The Senate Banking and Insurance Committee released the rough sketches of a bill imposing massive changes on the property insurance market Wednesday, attempting to move as much of the state’s risk into the private sector as possible.
As drafted, the bill:
* reduces the size of the Florida Hurricane Catastrophe Fund,
* allows private companies to share the risk of individual policies with state-run Citizens Property Insurance Corp.,
* prevents Citizens from insuring buildings under construction in coastal regions and from writing new policies covering homes valued at more than $400,000,
* sets up a clearinghouse to shop potential Citizens policies in the private market, and
* increases the cap on Citizens annual rate increases from 10 percent to 15 percent.
“I think that we’ve gone a long way toward giving a thorough analysis to the status of where we are and where we need to be and how to get there,” said committee chairman Sen. David Simmons, R-Maitland.
Although efforts to increase Citizens’ rate cap and make it easier to take policies out of Citizens have failed to get through the Legislature in recent years over fears of steep rate increases, Simmons said he is “cautiously optimistic” this year’s property insurance package won’t meet the same fate.
Other provisions in the bill include allowing private insurers to offer “consent to rate” policies to customers, in which a homeowner can opt to pay a higher premium. Lawmakers on the panel also want Citizens to crack down on policies receiving offers from private companies with rates within 15 percent of Citizens’ rates.
The draft bill is still being worked on by the committee. Simmons said it will get a hearing in two weeks.
The underlying assumption of the effort to move policies out of Citizens and reduce state exposure is that increasing competition among private companies will prevent homeowner rates from skyrocketing. Lawmakers have long wanted to shrink Citizens, which has 1.3 million policies and has about 25 percent of the property insurance market in Florida because its rates are subsidized by potential assessments on all homeowners should there be a cataclysmic hurricane.
Former Republican Sen. Locke Burt, president of Security First Insurance, told the committee Citizens rates in many areas throughout the state are already comparable with the private market, and need not rise as policies are shifted out of Citizens and into private companies. Still, he gave a nod to Florida’s historical property insurance divide pitting coastal lawmakers against inland and North Florida legislators.
“Because we all know at the end of the day, politics is local,” Burt said.