Lawmakers grapple with insurance ‘catastrophe’

By Jim Saunders
News Service of Florida

Offering a grim picture of Florida’s property-insurance system, senators backed proposals aimed at bolstering the private market while slowing a flood of policies to the state-backed Citizens Property Insurance Corp.

“The word might be ‘catastrophe’ is where we are right now,” said Senate Banking and Insurance Chairman Jim Boyd, a Bradenton Republican who is sponsoring a bill (SB 1728) to try to address the issues.

The Senate Agriculture, Environment and General Government Appropriations Subcommittee approved Boyd’s bill and another measure (SB 186), sponsored by Sen. Jeff Brandes, R-St. Petersburg, that focuses on making changes in Citizens Property Insurance.

Lawmakers are grappling with a market in which financially troubled private insurers are dropping policies, declining to write new coverage and seeking massive rate hikes. Part of the fallout has been thousands of homeowners a week seeking coverage from Citizens, which had about 777,000 policies as of Jan. 1 — an increase of more than 222,000 policies from a year earlier.

The latest evidence of problems came last Tuesday when St. Johns Insurance and Lighthouse Property Insurance Corp. told agents that they would stop writing new business.

But the complexity of finding solutions was evident during last Wednesday’s meeting, as senators discussed part of Boyd’s bill that would allow insurers to sell policies that would not offer replacement coverage for roofs when the roofs are at least 10 years old.

Instead, such policies would reimburse homeowners for roof damage based on depreciated values or the “actual cash” values of roofs. An exception would be that insurers would have to pay replacement costs when roofs are damaged in named hurricanes.

The insurance industry blames questionable — if not fraudulent — roof claims for driving up costs. But Boyd’s proposed change likely would force homeowners with older roofs to pick up more of the tab when their roofs are damaged.

“I’m worried about the disproportionate impact that this has on lower-income families, seniors, veterans, those in rural areas, that are more likely to have older homes with older roofs,” Sen. Loranne Ausley, D-Tallahassee, said.

Boyd, however, pointed to soaring premiums as he tried to refute arguments about effects on low-income people.

“In my view, what’s going to be disproportionate is their prices are going to continue to go up if we do nothing,” said Boyd, who is an insurance agent. “And it will hit them hard. Some of us can afford a 10, 15, 20 percent increase. Some can’t. Those that can’t are going to get hit with the same increases if we do nothing.”

But even if the Senate passes the roof-claim changes, it might run into opposition in the House, where Speaker Chris Sprowls, R-Palm Harbor, has indicated he has concerns about the idea.

“I want to make sure people are compensated,” Sprowls said Wednesday. “If you get a hurricane, and you’ve got a senior citizen on a fixed income, I am cognizant of the fact that they may not be able to go and get a huge roof. I totally understand the arguments, so we’ll see how the conversation goes in the next several weeks.”

State leaders have long sought to move policies from Citizens Property Insurance into the private market, at least in part because of financial risks if Florida gets hit with a major hurricane or multiple hurricanes.

But residents in some areas have little choice but to turn to Citizens for coverage. Also, industry officials say Citizens often charges less than private insurers, giving an incentive for homeowners to obtain coverage from what was created as a state insurer of last resort.

Along with the roof-claims proposal, other parts of the Senate bills include:

— Addressing situations in which homeowners receive coverage offers from private insurers. Under the bill, such customers would not be eligible for renewal with Citizens unless the private insurers’ premiums are more than 20 percent higher than what Citizens would charge.

— Eliminating limits on Citizens rate increases for properties such as second homes. The limits, known in Tallahassee as the “glide path,” would only apply to primary residences. This year, for example, the glide path prevents Citizens rate hikes from being higher than 11 percent.

— Allowing surplus-lines insurers to take part in programs designed to remove policies from Citizens. Surplus-lines insurers don’t face the same regulations as standard insurers.

News Service Assignment Manager Tom Urban contributed to this report.