Special Legislative Session: The Insurance Crisis
Day 2: Rollback bill passed
By Paige St. John, Jim Ash, Aaron Deslatte & Bill Cotterell
news-press.com Tallahassee Bureau
Originally posted on January 17, 2007
TALLAHASSEE -- Insurance Commissioner Kevin McCarty -- keeping a low profile in this week's special session -- behind the scenes warns lawmakers they may not be taking the best path to fixing the market.
Gov. Charlie Crist and House Republicans propose requiring national insurers to write home policies if they also want to sell profitable automotive coverage in the state.
McCarty supports the goal, his staff says, but suggests such blunt regulation may not be the best way to get there.
"The same goal can be accomplished through a structure of incentives and disincentives to the industry participants, while ensuring cherry-picking of good risks is minimized," his staff writes in its analysis of House legislation.
"We're actually agreeing with it, we're just suggesting ways to supplement it," said Bob Lotane, McCarty's spokesman.
State regulatory staff also notes that, as written, the current House bill would not preclude auto insurers from complying by issuing a single, low-risk homeowners' policy in Florida.
The agency also expresses concern that House members are attempting to force rates to move too quickly at the state-run Citizens Property Insurance, after a one-year rate freeze ends.
"The Office has concerns that in 2008 one year of premium will need to support losses equivalent to a 50 year (hurricane)," an estimated $16 billion to $20 billion tab that would have to be paid through premium increases to Citizens' 1.3 million policyholders.
"This is likely to be very expensive for the consumer," the analysis says.
McCarty's office warns that efforts to prevent policy cancellations during Florida's six-month hurricane season "may have unintended consequences" of increasing the number of policies dropped during the rest of the year.
The insurance regulator supports efforts in the House bill to limit how much profit companies make, and to require them to refund excess earnings to their customers.
3:44 p.m.
TALLAHASSEE -- The Florida House has passed bills rolling back state-run Citizens Property Insurance rates, allowing its rates compete with private insurance companies and doubling the size of the state's Hurricane Catastrophe Fund.
The expansion of the Cat Fund doubles the risk consumers take on if there are big hurricane losses in the future in exchange for the promise of lower insurance premiums now.
The bill allows insurers to buy low-cost hurricane coverage from the state -- up to $28 billion.
House leaders promise that it will lower home insurance rates in Florida by 33 to 38 percent -- a savings Florida insurance companies would be required to pass on to their customers.
Both now go to the Senate, considering its own proposal for the state to directly take on an additional $17 billion in hurricane risk.
• The Senate continues its insurance debate in session this afternoon, but for now, the House is done with its work.
After approving six sweeping insurance bills, the House adjourned this afternoon to wait for the Senate.
House Speaker Marco Rubio said he is undecided on whether to appoint conferees to publicly negotiate differences between the House and Senate bills, or to leave that to informal talks between chamber leaders.
"At some point, late tomorrow or early Friday we'll have a clearer idea of what the negotiation process will be," Rubio said. "I am very optimistic because about 95 percent of the major issues, we are in agreement on."
He called the House bills passed today "meaningful, comprehensive and unanimous."
With little discussion, the House has approved its bill limiting insurance company profits, and curtailing the creation of Florida-only subsidiaries, dubbed "pup companies."
"This was priority one on the agenda item of every election," said its sponsor, Rep. David Rivera, a Miami Republican. "I think every one of our constituents will think it is fair that companies that do property insurance elsewhere in the country and sell auto insurance in Florida, that they sell property insurance in Florida also.
"I think all of our constituents will say it is fair to give them an option, a choice, to insure their homes to their mortgage.
"It is fair, and our constituents will say so, that insurance companies can be ruled and judged on their merits . . . and I think every consumer will say that it is fair to ensure that there is truth in billing."
It passed 119-0, despite private grumbling by some members that the legislation is bad for the state's private insurance market.
2:12 p.m.
TALLAHASSEE -- Getting down to business, the House this afternoon began voting out the insurance reform legislation it has been working on this week.
First out of the chamber is a memorial to Congress, asking for a national catastrophe fund to back up the insurance industry.
House members were unanimous in ending building code exemptions in the Panhandle, requiring the Florida Building Commission to enforce wind-borne debris protection requirements in force elsewhere in the state.
