More insurance promises, less assurances
By JENNIFER LIBERTO and STEVE BOUSQUET
Published January 11, 2007
TALLAHASSEE -- With competing insurance proposals from the House and Senate already laid out in complex detail, Gov. Charlie Crist on Thursday offered lawmakers a simple goal for compromise: lower premiums.
After a year of touting the need for insurance reform, Crist chose to remain above the policy fray as the special session on insurance is scheduled to begin next week. Instead of offering specifics, the new governor offered stump-speech like guidelines for lawmakers.
Among his priorities:
- “Mandate meaningful and broad based rate cuts” by increasing the state’s role in offering cheap reinsurance to insurance companies and requiring a “return of excess profits” for insurance companies.
- Allow Citizens Property Insurance to sell other types of policies to bring in more money at lower risk.
- Push for a national catastrophe fund.
Crist said that proposals by House and Senate leaders included many of the things on his wish list.
“You’re talking to the happiest guy you’re going to find in Florida today,” Crist said. “As I said before, I’ll say it again, I can’t thank (the Legislature) enough. . . they’re doing the right thing.”
But many of the details don’t quite match up, yet.
For example, Crist’s priorities include “eliminating” Florida-only subsidiary insurance companies, called “pup” companies. National insurers have been allowed since 1998 to create Florida-only subsidiaries to limit their liability.
Theoretically, if the Florida subsidiary gets hammered during a hurricane season, the parent company is protected from big losses.
Only the House plan touches on that idea, but the language doesn’t touch existing pup companies. Instead, the House proposes preventing new Florida subsidiaries from being created, as of Jan. 1, 2008.
The House plan also would require that national parent companies report their profits when the Florida subsidiary requests a rate increase, similar to Crist’s desire to see profit-making curbed while premiums remain high.
But the House plan would bar state regulators from denying a rate increase request based solely on the national parent company’s profits.
Crist also repeated a campaign pledge on Thursday that he wants to eliminate “cherry picking” by companies that sell property insurance in other states but don’t sell it in Florida, even though they offer other coverages in Florida, such as auto or life insurance.
Again, the House proposal deals with the issue, but focuses only on insurance companies that sell car policies.
“Many of my constituents did say that if you write any insurance anywhere you’ve got to write homeowners,’’ said Rep. Carl Domino, R-Jupiter. “But it did seem like (the House bill) got awfully narrow, down to auto.”
Crist wants the state to make it easier for insurance companies to buy cheaper reinsurance, or backstop insurance, from the state.
The state manages a Catastrophe Fund, known as the CAT Fund, that insurance companies can tap into when they suffer especially high hurricane losses.
The idea is to lower the threshold for when companies can get access to the money in the CAT Fund, which would allow those companies to buy less reinsurance on the open market.
Both the House and Senate would require that any savings insurance companies gain by not having to buy more reinsurance be returned to policyholders in the form of premium reductions, but the chambers vary widely and how they would do that.
Crist also endorsed the concept of allowing Citizens Property Insurance Corp., the state-run insurer of last resort, to compete more with private insurers by selling coverage for fire and theft, a concept proposed by the Senate.
Crist also repeated his call for a national catastrophic fund, a proposal that has never had broad support in Congress, and said he would lobby other big-state governors on the national CAT fund issue at next month’s meeting of the National Governors’ Association.
For Crist, optimism abounds.
“There truly is a new wind blowing here,” he said. “The powerless have now become the powerful.”