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Property Insurance Reform: A Bill to Consider …

Posted by Bob Gernert on April 2, 2009 at 3:10 pm

Legislation is taking form in Tallahassee that could begin to address Florida’s broken homeowner’s insurance industry. At least nine major A-rated insurers have pulled out of the state citing artificially low rate regulation that forced them to pay out more in claims than they were collecting in premiums. The legislation described below allows the free market to return and can allow you as an insured to choose insurance based on competition in the market place.

It doesn’t address all the Florida’s quirks … but it’s a start. We present this summary for your consideration. If you support this approach, please communicate your support to Senator J. D. Alexander. His email link appears at the end of this post.

BILL SUMMARY – Senate Bill 2036   

This bill creates and defines classes of “non-assessable” and “assessable” residential property insurance policies. Non-assessable residential property insurance policies are exempted from state rate regulation except to make sure that insurers are charging enough to avoid insolvency. Non-assessable residential property insurance policies are also exempted from FHCF (Cat Fund – short for  funds reserved for catastrophic events such as a hurricane) assessments and CPIC assessments. 

Insurers would be allowed to offer assessable or non-assessable policies and consumers could choose which they prefer.  Such policies would be required to contain a specific disclaimer describing the assessable and non-assessable characteristics of the policy, as well as the limited rate regulation to which the policy would be subjected.  If passed, the legislation would take effect July 1, 2009.

Senate Bill 2036 is a companion bill to House Bill 1171 sponsored by Representative Bill Proctor, St. Augustine.                                                                          

The Problem:    

Florida’s current homeowner’s insurance system is broken. One major hurricane could bankrupt several private insurance companies, CPIC and the CAT Fund - devastating Florida’s already weakened economy.   

In addition to the real possibility that claims could go unpaid, the resulting threat every Florida family faces today is that we could be assessed as much as $1,400 a year – for several years – in “hidden hurricane taxes” to pay for the state’s hurricane losses that cannot be met through Citizens or the FHCF.   

The Solution:                                                                 

Statutory and regulatory obstacles that severely restrict rating and underwriting decisions by insurers should be eliminated to allow for pricing and underwriting in line with market demands. A free-market approach to insuring property in Florida would allow the bulk of insured losses to be covered by pre-event surplus, resulting in significantly less reliance on taxpayer subsidies (post-event assessments). 

The economic impacts on Floridians living in less-vulnerable areas would be minimized. As fewer private property insurers write homeowner’s insurance in the state, public sentiment is rapidly growing in support of free choice. If an insurance consumer feels their homeowner’s insurance company is charging excessive rates, it should be their choice to voluntarily leave that insurer.

It is not the state’s role to force consumers to choose between Citizens or an untested takeout company.

You can email Senator J. D. Alexandar here.  Note your support for Senate Bill 2036.

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