The bill erases what Rep. Marti Coley, R-Marianna, called "an outdated notion" that the Panhandle is not subject to the same degree of hurricane wind damage as the rest of the state.
The House is now in informal recess awaiting a 2:30 p.m. deadline to file amendments on its four remaining substantive insurance bills.
It appears now that the Senate, which convenes at 2 p.m., will give final passage to its insurance bills today as well. After the respective chambers pass their bills the action comes down to negotiations between House and Senate to work out differences between them.
1:41 p.m.
TALLAHASSEE -- Gov. Charlie Crist said today he's not worried about taxpayers shouldering a bigger burden for hurricane recovery, if it results in lower homeowner insurance rates, because Florida is "already in the insurance business."
During a Capitol news conference, Crist was asked about House and Senate positions on use of a "catastrophic" fund to cover excessive losses after a Katrina-size monster storm or exceptionally busy hurricane season.
"What's a catastrophe right now is what people have to pay for their homeowner insurance," said Crist. "They're on the hook now and we've got to get them off."
Crist said his only goal for the special legislative session is "significant" rate reduction for property owners, and that "how we get there is not as important to me." He said he was confident the House and Senate can work out a plan and have "a soft landing" of the special session early next week.
"If we don't, I wouldn't want to be going back home," he said, citing public outcry over rising insurance and property tax rates. Crist said the Legislature will work on cutting property taxes in the regular session next March.
The House and Senate both propose varying degrees of expansion of the Florida Hurricane Catastrophe Fund -- which provides backup coverage that protect insurance companies from huge storm losses -- and fewer competitive restrictions on the state-run Citizens Property Insurance Corp.
"The reality is, Florida is already in the insurance business," said the governor. "The question is, are we going to help them or leave them in the lurch."
• House and Senate proposals on how much hurricane risk the state should bear differ, as do the savings in premiums to consumers that would result. Gov. Charlie Crist said today he likes both, and refused to side with one chamber over the other.
"We're trying to determine how much to cut rates in Florida, and that's everything I wanted, and everything the people wanted," Crist said. "That's a great debate for us to be employed in."
He said he considered promised premium savings by both the House and Senate to be "significant" and worthy of his signature.
"How we get there is not important," Crist said. "What is important is that we get there, and we get there as soon as we possibly can, because the people of this state are screaming for it, and they need it and they deserve it."
While Crist lobbied members of the Senate this morning for insurance reform, Lt. Gov. Jeff Kottkamp worked the House.
Kottkamp said his former fellow representatives are "very receptive" with Crist's call for legislation to lower home insurance rates. "We're all going in the same direction, of lower premiums."
It is less important, Kottkamp said, that they pick up Crist's own legislation to control how national insurers operate Florida-only subsidiaries or offer to insure someone's car but not their home.
"The prime directive is a bill that lowers premiums," he said. "There are some nuances that would be nice to be included in the package, but the bottom line is having a bill that lowers premiums."
1:20 p.m.
TALLAHASSEE -- Days after claiming all insurance consumers needed to pull together, Senate lawmakers added one caveat to let doctors off the hook for assessments that could be levied by the state-run Citizens Property Insurance Corp. to pay off deficits
"This is to help the good doctors who keep us healthy," Sen. J.D. Alexander, R-Lake Wales, said in offering the amendment to the Senate bill during a committee meeting Wednesday morning.
The Senate plan expands Citizens to allow it to compete with private insurers, offer commercial coverage and assess most lines of coverage such as auto, homeowners, and medical malpractice in case of deficits after hurricanes.
Now the Senate bill carves out doctors – a constituency that Republicans went to bat for in a series of special sessions in 2003 to rein in malpractice lawsuits.
"That's a tough nexus. We just dealt with that issue. We just now have seen rates come down. To go back and do an assessment seems counterproductive," Senate Majority Leader Daniel Webster said.
But Senate Insurance Chairman Bill Posey cautioned before his committee approved the carve-out that "if we make one exception, we'll be asked -- and rightfully so -- to make a lot of exceptions."
One minute after the doctors amendment passed, Democratic Sen. Al Lawson of Tallahassee, an insurance agent, offered another to give the same break to surety and accident insurance buyers.
The committee passed it without comment.
Sen. Don Gaetz, R-Niceville, also got a provision added to allow beachfront dwellers who live in high hazard areas the federal flood insurance program won't cover to band together and insure themselves for floods.
