Legislative deal would cut windstorm rates by 7-35% for Florida property owners

Legislative deal would cut windstorm rates by 7-35% for Florida property owners

Posted January 22 2007

TALLAHASSEE · Key legislators reached a final compromise Sunday night on how to solve Florida's property insurance woes, and the full House and Senate will vote on the plan today, the last day of a weeklong emergency session.

Republican Gov. Charlie Crist gave a tentative stamp of approval to the bipartisan deal, reached after four days of intense talks between House and Senate negotiators.

Legislative leaders promised the plan will deliver rate relief to homeowners statewide who have been socked with soaring insurance premiums after two devastating hurricane seasons in 2004 and 2005.

Rate cut estimates for customers of private insurance companies range from 7 percent to 35 percent on the windstorm coverage in their policies. Customers of Citizens Property Insurance Corp., the state-backed insurer for homeowners who can't get private insurance, could see up to a 20 percent reduction in their premiums.

"There's going to be rate relief around the state," said Rep. Adam Hasner, R-Delray Beach. "For far too long the scales have been tipped toward the insurance industry, and I think our action has certainly put that in balance."

But others caution that only time will tell if the rate relief materializes as hoped, and whether homeowners are satisfied.

"This will be a success or failure on a family by family basis," said House Democratic Leader Dan Gelber of Miami Beach. "But we have stopped the hemorrhaging ... and there won't be an obscene rate increase this year. That's a given.''

Legislators also caution that insurance price breaks will not come immediately. It'll likely be months before anyone sees rates drop. "I know everybody wants it now but if they know the cavalry has been dispatched, they just have to hold the fort for awhile longer," Senate Democratic Leader Steve Geller of Hallandale Beach said.

Crist originally demanded mandatory across-the-board insurance rate cuts for all Florida homeowners. But by late Sunday he said he would accept "meaningful lower rates."

"Things look good. We are cautiously optimistic," said Crist, who spoke with legislative leaders late Sunday to discuss the final details of the package. "We are very hopeful relief will soon be on the way for the people of Florida ... lower rates across the board, that's what I think we're going to see."

Asked if he would call legislators back if he doesn't like the final legislation, Crist replied, "Let's not anticipate such a negative view. But, yeah, I would."

The final compromise encourages Floridians to storm-proof their homes to get premium discounts. Homeowners could also save money by increasing their deductible, dropping windstorm coverage with approval of a mortgage lender or not insuring the contents of their home.

Here's a look at key details in the final compromise:

Citizens Property Insurance Corp.: The state's largest property insurer, with 1.3 million policies, is required within a month to submit a business plan that shows how it would expand in the state's high risk coastal areas to offer fire and casualty coverage, as well as hurricane coverage. The profits generated are expected to help the company cut its rates by 10 percent.

Rates could drop by up to another 10 percent through a series of changes in the state Hurricane Catastrophe Fund, which provides reinsurance for the state's insurers to help pay claims after a major storm.

The bill also repeals a 21 percent rate hike that took effect on Jan. 1, and provides a rebate for Citizens' customers who have already paid that bill, and stops a 56 percent rate hike that had been scheduled for March.

Private insurance companies: Private insurers, which cover more than half of South Florida's homes and condominiums, would pass along savings to homeowners based on where they live.

State Farm has predicted it could cut windstorm rates an average of 17 percent statewide, which could translate into a 30 percent cut for South Florida homeowners, by getting access to cheap reinsurance through the state's catastrophe fund.

Justin Glover, a spokesman for State Farm Florida, the state's largest private insurer, said insurers aren't happy with all the changes in the compromise plan.

"There's a lot of anti-free market stuff in there. Our view is you should have less regulation rather than more ... fewer things that drive up the cost for our consumers," he said.

As for when customers will see some rate relief, Glover said, "I would expect renewal to be the time at which you'd see savings."

Assessments: If Citizens runs out of money again after a hurricane, more people will pay for a bailout with an extra charge on their property, automobile, life, health and other policies.

