The Current
By Gary Rohrer
October 19, 2011
The push to reform Citizens Property Insurance will continue this year, but the recent flap over its sinkhole rate request has some lawmakers skittish about supporting changes that could increase homeowners’ premiums in a harsh economic environment.
Sen. Garrett Richter, R-Naples, filed SB 578 Tuesday, which would allow surplus lines insurance companies to compete with private insurers to attract customers from Citizens .
“It would provide another alternative for depopulation,” Richter said Wednesday.
But the use of surplus lines carriers – out-of-state insurers with less oversight than in-state insurers whose rates must be approved by regulators – is viewed skeptically by those opposed to changes to Citizens that might increase rates.
Sen. Mike Fasano, R-New Port Richey, a perennial thorn in the side of property insurers, doesn’t think using surplus lines will help homeowners in a state with large amounts of foreclosures.
“You can’t take a homeowner in the state of Florida and force them to take insurance from a company that’s not regulated by the state of Florida,” Fasano said.
Richter counters that there will be standards for surplus lines carriers in his bill that would prevent them from dramatically increasing rates and that Citizens customers would not be forced out.
With 1.3 million policies, Citizens is the largest property insurer in Florida, and some legislators think a three-year freeze on its rates that ended in 2009 — while other private insurers were increasing rates — and a subsequent 10 percent cap on annual increases has made the state-backed insurer too attractive to homeowners, taking on too much risk to be able to pay out claims in the event of a catastrophic hurricane.
But after the fight over SB 408 during the previous legislative session – which Richter sponsored and Fasano fought against – and the large rate request from Citizens it enabled, some lawmakers are leery of voting for more insurance changes with the potential to raise rates.
Citizens initially filed a statewide average 447 percent increase in sinkhole rates, but after an uproar from Tampa Bay area residents, its board voted to phase-in the increase, and a much lower rate hike was approved by the Office of Insurance Regulation.
The outcry from residents facing the rate hikes – in the Tampa Bay area some homeowners would have had rate increases of more than $3,000 – caused some lawmakers to change their minds about the law. Rep. Richard Corcoran, R-New Port Richey, who voted for SB 408, helped organize rallies against the original rate request.
Richter defended SB 408, saying the flap over rates showed the need for its provisions aimed at driving down the amount and cost of sinkhole claims.
“In my eyes it shined a light on the fact that (SB) 408 is absolutely necessary. It just actually confirms the fact that we had a problem that was running rampant,” Richter said.
Now, the effort to further reform Citizens could mirror the fight over SB 408.
“The [Citizens] premiums that are artificially and actuarially unsound need to be addressed,” Richter said.