The amendment was meant to help Destin homeowners in his district that the freshman lawmaker said could lose their homes. The requirement: The homeowners banding together must have at least 50 homes worth a total of $25 million, which equates to $500,000 homes.
Gaetz said it was needed to help homeowners with mortgages from losing their homes.
The Senate committee Wednesday morning also defeated one of Gov. Charlie Crist's proposals to prohibit insurers from picking and choosing lines of coverage if they offer homeowners policies in other states.
The House is expected to add that language to its bill and work out their difference in conference negotiations over the weekend.
"We're still in the pre-season," Webster said.
12:20 p.m.
TALLAHASSEE -- The pace of a special legislative session picks up this afternoon when the Florida House begins debating its version of sweeping insurance reforms.
A House committee this morning unanimously approved its fundamental proposal, a plan to lower rates by giving the industry greater access to an expanded hurricane catastrophe fund that provides backup coverage for insurance companies against huge storm losses.
The move is a gamble and bets that another major storm will not hit soon. But it could offer homeowners reductions from an average 30 percent in their insurance premiums statewide and as much as 60 percent in the riskier coastal areas, sponsors said.
"This is really the core of where our savings will be," said Rep. Stan Mayfield, R-Vero Beach.
Other House proposals would freeze and roll back rates for Citizens Property Insurance Corp., the state-run insurer of last resort, prevent insurance companies from dropping customers for 100 days during hurricane seasons and prevent them from imposing rate increases and asking state regulators for permission after the fact.
Companies that sell auto and homeowner insurance in other states would also be forced to sell homeowners insurance in Florida if they want to tap this state's lucrative auto market.
"A market cannot be truly free if it is fundamentally unfair," said sponsor Denise Grimsley, a Lake Placid Republican.
12 p.m.
TALLAHASSEE -- Gov. Charlie Crist is lobbying the Legislature in person, to push his proposals to lower insurance rates.
Crist walked the Senate office building this morning, stopping by the offices of Sens. Bill Posey and Dan Webster -- key architects of the chamber's special session bills. Neither was in.
He steered instead to Sens. J.D. Alexander and Jim King, who pledged general support for Crist's efforts to respond to public demand for lower rates.
"Follow the people or they will take us out of here with our heads on pitchforks," said King.
Crist was not deterred by a Senate committee's refusal today to take up his anti-cherry picking legislation, introduced by Sen. Ronda Storms, R-Brandon.
"It is early in the week," Crist said.
He pushed legislators he met on his walk-through to unfetter Citizens Property Insurance, and allow the state-run insurer to compete with the private market.
"Citizens is key," he told Rep. Jack Seiler.
10:41 a.m.
TALLAHASSEE -- The chaos is settling and clear policy lines beginning to show as the Legislature tackles property insurance reform.
Gov. Charlie Crist is lobbying lawmakers for his proposal to unleash Citizens Property Insurance and turn the state-run insurer of last resort into a state-run insurer of refuge, offering rates lower than the private market.
He called Senate Democratic Leader Steve Geller this morning to tout the concept as well as his cherry-picking legislation to require auto insurers to also sell home insurance.
Geller in turn lobbied Crist on his proposed super-sizing of the Florida Hurricane Catastrophe Fund, with a state guarantee to pay 90 percent of hurricane claims over the fund's $23 billion ceiling. Geller this morning offers amendments to cap that obligation, taking on no more than an additional $17 billion in debt.
"We don't want the state to assume unlimited liability," Geller says.
However, he has yet to sell the House, which is more interested in lowering the threshold on the Cat Fund, putting the state on the hook only for smaller storms.
And Geller does not like Crist's cherry-picking legislation, dismissing it as "a great campaign issue but it is not good public policy."
Both the House and Senate this morning are hearing amendments to their start-out bills, and will meet in session this afternoon to start voting.
7:05 a.m.
TALLAHASSEE -- The Florida House is prepping insurance legislation for a floor vote this afternoon, in hope of sending a bill to the Senate by the end of the day.
"It's pretty straightforward," said House Speaker Marco Rubio, pushing that fast-track schedule that starts with a policy committee meeting at 8 a.m., rules committee at 10:15 a.m., and a House floor session that starts at 1 p.m.
A House floor vote today will mark the end of the first phase of bill-writing, and the acceleration of serious negotiations between the two chambers and the governor's office.
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