Insurance plan seeks rate cuts, takes flak

By Dara Kam
Palm Beach Post Capital Bureau

The Florida Senate rolled out an insurance proposal Monday aimed at reducing property insurance premiums but including measures that both consumer advocates and the insurance industry say won’t help stabilize the market in the long run.

The 153-page draft bill would roll back Citizens Insurance rate hikes, expand insurers’ access to the Florida Hurricane Catastrophe Fund and allow policyholders to forgo windstorm coverage and opt out of covering the contents of their homes.

“A lot of what they’re doing here is reducing rates, but transferring risk from the insurance companies to the taxpayers. So you’re paying less and you’re getting less, but someone still has to pay it if there’s a storm,” said Bill Newton, executive director of the Florida Consumer Action Network.

The Senate proposal would cut in half, from $6 billion to $3 billion, the amount of losses insurance companies must pay out before they can buy reinsurance from the state catastrophe fund, which is cheaper than the private reinsurance market. It also would allow insurers to buy up to $3 billion more from the fund than the $16 billion limit for 2007 and 2008.

If insurers take advantage of those options, they must prove that the loss of exposure would result in rate reductions.

That part of the Senate plan could cut premiums by 15 percent, said Senate Minority Leader Steve Geller, who briefed his colleagues on the bill Monday morning and later met with Gov. Charlie Crist.

The exact savings from the rest of the plan is unclear, Geller said.

“There are a lot of things in there that we think may be good ideas but are unknowns in terms of what will be the amounts of the effect. We just don’t know,” said Geller, D-Hallandale Beach.

Expanding the catastrophe fund would reduce rates for property owners covered by private insurers, said Sen. Bill Posey, chairman of the Senate Banking and Insurance Committee.

“If we sell them reinsurance cheaper, then they have to pass that savings on to the consumer,” said Posey, R-Rockledge.

The Senate plan also should reduce state-run Citizens’ property insurance premiums by 85 percent, by rescinding this month’s 56 percent increase and an anticipated 29 percent increase in March, Posey said.

And the plan, which will be taken up this morning at the banking committee meeting, includes a provision that would charge assessments for Citizens’ losses to automobile insurance and medical malpractice insurance policyholders. Now, only property insurance policyholders are assessed for the losses.

It also would allow homeowners to opt for higher deductibles and waive coverage of the contents of their homes. It would further require insurers to offer policyholders the option to waive windstorm coverage, subject to approval of all policyholders, including the lender.

Although that may bring rates down, it may leave some homeowners unable to pay for out-of-pocket fixes after a catastrophic storm.

Higher insurance deductibles are a “horrible poison for many Floridians to swallow,” House Minority Leader Dan Gelber said.

“Either unaffordable insurance or little or no insurance – those options are being discussed everywhere and they are not viable solutions,” said Gelber, D-Miami Beach. “We’re going to lower everybody’s insurance premium by increasing their deductible or letting them go bare.”

Crist, whose campaign included a pledge to reduce property insurance and tax rates, said the Senate plan is encouraging, and he will release his own proposal this week.

A special session addressing property insurance will begin Jan. 16.

Crist criticized the “exorbitant profits that people are able to achieve in the insurance business” and vowed to push legislation that would lower premiums. “Big insurance has a new day coming, and it starts the 16th.”

Insurance industry representatives said Crist’s plan would be even tougher on insurers than the Senate’s, but they advised the governor and lawmakers to move cautiously.

“We’re not dummies. We know that we’re the target,” said Sam Miller, vice president of the Florida Insurance Council, which represents the industry. “You just will find that getting relief for consumers now requires very tough decisions. It’s financed through ‘pay me now or pay me later.’ You can reduce insurance premiums if you fill the gap with something else.”

Crist said insurers’ record earnings should translate into lower rates for consumers.

“This much I do know: Insurance companies are making extraordinary profits,” Crist said Monday. “Last year alone, if you believe the figures that we’ve been exposed to, it’s about $60 billion. Maybe about $3 billion of that alone in the state of Florida. So obviously this is not an industry that’s doing badly.”

Crist pointed out that insurer Allstate was making enough money for it to sponsor the Sugar Bowl football game. “I’m all for people making a profit, but I am not for them profiteering on the backs of Floridians in a time of need,” Crist said.

Crist’s expected plan and the Senate package put the insurance industry on the defensive.

“We’ve all done some good things and some less-than-good things in the past, but if we want to have a healthy market in Florida, which is good for us and good for the consumer, we all need to work together and stop the blame game,” said William Stander, regional manager of the Property Casualty Insurers Association of America.

“Unfortunately, the overall rhetoric has been of short-term results,” Stander said. “Not only is it the wrong thing to do, it undercuts your ability to put into place good, long-term solutions. My fear is that we do more harm than good. Notwithstanding that nobody cares what insurance companies think at this point.”

Gelber told Democratic senators that Crist, a Republican, sounded like a Democrat as he discussed the problem, and that some GOP lawmakers also are coming around.

“They’re beginning to sound a lot like we did a year ago,” Gelber said. “I think this last election cycle threw some cold water on our colleagues on the other side of the aisle.”
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