Posted on 24 May 2010
All eyes in Florida are on Governor Charlie Crist to see whether he will sign an omnibus property insurance bill endorsed by the the state's insurance commissioner, a group of domestic insurance company executives, trade associations, and a consumer advocate.
Industry experts were not about to make any bold predictions about Crist's actions as of last week. Now an Independent Senate candidate, Crist has Senate Bill 2044 on his desk. Crist has until the start of hurricane season June 1 to sign or veto SB 2044.
"I don't think anyone can say if he (Crist) will sign it but there are a lot of people who worked hard to make it something he could sign," said William Stander, regional manager for the Property Casualty Insurers Association of America. "We did what we could do. We think this bill takes some measurable steps toward fixing the problems insurance companies are having in Florida."
Crist told a local newspaper he's leaning toward a veto because the bill would make it easier for insurance companies to raise rates. Experts said it looks like Crist has bought into claims the bill is not consumer friendly despite efforts to convince him otherwise. In a letter to Crist, Insurance Commissioner Kevin McCarty tried to correct what he called "a misperception circulating in the several press articles that claims this legislation allows for an automatic rate increase of 10%" without review by the Office of Insurance Regulation. McCarty said the conclusion was wrong and there is nothing in the bill that mandates any rate increases or permits them without regulator approval.
"There is a perception this bill will hurt consumers when, in fact, it will not," said Fred Karlinsky of Colodny, Fass, Talenfeld, Karlinsky & Abate. The firm is general counsel for the Florida Property & Casualty Association, which represents many of the domestic companies that have grown to become a major portion of the Florida marketplace. "Consumers will be hurt if this measure does not pass."
The industry said the bill addresses cost drivers identified by insurers as reasons many companies are experiencing financial woes even without a hurricane in Florida. Two companies last year were liquidated. Here are some highlights of SB 2044:
--Public Adjusters: "One of the biggest factors impacting insurance companies has been the rapid rise in claims initiated by public adjusters," McCarty wrote to Crist. SB 2044 looks to curtail this by limiting the amount of time a homeowner can file a claim to three years after a storm instead of five years. The bill also also limits public adjuster commissions and solicitations following a storm. The provision is "key in stopping the manipulation of people by public adjusters," Stander said. Public adjusters -- independent contractors who work directly for policyholders instead of for insurers -- have quadrupled in Florida since 2004.
-- Mitigation Credits and Replacement Costs: If an insurer shows the aggregate of state-mandated mitigation discounts results in a revenue reduction, the insurer can recover the loss through a rate increase. The replacement cost methodology is also changed to allow insurers to pay actual cash value. After a homeowner hires a contractor, the remaining costs will be paid as repairs are made.
-- Rate Filings: The bill expands an expedited rate filing procedure adopted last year for property insurers to include a rate adjustment for reinsurance costs, financing products, and an inflation trend factor determined by the OIR. Increases are capped at 10% per policy. File-and-use, which was to expire at the end of the year, is to be extended until 2012.
-- Regulatory Oversight: SB 2044 requires residential insurers to $15 million in minimum capital and surplus instead of $5 million. For some time, the OIR has said the current level is insufficient to support an insurer in Florida. To also help the OIR make sure companies are solvent, the measure gives regulators additional oversight of the managing general agents and affiliates of insurers. Companies must report when they suffer a 15% loss on any quarterly or annual statement. SB 2044 allows troubled companies to cancel a portion of its business within 45 days instead of 100 or 180 days, depending on the time of year. OIR spokeswoman Brittany Benner said this part of the bill lessens the impact on the Florida Insurance Guaranty Association.