Filed Under:Carrier Innovations, Regulation/Legislation

Florida’s Insurance Industry Not Assured of Success in 2011 Legislative Session

Florida lawmakers sauntered into the 2011 session promising to help businesses, end red tape and regulation, and revive the state’s economy.

The Republican-controlled Florida Legislature championed the idea of free markets at nearly every turn in the first few weeks of the 60-day session. However, so far it is clear that the insurance industry may not get everything it wants, even from a decidedly pro-business legislature.

A comprehensive property insurance bill intended to address cost drivers that affect the bottom line of insurers is moving—but not without much debate, controversy and changes pushed by those who say the measure is unfriendly to consumers.

Shifting Political Sands
This is not what the insurance industry expected.

“Over the last year the industry has benefited from hearing from the governor and legislative leaders who came through our conferences telling us that there was a new day in the Capitol,” said William Stander, assistant vice president and Florida regional manager for the Property Casualty Insurers Association of America.

Meanwhile, there are groups out there who have stepped in to fight the insurance legislation—primarily the group that represents trial lawyers. It has been lobbying heavily to stop or at a minimum seriously alter some of the legislative proposals.

Sean Shaw, the insurance consumer advocate under CFO Alex Sink, has blasted many of the proposals under consideration. He agrees that the insurance market is still fragile, but he says there should be a more measured response.

Homeowners can purchase a policy that covers only the depreciated cash value of their home and possessions or they can pay for a policy that will require the insurance company to pay to replace everything regardless of how much it would cost. Richter’s bill would change how insurers pay policyholders with these replacement-cost policies.

His initial legislation called for paying the depreciated cash value; the homeowner would get the rest of what was owed upon completion of the repairs. Florida had a similar process in place until 2005 when legislators mandated the change amid an outcry following a series of hurricanes that hit the state.

Rate Hikes, Citizens, and SB 1330 Are in the Mix
Richter’s bill, however, is far from being the most substantial insurance bill under consideration this year. Florida lawmakers also have resurrected a bid to let insurers raise their rates without much interference from state regulators. This year’s version of the “deregulation” bill would let insurers raise their statewide average rates by 15 percent and individual policyholder rates by as much as 30 percent a year.

Sen. Alan Hays, R-Umatilla, and the sponsor of SB 1330, contends that the legislation is about giving consumers the choice to decide if they want to pay more in premiums in order to keep their coverage with the same company.

percent a year. He said the measure will force the state-created carrier to shrink in size. Citizens has 1.29 million policyholders across the state, including most homeowners who live along the state’s vulnerable coastlines. Lawmakers four years ago made changes to Citizens to make it more competitive with private insurers that were either raising rates or pulling out of the state completely in the wake of eight hurricanes in two years. Initially, lawmakers froze rates for Citizens, but then gave the carrier the ability to raise rates up to 10 percent a year for policyholders.

“Ultimately what I’m trying to accomplish is to get the state of Florida out of the insurance business and return Citizens to being the insurer of last resort,’’ Hays said.

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