'05 Hurricanes To Dominate Fla. Leg. Session

Insurance issues will loom large over the Florida state legislative session that begins on Tuesday, when lawmakers will debate changes to the state property insurer of last resort and the fate of the no-fault auto insurance law.

Given the state's experience with major storms over the past two years, property insurance issues are among the main topics for lawmakers.

"As with the 2005 session, the lingering impact of last year's hurricane season is again the driving force behind the property-casualty legislative agenda in Florida," said Cecil Pearce, vice president of the Southeast Region for the American Insurance Association.

At the center of the debate is a bill currently before the state House Insurance Committee that would make several changes to the state's residual market, known as Citizens Property Insurance Corp.

The bill was designed to reform Citizens and try and reduce its growing market share. To reduce the growth of Citizens, the bill would bar it from covering "non-homestead" properties, which are not the owner's primary residence, and would limit coverage on homes to $1 million. Residential property insurers also would be allowed to increase or decrease rates by as much as 10 percent statewide, or 25 percent in any rating territory, without regulatory approval.

Although this is considered a positive provision for insurers, David Reddick, senior state advocacy manager for the National Association of Mutual Insurance Companies, said that it will not necessarily be a part of the final legislative product.

"It is too early in the legislative process to know if this provision will stay in the bill," he said, adding, "Based on past sessions, it's unlikely to survive."

Another provision in the bill is more troublesome for insurers.

"The bill would mandate that the private market both issue and provide claims service for wind policies in the Citizens High Risk Account," Mr. Pearce said. He noted that the AIA "has and will continue to stress to legislators that such a requirement will cause extreme operational and administrative problems for insurers. Also, Citizens has recently announced dramatic improvements in its claims servicing record, making this provision far from necessary."

Mr. Reddick echoed those sentiments, saying that if enacted, the provision "will be problematic for some of our members."

The other major issue facing insurers in the legislature is the fate of the state's no-fault auto insurance law, scheduled to sunset in 2007 and strongly opposed by insurance industry groups.

"It's clear to us that the no-fault system isn't working in Florida," Mr. Reddick said. "The average Florida family is paying at least $250 a year more than it should for auto insurance."

Legislation known as Senate Proposed Bill 7094 has been sent to the state Senate Banking and Insurance Committee, proposing a medical fee schedule for personal injury protection set at a specified percentage above the Medicare fee schedule. It also would eliminate the contingency risk multiplier applied to attorney fee awards.

Hopes that the bill would provide enough meaningful reform to save the no-fault system after lawmakers have gotten through with it remain low, however.

"We know several auto insurers favor the reforms contained in SPB 7094, but once the legislative debate gets under way, the reenactment provisions are likely to be watered down so much that substantive reform isn't going to be possible," Mr. Reddick said.

Mr. Pearce also expressed doubts that the bill would survive as an effective solution.

"The no-fault system is broken, and it is highly unlikely that the legislature will pass a strong package of reforms," he said.