Under current law, only property policies are assessed a surcharge to help Citizens overcome a deficit. Only worker's compensation and medical malpractice policies will be exempt under the new plan.

While more people will pay, legislators say the amount will be smaller because the assessment base is broader.

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Lawmakers approve home insurance reform billAssociated Press
TALLAHASSEE, Fla. - Florida lawmakers have overwhelmingly passed a major hurricane insurance bill that aims at lowering soaring premiums.

Politicians say the average homeowner will see a reduction of 22 percent, but many homeowners will see reductions far less than that.

The bill now heads to Gov. Charlie Crist -- but it's not clear whether he'll sign it. Crist has said that rate cuts have to be "meaningful."

The bill would place some burdens on insurance companies, but it also would increase the state's risk -- because taxpayers would be on the hook in case of a super-storm.

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State takes on more risk to give insurance reliefState legislators passed a major revamp of the insurance market, increasing the state's role in order to lower rates.

By MARY ELLEN KLAS, MARC CAPUTO AND BEATRICE E. GARCIA
meklas@MiamiHerald.com

PHIL COALE/AP

TALLAHASSEE - The Florida Legislature voted Monday to overhaul the state's hurricane-insurance market, promising big savings for homeowners and businesses while expanding the role and risk of the state as never before.

But despite the politicians' promises, they wouldn't and couldn't guarantee how large those savings will be for most people or when they will begin.

The bill, which Gov. Charlie Crist said he will sign as early as Wednesday, has no clear requirement for immediate across-the-board rate reductions and relies on ever-changing calculations. Estimated average savings: about 22 percent for private-insurance customers and 8 percent to nearly 19 percent for those covered by Citizens Property Insurance.

Those promised savings, though, could be permanently shattered if a major hurricane hits, because the Legislature has pledged the state's finances to cover damages that exceed about $35 billion. If that happens, Floridians can expect increases on everyone's windstorm policies -- as well as their car, fire and liability insurance as well.

''What we're doing is we're gambling. We're doing that with all the people of the state of Florida. That's what insurance is -- gambling,'' said Rep. Ronald Reagan, a Bradenton Republican who helped craft the bill.

Crist, who had said he would accept nothing less than substantial rate reduction, said he was comfortable with the risk and the shifting numbers because he's an ''optimist.'' He joined legislators to jubilantly cheer the bill, acknowledging that while he threatened a veto early in the day, lawmakers addressed his concerns.

''They said this could not be done. You've done it,'' Crist said. ``We are going to lower rates in a meaningful way. This is a great start.''

The bill not only rolls back huge planned rate increases for Citizens, it allows more commercial businesses into Citizens and adds $100 million in new federal money to beef up the My Safe Florida Home Program, which subsidizes inspections and storm-proofing of some homes.

Lawmakers and analysts estimated the average homeowner lives in a structure sound enough to merit an 18 percent rate cut. Legislators said the bill codifies rate cuts for home improvements, such as adding shutters or strengthening roofs.

After congratulating themselves for the bipartisan, ''responsible'' work that lowers rates but doesn't raise taxes, lawmakers approved the final package 40-0 in the Senate -- where Kumbaya was played after the vote -- and 116-2 in the House, with the House's two former insurance chairmen, Republicans Dennis Ross of Lakeland and Don Brown of DeFuniak Springs, voting no.

NEW DIRECTION

The two men crafted last year's law that legislators spent the last week trying to undo. That plan was designed to lower premiums and increase competition, but it didn't stop rising insurance costs or deter insurance companies from leaving the state.

Almost as uncertain as the weather are the many unknowns in expanding the state-run insurer, Citizens, and requiring the state to assume more risk by offering below-market-rate ''reinsurance'' to private companies. Among the unknowns:

• The effect the Citizens expansion will have on insurance costs statewide. A deficit in Citizens would be made up by assessments on most other policies in Florida and could potentially offset savings brought about by the plan.

