Sweeping property insurance legislation (Senate Bill 1770) is rapidly progressing through the Florida Senate and may be up for a final vote as early as today. We have not-so-affectionately named this complex bill after the iconic 1966 western movie “The Good The Bad and The Ugly.”
The good provisions in the bill include a clearinghouse within Citizens Property Insurance Corp., designed to keep out policies that belong in the private market and a new state agency designed to help private insurers find cheaper reinsurance. Other good provisions would establish an inspector general within Citizens and require that the state-run insurer follow the same procurement rules as other state agencies. These are common-sense measures.
The bad provisions include making the Citizens president and CEO a political appointee of the governor and chief financial officer, as if Citizens needs to be more political, not less. The bill would weaken the Citizens board and remove the authority of the Office of Insurance Regulation to review and approve rates. In other words, a political appointee would set rates with very little oversight.
The bill also would also codify the ability of Citizens to make loans to private carriers out of the insurer’s surplus, a move that generated considerable controversy when it was attempted last year. And as a gift to the powerful reinsurance lobby, SB 1770 would increase the annual 10 percent rate cap by 30 percent, to pay for expensive private reinsurance.
The ugly provisions are just that. All new Citizens policies after July 1 would no longer be subject to the aforementioned 10 percent annual rate increase cap. In fact, in most rating territories, policies would be set at no less than the highest average rate among the top 20 insurers writing in the state.
According to a Citizens analysis of the rate impact this would have, personal lines residential policies would immediately increase by an average of 18.87 percent, or up to 35.5 percent. Wind-only policies would skyrocket by an average of 54.49 percent, or up to 91.42 percent.
Not only new policies would be subject to the higher rates. All policies on commercial residential, non-homestead and rental properties with less than a 12-month lease agreement would increase immediately. All standard multi-peril policies for homes with an insured value of $300,000 or more would be subject to the higher rates. The impact on the still fledgling real estate market could be devastating.
This bill is advancing despite evidence from many, including Insurance Consumer Advocate Robin Westcott and even some private insurer CEOs that the current 10 percent annual increase for Citizens is working, and will result in actuarially sound rates in most areas of the state within a few years. Florida domestic carriers, which already write half of the property insurance market in the state, are stronger and more able to compete with Citizens. Nearly 300,000 Citizens policies moved into the private market in the latter part of 2012 without surplus loans and without huge rate increases.
Don’t wait until you open your next renewal notice to do something. Go to www.flsenate.gov to contact your state senator today. Tell him or her to get rid of the bad and the ugly parts of this bill.
Jay Neal is executive director of the Florida Association for Insurance Reform. Its members include public adjusters and lawyers.