Sarasota Herald Tribune
by Paige St. John
May 5, 2011
TALLAHASSEE – A “diluted” property insurance bill that still opens the door for rate increases and greater industry profits with less coverage to homeowners has cleared the Legislature and now heads to a friendly reception from Gov. Rick Scott.
Supporters contend that the final moderated bill approved Thursday evening, while no longer containing steep increases for customers of the state-run carrier and still requiring insurers to offer sinkhole coverage for sale, is a step toward a more stable property insurance market. Opponents countered that consumers will bear the burden.
“The bottom line is, rates are gonna rise,” warned Sen. Mike Fasano, a conservative New Port Richey Republican who turned out to be the industry’s chief opponent this year.
Fasano went down fighting a House-written provision that allows nearly automatic 15 percent boosts on top of other rate increases approved by regulators.
His effort to block those increases failed 18-20. Among those voting against Fasano was Sen. J.D. Alexander, the Senate budget chairman from Lake Wales who was out of the chamber at the time. Senate President Mike Haridopolos refused to take up Fasano’s objections that someone else had punched the button for an absent senator — a violation of Senate rules — declaring that Fasano would have lost anyway.
A video taken during the voting appears to show Sen. Ellyn Bodganoff, R-Fort Lauderdale, reaching over and punching the vote for Alexander.
Nevertheless, the final bill, a melding of several controversial measures, is a far step from what insurance lobbyists themselves wrote at the beginning of the session.
“I think it was overload,” said Don Brown, a former Panhandle lawmaker who now lobbies for insurance carriers and is a policy expert for a conservative think tank. Disappointed that lawmakers did not pursue rate deregulation, Brown chastised them earlier in the week for failing to stick to free market principles.
Though the industry’s ambitious agenda fell short — leaving their lobbyists uncharacteristically glum even after passage — Florida’s struggling property insurers do walk away with a victory that has eluded them for years, undoing a 2005 law change that required companies to pay claims in full and up front.
The bill now headed to Scott for likely approval into law allows insurers to pay only the depreciated value of a property at first, withholding the full amount until repairs are made.
The holdback applies only to structural property. Homeowners will still be able to buy policies — at added cost — that require carriers to pay in full for personal belongings insured by the policy.
Insurers also win the ability to raise rates up to 15 percent higher than what regulators ordinarily approve, to cover the costs and added profit demanded for providing hurricane coverage. “There is no automatic rate increase,” said bill sponsor Sen. Garrett Richter, R-Naples, who declared that the increases are not automatic, but rather “expedited.”
It will result in stronger insurers, ultimately worth the added cost to consumers. “The most expensive policy is a company that can’t pay the claim when the claim is filed,” Richter said.
Property insurers also can pull sinkhole coverage off the table, requiring homeowners who need the protection to buy it back as an ala carte “extra.” Carriers also staved off consumer-oriented measures, including state audits of the side ventures some insurance companies use to hide profits while seeking rate increases.
Richter characterized the final bill as “diluted,” reflecting a compromise between lawmakers in both the House and Senate.
Other bills already headed to the governor kill a state grading system intended to allow consumers to compare insurers, and a public database showing where and how bad the state’s sinkhole problem actually is.
Several insurers had pressed for an end of the mandate to provide sinkhole coverage. Carriers would still be required to offer sinkhole coverage for the house alone, but they can drop protection in the main policy and require homeowners to buy a second policy adding it back.
Sen. Alan Hays, R-Umatilla, sought to require Citizens Property Insurance to raise rates as high as 25 percent a year, to make it less competitive to private insurers.
A current requirement to raise rates, capped at 10 percent, remains in effect but there would now be no limit on how high and how fast the state-run carrier can raise its rates for sinkhole coverage.
Heading into what could be Florida’s first actual brush with hurricanes since 2005, the time limit for hurricane victims to file insurance claims shrinks to five years; for those with sinkhole damage, it falls to two years.
The bill limits what insurers, including state-run Citizens Property Insurance, will pay for sinkhole damage, to just the house and not attached structures, pool decks or sidewalks.
It requires that Citizens policyholders first be assessed the maximum tax to pay hurricane claims, before the state then attempts to collect from other home, auto and commercial policyholders in the state.
It keeps the 100-day cancellation notice requirement on property insurers, but allows state regulators to trigger 45-day cancellations if they believe a property insurer is in danger of financial collapse.
New carriers would be required to put up $15 million in capital, but existing insurers in Florida would be given until 2021 to raise that much money.
The bill includes a special provision written to help out a single potential insurer — allowing home and auto policies sold as a package to be canceled together, for any reason, with 90 days notice. Senators had objected that it was unwise to write a new law on behalf of a single, unnamed company.
Sen. Mike Bennett, R-Bradenton, was among the 19 senators who voted against Fasano’s amendment seeking to remove the expedited 15 percent rate hikes. Sen. Nancy Detert, R-Venice, supported Fasano’s amendment.