• Whether Citizens' ability to offer more kinds of state-subsidized insurance will help or discourage private competition. The insurance industry warns that it's unfair and foolhardy.

''They're talking about competition,'' said Bill Stander, a lobbyist with Property Casualty Insurers Association. ``This isn't competition for the free market. We're competing against government-run, government subsidized insurance on the cheap.''

• Whether Citizens, which has been rocked by complaints about poor service, unfair coverage and management troubles, is ready to be expanded. House Speaker Marco Rubio, a Coral Gables Republican and Citizens customer who called it ''the worst insurance company in the state,'' is doubtful.

• What effect the greater risk assumed by the state will have on state finances, such as its bond rating. The state's bond guru, Ben Watkins, said the added risk to the state ''will be a negative factor'' for bond-rating agencies.

Under the bill approved Monday, Citizens will be allowed to offer lucrative insurance lines, such as fire and theft. That should help spread risk, increase capital and lower rates by up to 10 percent more -- for a total of 20 percent -- lawmakers said.

Only 350,000 people in the high-risk areas served by Citizens would be able to participate. The remaining 900,000 customers won't be able to get the new state-run insurance products and would see only an estimated 10 percent savings.

Politically, expanding Citizens is a 180-degree turn for the GOP-controlled Legislature, which has talked about disbanding it, and once saw government as the problem rather than the solution.

Former Gov. Jeb Bush had blocked a special session on insurance late last year as fellow Republicans started talking about expanding government at the expense of the private market.

The bill makes Florida a major player in the reinsurance business, offering private companies state-backed reinsurance at below-market rates and requiring them to pass along the savings to their customers. Even if a company doesn't buy the reinsurance, it must still pass on the savings, Stander said.

SAVINGS NOT CERTAIN

But when will those savings come? When the companies refile for their rates, which could be as long as year from now.

''If you're in a private company . . . that has already purchased reinsurance for the year, then your potential savings could be zero'' for this year, said Rep. Susan Bucher, a Lantana Democrat. ``I guess this bill is better than nothing because it does repeal the bad bill that was passed.''

Uncertainty over the numbers confused legislators and led many to doubt the proposed estimates. ''I'm not sure how we're going to tell anybody in the state what's going to go down and where,'' said Sen. Nancy Argenziano, a Crystal River Republican.

For consumers, there was much to cheer, including a requirement that the state consumer advocate issue an annual report card on insurance companies and prohibiting companies from denying coverage based on the age of a home.

But lawmakers rejected a plan to require the parent companies of Florida insurers to report their profits and losses. And while they agreed to stop companies from raising rates before they get approval from state regulators, they imposed that requirement for only two years.

Crist also didn't get some consumer-friendly proposals he sought -- a four-year ban on policy cancellations and a two-year ban on increasing rates -- but said he was satisfied. ''You can't always get what you want, but you get what you need,'' he said, quoting the Rolling Stones.

Miami Herald staff writer Gary Fineout contributed to this report.

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Highlights of insurance overhaul

COST SAVINGS

• Private insurers will be allowed to buy state-backed reinsurance at below-market rates to cover their risks in a mega-storm, producing an expected average rate savings of about 22 percent, depending on the company. Insurers must pass on all of the savings to consumers, but the reinsurance expires after two years.

• Citizens Property Insurance will be allowed to lower its rates by up to 10 percent by offering more insurance coverage to the 350,000 homeowners now receiving windstorm coverage in their high-risk areas.

• All Citizens customers will also see another rate cut of 5 percent to 15 percent because of changes made to the way the company manages its risks, pays for its capital and calculates its expenses.

• Citizens customers will not get a 56-percent rate increase in March or a 21 percent increase due this month.

HOME IMPROVEMENTS

• The plan steers $100 million in new federal money to supplement the $250 million in the My Safe Florida Home program that provides subsidized home inspections and matching construction grants for single-family homeowners.

