Legislation that gives Florida regulators more authority over private property insurance companies sailed through the Senate on Wednesday, escalating the state’s ongoing battle with insurers.
Senators voted to end a practice of companies being able to increase customers’ rates before final state approval. The practice allows companies to start charging higher rates and then seek approval of the increase. If it’s denied, they have to refund the money, albeit not with interest.
The Senate bill (SB 2860) would also require that home and business owners’ claims are paid within 90 days if the company does not dispute the claim.
It also eliminates a loophole that allowed some companies to use models not approved by the state in setting their rates.
The measure also increases daily fines from $2,500 to $25,000 when companies fail to comply with the state’s insurance regulations.
“Before, the fines were almost meaningless,” said Sen. Bill Posey, a Rockledge Republican who chairs the Senate Banking and Insurance Committee. “It was more like swatting. Now it’s more like spanking.”
The legislation also takes $250 million from Citizen’s Property Insurance, the state-backed company, and makes it available as incentive money for new companies to take some of Citizens’ customers to reduce the state’s risk over time.
However, there is no exact companion measure in the House, which is considering two bills (HB 5003 and HB 5057) that are more industry friendly. The differences would have to be worked out before anything could go to Gov. Charlie Crist, who favors the Senate measure, which passed 32-7.
“I hope the House now will also see the importance of this legislation for Florida consumers and how it will enable my office to continue to ensure that companies are keeping insurance available and affordable,” Insurance Commissioner Kevin McCarty said Wednesday after the Senate bill passed.
Florida expanded its Hurricane Catastrophe Fund to $28 billion last year with the intention of making reinsurance available at a lower cost, with the goal of lowering premiums for consumers.
But fewer than one in five Floridians have seen lower rates, infuriating many lawmakers and Crist, who made lower taxes and lower insurance rates the centerpiece of his successful 2006 campaign.
Since lawmakers passed the bill last year with the intent of lowering rates, the Office of Insurance Regulation has denied dozens of requests by private companies for rate increases.
McCarty suspended Allstate from doing business in the state three months ago, but their agents have been allowed to keep writing new business while the dispute winds through the court system.
Private insurers began re-evaluating their business practices in Florida following Hurricane Andrew in 1992. The devastating back-to-back seasons of 2004-2005 made the problem even bigger. Allstate, for example, has dropped roughly 400,000 homeowners policies in the state in recent years.
Meanwhile, the state remains on the hook if it’s hit by a major hurricane this summer.
“The real crisis is whether Citizens, the CAT Fund and private insurers can timely pay claims after a major hurricane this year,” said Sam Miller, executive vice president of the Florida Insurance Council, an industry group. “Nothing in the Senate bill addresses that.”
Industry representatives believe lawmakers should be more concerned with Citizens, the state-backed company that now carries more than 1.25 million policies – far more than any of the private insurers.
Citizens has legislative authority to charge below-market rates, but would make up a shortage by assessing its policyholders, and in a catastrophic event everyone in Florida with an insurance policy whether it be homes, businesses, cars or boats would be charged.
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