State Lawmakers Finalize Insurance Plan, Cuts

TALLAHASSEE -

Florida homeowners could see property insurance rate cuts anywhere from about 5 percent to more than 40 percent under a plan finalized Sunday by lawmakers hoping to reverse hurricane-fueled increases many residents say have threatened to price them out of their homes.

Lawmakers said the wide-ranging proposal they'll vote on Monday is expected to provide savings of up to 20 percent for some coastal customers of Citizens Property Insurance, the state-created company that has become Florida's largest property insurer.

Private insurance company rates are also expected to come down under the plan, which would still need approval from Gov. Charlie Crist, who has demanded that lawmakers send him a bill that will provide meaningful rate relief.

Crist hasn't specified exactly how big of a savings the plan would have to provide for him to commit to signing the bill, but hinted that the proposal that emerged Sunday evening was likely to be up to par.

Noting that his bottom line standard has been 'meaningful lower rates across the board,' Crist said that he was 'encouraged that's what we're going to see.'

For the thousands of Florida residents who have complained that spiraling rates to cover their homes against wind damage has threatened to force them to move out of state, Sen. Steve Geller urged that they 'hold on a little longer.

'We know the fort is surrounded, but the cavalry is on the way,' Geller, D-Cooper City, and a chief architect of the bipartisan plan, said Sunday after lawmakers triumphantly ended negotiations on the issue.

Much of the proposal was hashed out over the weekend, and was mostly finished Saturday night. But on Sunday lawmakers were still looking for a way to provide more relief to customers of Citizens Property, which provides the wind coverage for many on Florida's coasts. The state-created company was envisioned as a last-resort insurer for those who can't get private coverage, but has grown to be the state's largest property insurer with 1.3 million customers.

Sen. Jeff Atwater, R-North Palm Beach, another author of the plan, said he was confident that Citizens customers in the high risk coastal areas of the state would see 15 to 20 percent rate cuts when they renew their policies. In addition, lawmakers canceled a 56 percent average rate increase that Citizens customers would have been hit with this year and rolled back a recent 21 percent rate hike.

Getting the 20 percent rate reduction would require a number of factors, and the only guaranteed savings across the board appeared to be closer to 5 percent. But many customers will see much larger reductions, lawmakers argued.

Among the ways lawmakers moved to cut Citizens rates were to allow it to sell policies for other risks if it can guarantee 10 percent savings by doing so, decreasing how much backup coverage the company must get from the state's Hurricane Catastrophe Fund, and changing the way the company would be bailed out in the event of a shortfall.

The proposal will also mean rate cuts for customers of private insurance companies, although it's unclear how much of a break those homeowners will get, with wide variations based on where the home is and which company insures it.

Some private insurers could be able to file for rate decreases of more than 40 percent, predicted Sen. Bill Posey, R-Rockledge.

State Farm, the state's second-largest property insurer, said proposed changes will mean it will be able to offer customers savings of more than 14 percent on average on the wind portion of residents' premiums. Customers near the coast will see the largest savings because wind coverage is a bigger portion of their premiums.

The costs for businesses are also expected to decrease under the proposal, although not as much.

The industry has blamed the rapid increases mostly on the devastating hurricane seasons of 2004 and 2005, in which insurers lost $36 billion in Florida. But many residents stunned by the premium spikes were angry when after 2006 passed with no Florida storms, rates didn't go back down and in many cases continued to increase.

Lawmakers last year tried a fix that relied mostly on making it more attractive for private companies to do business in Florida - including in some cases making it easier for them to raise rates more.

Several legislators have said they were angry when the companies did just that, asking regulators for huge rate increases shortly after the law passed. Lawmakers also said they were responding to an outcry from homeowners, who have bombarded their offices with angry letters about their rising costs.

But Crist also has been credited by lawmakers for driving them to quickly respond. Since taking office earlier this month, the governor has banged the drum for lower rates, routinely refusing to talk about details while telling lawmakers to simply get it done.

In addition to changes aimed at lowering Citizens' rates, the plan also would increase the amount of backup coverage, or reinsurance, available to private insurance companies through the state's Hurricane Catastrophe Fund. Insurers say their own costs for reinsurance have gone up dramatically since the back-to-back storm seasons. Coverage from the state fund is much cheaper than private reinsurance.

Insurance industry officials have called many parts of the proposal 'anticompetitive,' saying it makes it harder for private companies to charge rates they need to make it worth doing business here. And it discourages new companies from getting into the market, insurers say.

The industry also has criticized the state's effort to put more risk on government - calling it a quick-fix bailout.

'In an effort to deliver on promises of 25-30 percent rate cuts, this reform package transfers the cost of paying for future hurricanes to generations of taxpayers, mortgaging our economic future on the hope that a major storm won't strike anytime soon,' the Property and Casualty Insurers of America said in a letter published Sunday in several Florida newspapers.

If the catastrophe fund or Citizens were to come up short and be unable to pay claims, it would be nearly everyone with an insurance policy who would be hit with an assessment under the proposal.

'No question that we are going to have more risk in the system,' said Rep. Jack Seiler, D-Wilton Manners. 'But ... with that risk comes greater reward. So if you look at the purpose for which we were sent up here and that was to reduce rates, we're going to accomplish that.'

The industry has pushed for a plan that relies more on long-term fixes, such as strengthening buildings and houses to reduce losses. Insurers believe that is the primary answer to rates many companies acknowledge are too high for their consumers.

'The quick fixes being considered don't do anything to make homes stronger, families safer, or insurance premiums lower over the long-term,' the letter said.

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