• Insurance companies will be required to offer discounts to citizens who strengthen their homes.

• The program will be expanded to allow homeowners without insurance to qualify for the dollar-for-dollar $5,000 grants to strengthen their homes.

• Homeowners will be able to use state money to fix parts of their homes, such as rotten window frames and weakened foundations, before they add improvements such as shutters or roof straps.

CONSUMER OPTIONS

• Consumers may exclude windstorm coverage from their policies if their mortgage company approves and the homeowner writes a letter saying he understands the risks.

• Consumers can increase deductibles to lower premiums, but those with homes valued at $500,000 or less must get approval from their mortgage company if the deductible is worth more than 10 percent of the home's value.

• Homeowners will be able to lower their premiums by not covering the contents of their home as long as they write a letter saying they understand the risks.

CONSUMER PROTECTIONS

• A consumer advocate will grade insurance companies with an annual report card.

• Insurance companies will get just 90 days to deny or pay a claim and will not be able to deny coverage based on the age of a home.

INSURANCE COMPANY REQUIREMENTS

• Companies that write homeowners insurance in other states but don't write it in Florida will be banned from writing auto insurance.

• Companies that take over policies from Citizens can increase rates up to 25 percent, but those policyholders can decide to stay in Citizens if they prefer.

• A senior officer of an insurance company will need to sign an oath of truth that rate filing information is true.

• Until at least December 2008, insurance companies will not be allowed to start charging customers increased rates before they get approval for them.

• Companies must offer customers the option to pay annual insurance bills on a quarterly or twice-a-year installment plan.

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House Speaker favors special election on property tax relief

By BILL KACZOR
Associated Press
Posted January 24 2007, 5:59 PM EST


TALLAHASSEE -- Gov. Charlie Crist and Florida House Speaker Marco Rubio added their influential voices Wednesday to the push for a special election this year on property tax relief instead of waiting until 2008.

Rubio said rapidly rising property taxes is one of the ``twin threats'' facing the state. The other is property insurance rates, climbing equally as fast if not quicker. Lawmakers responded to the insurance issue by passing legislation during a special session that ended Monday.

State and local taxing power, though, is controlled by the Florida Constitution and amendments must be approved by voters. Holding off until the next regular election in November 2008 would mean reforms likely could not take effect until the following fiscal year, which would begin Oct. 1, 2009, for many local governments.

``I always feel patience is a virtue, but on this issue I hope we'll be a little impatient,'' said Rubio, R-Coral Gables. Under Rubio's scenario, a special election would be held this summer, followed by a special session in September for lawmakers to pass implementing legislation. That way, the reforms would be in place before city and county budgets take effect Oct. 1.

Senate Finance and Taxation Committee Chairman Mike Haridopolos had previously advocated a special election. It would take a three-fourths vote in each chamber to put a proposal on the ballot this year, slightly more than the three-fifths needed if offered at a regular election.

The process may be clear, but the form tax relief would take remains murky.

Lawmakers will begin drafting legislation after holding a series of town hall meetings across the state this month and next to hear comment from citizens and local officials. The first meeting is Thursday in Panama City. Others will be held in Jacksonville, Fort Lauderdale, Miami, Tampa, Fort Myers, Orlando and Lake Worth.

``We want people to see real savings, the kind of savings that will allow them to buy homes they can't afford to buy right now or to transact business that they can't afford to transact,'' Rubio told two Republican House leaders.

Rubio told Policy & Budget Council Chairman Ray Sansom of Destin and Economic Expansion & Infrastructure Council Chairman Dean Cannon of Winter Park that reform must benefit all taxpayers, not just homeowners.

Rising property values have driven up taxes for all property owners, but homeowners have been partly sheltered by a $25,000 homestead exemption and the Save Our Homes Amendment limiting their annual tax increases to 3 percent.

Save Our Homes, though, has caused another problem for homeowners because they lose their accumulated benefits if they move.

