Posted on 15 Mar 2013 by Neilson
The Florida Senate Banking and Insurance Committee passed property insurance reform legislation designed partly to reduce the market share of the state-backed Citizens Property Insurance Corp. by a near-unanimous vote.
The bill, SB 1700, contains several provisions that are designed to tackle the growth in Citizens, the states leading property insurer even though it is an insurer of last resort. Citizens President and Chief Executive Officer Barry Gilway said previously his company should have no more than 800,000 policyholders, although as of January 2013, it had 1.3 million.
Citizens is writing an estimated 8,000 policies in some weeks, said Sam Miller, executive vice president at the Florida Insurance Council. Miller and others want Citizens to be restored to the traditional role of a residual market and Miller said the bill would reduce Citizens' market share. Currently, Citizens finds itself the preferred insurer because in part because it charges far lower rates.
One provision in the bill involves the creation of a clearinghouse that would enable private companies to use the clearinghouse to compete for new or renewed policies, provided the offers are no greater than a maximum rate that is 15% higher than Citizens' rate. Miller said the clearinghouse would allow private company participants to review policies placed there and decide whether to offer coverage before a deadline. Should they not make an offer on a policy, then the policyholder then would be eligible for Citizens' coverage.
The bill reduces Citizens maximum policy limits from $2 million to $1 million and reduces the amount by an additional $100,000 annually for the next five years, until the maximum reaches $500,000 on Jan. 1, 2019, the Senate analysis said.
Also, it allows Citizens and authorized private insurers to engage in risk-sharing agreements in which the insurer retains part of the risk for a subset of policies or perils within a group of policies in exchange for the insurer removing those policies from Citizens, the Senate analysis said.
The Florida Association of Insurance Agents supports the clearinghouse idea and has been working on it with other groups for six months, said Kyle Ulrich, FAIAs senior vice president of public affairs. The clearinghouse will ensure enforcement of which policies are eligible to go to Citizens, he said. FAIA is surveying it's members on other provisions, including the reduction-to-coverage provisions that would drop Citizens maximum coverage amount to $500,000. A similar proposal two years ago proved very controversial, despite the fact that only 30,000 of Citizens 1.3 million policies fall into that coverage range, Ulrich said.
Floridas House has separated the Citizens changes into several bills, as opposed to the Senates one stand-alone item, Ulrich said. HB 835, sponsored by House insurance and banking subcommittee Chairman Bryan Nelson, provides the same maximum coverage levels as the Senate bill. The bill passed his panel earlier in March. It's kind of hard to say where those things go from here, Ulrich said. The Senate bill and the House bills still have multiple committees to navigate before reaching the floor. I think it's fair to say there will be changes made to each of the proposals, Ulrich said, adding that the bills will get more attention from members of the legislature as they move forward.
The top five writers of homeowners insurance in Florida during 2011 were Citizens Property Insurance Corp., with 19.93% market share; State Farm Group, with 10.78%; Universal Insurance Holdings Group, with 8.34%; Tower Hill Group, with 6.42%; and USAA Group, with 4.6%, according to BestLink.