A sweeping property insurance bill, SB 1770, is rapidly progressing through the Florida Senate and may be up for a final vote as early as this week.
The good provisions in the bill include a clearinghouse within Citizens Property Insurance designed to keep policies out 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 insurer follow the same procurement rules as other state agencies. All reasoned common sense measures.
The bad provisions include making the Citizens president and CEO a direct political appointee of the governor and state CFO. 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 little oversight. The bill would also codify the ability of Citizens to make loans to private carriers out of surplus, a move that generated considerable controversy when it was attempted last year. And, as a gift to the powerful reinsurance lobby, it would increase the annual 10-percent rate cap by 30 percent to pay for expensive private reinsurance.
All new Citizens policies after this July would no longer be subject to the 10 percent annual rate increase cap. In fact, in most rating territories, they 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. Wind-only policies would skyrocket by an average of 54.49 percent. Not just new, but 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 also be subject to the higher rates. The impact on the still fledging real estate market could be devastating.
This bill is advancing despite evidence from many, including the Insurance Consumer Advocate and even some private company CEOs that the current 10 percent glide path is working and will result in actuarially sound rates in most areas of the state within a few years. Nearly 300,000 Citizens policies moved into the private market in the latter part of last year 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, contact your state senator and tell them to get rid of the bad and the ugly parts of this bill.
Jay Neal, executive director, The Florida Association for Insurance Reform, Lake Worth