and he remains outspoken about it.

When asked what should be done to help lower the number of uninsured, he said that the cost of health care needs to be lowered and that would make insurance more affordable. While he has offered no direct proposals to lower the cost of insurance, the economic plan he released this past summer says he would support examining whether or not to eliminate some of the coverage mandates now imposed on most health insurers.

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