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[UPDATE] Property Insurance Rates

By: Whitney Ray; Michael Peltier, The News Service of Florida Email
By: Whitney Ray; Michael Peltier, The News Service of Florida Email

THE CAPITAL, TALLAHASSEE, Nov. 30, 2010 --

Stymied last session by an election-year veto, backers of proposals to bolster the property insurance market said Tuesday they’ll return with a similar package of changes, but likely won’t include sweeteners added in an unsuccessful attempt to earn Gov. Charlie Crist’s support.

Lawmakers in January are expected to begin revisiting efforts to reduce the cost drivers they say are making the state’s property insurance market unstable and potentially budget busting.

With the 2010 hurricane season officially blowing its last breezes at midnight Tuesday, insurers say the state’s luck the last few years can’t hold forever.

Industry supporters say rates have been kept artificially low to curry favor with homeowners for too long.

Lawmakers in April approved an industry backed effort that also had the blessing of the state’s top insurance regulator that would have allowed an easier path to higher rates in some cases, only to see the measure vetoed by Gov. Charlie Crist.

Crist, who was running as an independent candidate for the U.S. Senate, said the bill would have increased premiums at a time when many Floridians were hurting financially.

The bill would have let insurance companies raise rates up to 10 percent a year to adjust for inflation and reinsurance costs without having to receive approval by the Office of Insurance Regulation, among other things.

With six months to go before the 2011 hurricane season begins, insurance industry representatives say the state can’t afford to roll the dice again without making at least those changes that were attempted in last year’s bill.

“Last session, a bill passed with the support of an incredible coalition that included everyone but the governor,” said Sam Miller, executive vice president of the Florida Insurance Council. “We’ve got six months and a legislative session between now and the 2011 season. We have plenty of time.”

Without an effort to build up insurance reserves there won’t be enough to pay out claims in the event of a major storm – or multiple storms as the state saw in 2005, the last year a hurricane hit Florida, said Sen. Garrett Richter, chairman of the Senate Banking and Insurance Committee. The state doesn’t have a good idea what it will do if insurers can’t handle all the damage of a blockbuster hurricane.

“Florida has relied upon prayer as its primary defense against hurricanes,” said Richter, R-Naples.

Lawmakers already have a template for reform in the bill Crist vetoed earlier this year, he said.

The product of weeks of hearings and passed by wide majorities in both chambers, the bill, in addition to allowing higher rates, also allowed insurers to withhold portions of claims until repairs are completed. It also would have shortened the timeframe that policyholders could file hurricane claims and placed more restrictions on public adjusters, who have been blamed for unfairly reopening claims that have already been dealt with.

As a carrot to Crist, the measure also made a consumer-friendly gesture. Beyond the 10 percent increases, the bill would have required insurance companies to get agency approval before raising rates – known as file-and-use – rather than hitting customers with premium hikes and then getting regulatory approval.

In June, however, Crist vetoed the bill despite calls from OIR Commissioner Kevin McCarty - a frequent industry critic - who said the bill strengthened the state's property insurance market by requiring more financial backing for new and existing insurers, while still protecting consumers.

"I am most concerned about the expansion of the current expedited rate filing procedure for property insurers that makes it easier to increase Floridians' premiums," Crist said in his veto message. "During these very difficult economic times, Florida's consumers should not have to be concerned with an additional premium increase to their policy.”

With a new governor perceived to be more sympathetic to industry concerns, Richter said Tuesday the revised insurance measure will likely not include the extension of the file and use provision and would instead allow which companies to raise rates first and then seek OIR approval.

Another provision calling for a consumer information website will also probably not make the cut because of cost, Richter said

Last year, the state-run insurance pool paid out nearly $700 million in claims from the 2005 hurricane season, a flurry of claims that critics blamed in part on public adjusters convincing homeowners to revisit old damage before the five-year deadline. Last session’s bill would have shortened the deadline to three years.

“We’re not trying to keep people from filing legitimate claims,” said Rep. Bryan Nelson, R-Apopka, and member of the House committee overseeing insurance issues. “But we all have to pay for fraudulent claims.”

Meanwhile, Senate staff is expected as early as this week to release findings of an interim study looking at the state’s sinkhole insurance market. With nearly $2 billion in claims paid out between 2006 and 2010, sinkhole payouts have reached the level of a small hurricane.

Richter said it’s unclear whether lawmakers will address sink hole changes as part of an overall property insurance package or separately.

The Atlantic hurricane season was actually one of the most active on record, with 19 named storms. Climatic conditions brought on by a La Nina weather pattern helped protect the United States from landfall.

But, to the chagrin of both homeowners and insurers, state officials cautioned Tuesday that there’s a downside to that – those same conditions could make already dry Florida a tinderbox over the next several months, ripe for wildfires.

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Tallahassee, FL - Whitney Ray

Today (11-30) marks the end of the Atlantic Hurricane Season and another year without a hurricane hitting Florida. It’s been five hurricane-free years now, so what does this mean for property insurance rate?

The Atlantic Hurricane Season is over and for the fifth straight year Florida emergency managers can breathe a sigh of relief.

“For the first time in recorded history this is now five years in a row that a hurricane has not hit Florida or struck the East Coast of the United States,” said Dave Halstead the Director of the Department of Emergency Management.

That means for half a decade Florida insurance companies haven’t had to pay massive claims, but it’s not all rosy. Industry Expert Bob Lotane says rates are still too low to adequately prepare insurers for a major storm hitting a large city.

“The insurance commissioner himself has testified to the cabinet that a majority of companies are not reserving money at the rate that they need to, to be ready for a hurricane,” said Lotane.

Lawmakers want to make it easier for insurance companies to raise rates up to 10 percent a year. Legislation loosing regulations on the industry landed on Governor Charlie Crist’s desk twice in the past two years and both times he vetoed the bills. Crist has faith the war on insurance rates he started will continue.

“I certainly hope for the people and myself that they continue to go down,” said Crist.

But 2011 is likely to be different. A new governor and a GOP supermajority in the House and Senate could mean the legislation sails through the process, and insurance companies will no longer have to ask the state when they want an increase. The legislation is already in the works and is expected to begin the committee process when lawmakers come back to Tallahassee next week.


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