Rubio cited the example of a former neighbor, an 81-year-old widower who cannot afford to sell his four-bedroom home because he would pay higher taxes if he bought a smaller house.

Crist's campaign platform last year included doubling the homestead exemption to $50,000 and allowing homeowners to take Save Our Homes benefits with them when they move, an idea dubbed ``portability.''

Rubio said portability will likely be a cornerstone of any reform, but it must be more comprehensive and also offer relief to businesses and rental property owners.

Nearly all ideas are on the table, including the possibility of lowering or abolishing property tax while increasing the state's 6 percent sales tax to make up the difference, Rubio said.

He excluded, though, any proposals for offsetting property tax cuts with an income tax or by extending the sales tax to now-exempt services.

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Gov. Crist signs property insurance bill

By DAVID ROYSE
Associated Press
Posted January 25 2007, 12:47 PM EST


TALLAHASSEE -- Gov. Charlie Crist signed a bill Thursday that he and others hope will lower Floridians' property insurance costs, although it means that the state could have to pay billions of dollars if a catastrophic hurricane hit.

The measure was passed by lawmakers in a special session Monday. It was the first signed by Crist, who took office earlier this month. He had an official signing at the Capitol, to be followed by two ceremonial events in South Florida.


``We have a message for the people of Florida today: Help is on the way,'' Crist said in Tallahassee.

The bill aims to cut into the skyrocketing cost of home insurance that many Florida residents, especially those on the coasts, have seen since the busy hurricane seasons of 2004 and 2005. Many have seen premiums more than double or triple.

Although the measure (HB 1A) will provide some relief to a large number of home owners, how much remains murky. Estimates range from 5 percent for many inland customers to averages of nearly 20 percent for others, particularly those on the coast.

Also unclear is exactly when people will see savings.

``I'm real excited about getting these reductions to the people as quickly as possible,'' Crist said after the signing. ``It's going to take a little while, candidly, but it's going to be a lot sooner than it would have been if this had not happened today.''

After the Capitol signing, Crist left for North Palm Beach for a second ceremony. Then he planned to travel to Port Charlotte in southwest Florida for another event at the home of Stan Whitney.

Whitney, 78, contacted the governor about his high insurance costs, complaining that he wanted to drop the wind part of his coverage, but that the law wouldn't allow that. One of the many provisions in the new bill would allow Whitney and others to forgo wind coverage if a mortgage lender lets them.

As lawmakers worked on the plan, Crist urged them to avoid getting caught up in political wrangling by keeping sight of the people who needed relief. At one point he told lawmakers they needed to just ``remember Stan,'' and get the bill written and passed.

``I'm as pleased in the process as I am of the product,'' Crist said, praising House Speaker Marco Rubio and Senate President Ken Pruitt, both Republicans, for working with Democrats to write and pass the bill. ``It's a great blueprint for Washington and for America. We will stay focused on the needs of the people of our state.''

A key provision of the bill forces an immediate rate decrease for Florida's largest insurance company, state-created Citizens Property Insurance Corp., and cancel another planned increase for the company.

The other main way the bill seeks to lower rates is to make more state backup insurance available to private insurance companies. By taking on more of the responsibility to pay out of the Hurricane Catastrophe Fund if there is a large storm, the state will reduce insurers' ultimate risk, cutting their need to raise rates. But the state and its residents take on that risk.

The backup coverage also will be cheaper than the private reinsurance that most companies buy, immediately cutting one of their biggest costs. Those savings will also be passed on to consumers.

The measure also makes an effort to allow consumers to change their coverage to try to save money. Besides going without wind coverage, some might be able to have a higher deductible, for example. Many of those changes, however, won't be available to homeowners who haven't paid off their house, because mortgage lenders often dictate how much coverage they must have.

``The highest compliment we can pay to any piece of legislation is that it makes Florida a better place than it was before it passed and I have no doubt that is the case here. This bill makes Florida a better place to live,'' Rubio said.

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