Crist proposes barring insurers from dropping policies for 4 years

Published January 16, 2007

TALLAHASSEE - Little noticed in the runup to this week's special legislative session on insurance: Gov. Charlie Crist wants lawmakers to ban private insurers from canceling existing homeowner's policies for up to four years.

Insurers who failed to comply would face either a hefty 5-percent penalty - roughly the equivalent of some insurers' annual profit - or forfeiture of their right to sell any insurance in Florida, including participation in the state's lucrative auto insurance market.

Crist's plan contemplates only a few exceptions. Insurers would be allowed to shed policies if they're on the verge of insolvency; they could agree to shed no more than 1 percent of their policies a year; or they could cancel for reasons unrelated to hurricane risk, such as nonpayment of premium.

The plan - akin to one passed during the state's last insurance crisis after 1992's Hurricane Andrew - is part of a package of legislation Crist has shopped quietly to both the House and Senate in the past several days. It was obtained Monday by the St. Petersburg Times through a public records request.

Whether lawmakers will embrace Crist's nonrenewal ban, and his version of other tough-on-industry measures, is far from certain. The 68-page package also envisions an expanded role for Citizens Property Insurance, the state-backed insurer of last resort, by allowing it to compete more head-on with private insurers.

The nonrenewal ban will be fought hard by the industry, which says it would hamper other insurers from entering Florida's market and lowering prices through competition. It would likely also face legal challenges.

"We oppose schemes that create barriers to entering or exiting an overregulated market that will hinder Florida's economy for years to come," Mark Delegal said Monday night when told of the governor's proposal. He is a lobbyist for Florida's largest private insurer, State Farm Florida.

Crist's proposal isn't without precedent. Lawmakers approved a nonrenewal ban after Hurricane Andrew. But Crist's plan, proposed through the end of 2010, is far tougher. Under the earlier ban, insurers couldn't cancel more than 5 percent of their policies in a given year, compared to just 1 percent for Crist's plan. In addition, there was no linkage to other insurance lines, such as auto.

The proposed ban is tougher for a reason, says Crist's legal adviser. The pending session is expected to shift much of the state's hurricane risk onto the state's reinsurance fund, meaning taxpayers will be on the hook when a big storm hits.

"The governor's message is that this is not a one-way street," said Christopher Kise, counselor to the governor. "If insurance companies want to reap enormous benefits from Florida's roughly $40-billion in insurance premiums, they have a responsibility to contribute to an orderly and affordable property insurance market."