Citizens rate hikes won't stick

By Jennifer Liberto and Joni James
Published January 11, 2007

TALLAHASSEE - At least one thing seems likely to come out of next week's special legislative session on homeowner's insurance: Citizens Property Insurance policyholders will be spared two big rate hikes that were scheduled for early this year.

House Speaker Marco Rubio unveiled an ambitious overhaul of Florida's insurance market that is more far-reaching than the Senate plan offered earlier this week.

But both chambers propose repealing a Citizens premium increase that went into effect this month, and both would prohibit another one scheduled for March. Citizens rates would be frozen at 2006 levels for the year.

"If it's in the Senate bill and it's in the House bill, my experience here teaches me that's some pretty good odds," Rubio said Wednesday.

The House plan, coming after months of voter outrage on rising insurance rates, shows a seismic shift in the chamber's philosophy on insurance. Rubio is leading the House away from its free-market view of the problem to one that supports more government intervention.

The Senate has always favored more government influence, but the two chambers differ so much on the details that the high-stakes special session will open Tuesday under a cloud of uncertainty.

The House plan would do everything from spending $100-million more to help homeowners harden their homes against hurricanes to firing the Citizens' board, which oversees the state-run insurer that covers one in three Florida homes.

But the biggest surprise in the House plan was a pair of controversial new industry regulations.

One would require insurance companies to detail their parent company's profits when applying for rate changes in Florida, and the other would force companies that write property insurance in other states to write it here if they write any insurance line, such as auto.

Both ideas were first championed by Gov. Charlie Crist when he ran for office last year.

The House proposal took many in the insurance industry by surprise. The details had been kept secret, but the real surprise is in the way the new plan reverses the House position on insurance. Last spring, House leaders said the state needed to lure more insurance companies into the state with incentives and lighter regulation.

Now, State Farm Florida is warning that some of the ideas in the House plan would make the state less appealing to new insurance companies.

"Nearly everything in that one section (regulating the industry) is a barrier to more private insurance coming into this market," said State Farm lobbyist Mark Delegal.

Beyond agreement on the Citizens rate rollbacks, the House and Senate plans share some common goals but depart sharply on the details.

Both chambers would eliminate the law that now requires Citizens, as a state-run insurance company of last resort, to charge the highest rates in the state. But the House would not allow Citizens to offer more coverages, such as fire and theft policies, that can generate revenue at a lower risk. The Senate would allow such an expansion.

Both chambers want to make it easier for insurance companies to buy cheaper reinsurance, or backstop insurance for insurance companies, from the state.

The idea is to force the companies to pass those savings to consumers, but the details - as well as how much they would help lower premiums - vary widely.

The Senate promises as much as 12 percent savings on windstorm insurance, while the House predicts 25 percent savings by having the state assume significantly more risk.

Also on Wednesday, a bipartisan group of Senate leaders unveiled its own unconventional idea for fixing the insurance crisis by saving insurance companies from having to buy much reinsurance at all. The state would cover much of the risk.

Senate leaders shrugged off suggestions Wednesday that introducing yet another variable in an already confusing array of proposals could thwart progress during next week's session.

"We are closer than it might appear," said Senate Majority Leader Dan Webster, R-Winter Garden.

Fixing Florida's Insurance?

Insurance solutions

In both Senate and House plans

- Make it easier for insurers to buy cheap reinsurance from the state

- Freeze Citizens Property Insurance rates for one year.

- Remove requirement that Citizens charge the highest rates

Only in the House plan

- Factor in national profits of insurance companies when setting Florida rates

- Require companies that offer property insurance elsewhere to offer it in Florida as a condition of selling other lines, such as auto insurance

Only in the Senate plan

- Eliminate laws taking effect March 1 that will make it harder for nonhomesteaded homeowners to get coverage from Citizens