House passes legislation allowing Fla. property insurers to raise rates

The Florida House passed a broad measure Wednesday to strengthen the state's property insurance market by raising rates and lowering insurers' claims costs.

The bill, SB 2044, cleared the Florida Senate last week but the House made a minor change, so it must go back to the Senate. If the Senate makes additional changes, it then goes back to the House; if it's approved unchanged, it goes to Gov. Charlie Crist for his signature or veto.

Crist, who is running for U.S. Senate, previously said he doesn't support anything that would raise rates for consumers, but he has not weighed in on this particular bill, which the House passed by a 72-to-44 margin.

Consumer advocates oppose the parts of the bill that allow insurers to raise rates with less state oversight, noting regulators already approve many rate increases. Since last year, the Office of Insurance Regulation has approved about 100 statewide residential property insurance rate increases ranging from 0.2 percent to 27.9 percent, and it has rejected about 15 ranging from 0.7 percent 14.9 percent.

Proponents of the bill say it would help insurers that lost money in recent years and as they struggle to keep up with claims costs. Several national insurers have scaled back from Florida and a few smaller insurers folded last year.

Some insurance company officials say the rate provisions of the bill are less critical than other parts to reduce claims costs, which they say have increased in recent years despite four years without hurricanes.

The provisions affecting rates would allow insurers to:

Raise premiums up to 10 percent without full regulatory scrutiny. This would be folded into a law passed last year that already allows an increase of 10 percent or less for certain reinsurance costs.
Raise rates if the companies provided too high of a discount to homeowners for fortifying their homes.
Pass on to customers the cost of recruiting policyholders, including advertising and agent commission costs, without interference from regulators. In rejecting State Farm's request for a 47 percent or 67 percent rate increase in 2009, state regulators said, in part, that the company spent more than needed for agent commissions, marketing and advertising if it wasn't accepting new property insurance customers in Florida.
Some lawmakers say the bill could harm consumers. "It's not right to hit Floridians again and again in the pocket," said Rep. Julio Robaina, R-Miami.

But Locke Burt, president of Security First Insurance in Ormond Beach, said: "Rates are going to go up no matter what the Legislature does. … The only thing the Legislature can do is slow the rate of increase by addressing the cost. If you don't address those issues, rates are going to go up faster."

That's the intent of new restrictions in the bill for public insurance adjusters hired by policyholders during claims disputes with their insurers, and a requirement for homeowners to file a windstorm claim within three years after a hurricane. It's also the goal of a provision to allow insurers to withhold part of a claim until policyholders have a contract to make repairs.

Insurers say the changes, which would address rising costs for non-catastrophe and sinkhole claims, are critical to keeping some insurers afloat.

"Billions of dollars are paid out every year for reopened claims that happened five years ago," says Rep. Janet Long, D-Seminole. "We are all paying for that. … If we can get a handle on this, then we can make our rates better."

Floridians pay fees on their insurance policies to offset deficits in state insurance programs.

Gwyn Clarke-Reed, D-Deerfield Beach, says the bill could cause problems for people like her, who had to wait four years to get paid by state-backed Citizens Property Insurance for a hurricane claim. "I was looking to get a public adjuster because I wasn't getting anywhere," she says.

Consumer advocates and regulators back some provisions of the bill. For instance, the bill requires insurers and policyholders to provide any documents used to estimate damage costs if using the state's mediation program. The program is a non-binding process to help resolve claims disputes before they go to court. The bill also would require new insurers to have $12 million to $15 million in claims-paying reserves, and require insurers to file detailed financial information about affiliates they hire for certain products and services.

Regulators have raised questions in recent months about insurers that reported losses last year but sent some money to their affiliates.

Source: Copyright © 2010 Sun Sentinel, Fort Lauderdale, Fla., Julie Patel. Distributed by McClatchy-Tribune Information Services.