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FL Bill Would Allow Market to Determine Homeowners Insurance Cost

Posted on 15 Apr 2009

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A proposal headed for the floor of the Florida House would let the marketplace to decide how much it would pay for homeowners insurance instead of state regulators.

Rep. Bill Proctor's bill would allow well-financed insurance companies to offer policies with unregulated rates and exempt from the extra charges if the state-run insurance company runs short of money to cover claims. The proposal was approved by its last House committee Tuesday and now heads for the full chamber.

State Farm Florida, the state's largest private property insurer, last year was denied a requested 47 percent rate increase and is pulling out of the state, dropping its 1.2 million property policies by 2011.

Mark DeLegal, a lobbyist for State Farm, said the company is not saying whether it would sell the unregulated policies but does favor a change in regulations.

"We're interested in seeing transformative change" in how rates are approved, DeLegal said.

Under the proposal, the state would still govern property insurance except for top-end rates.

State Farm is not the only company that could offer the policies. An Office of Insurance Regulation representative said its analysts concluded there are many companies that would meet the capitalization requirements to sell the policies.

State-run Citizens Property Insurance Corp., now the state's largest property insurer with 1.1 million homeowners policies, has had rates frozen by the Legislature since 2007. If Citizens has a deficit it can add up to 45 percent on top of premiums to Citizens customers to make up the difference. If that doesn't cover its losses, all private insurance customers can be assessed up to 18 percent to cover the losses.

Consumers "can make the choice to purchase property insurance without great restrictions, but with the understanding he would not be subject to assessments at the end of an event," said Proctor, a St. Augustine Republican.

"I do believe there is some desire for consumer choice," Proctor said. "If I know what the price of my policy is and I'm not vulnerable to assessment, I know what my entire cost is. I'd rather know the price up front."