CFO tries to keep rate cuts sensible

As insurance ideas swirl in Tallahassee, Alex Sink tries to be the voice of reason.

Published January 19, 2007

TALLAHASSEE - Alex Sink's Capitol office looks out on a busy side exit frequented by House members who stop to smoke, chat or walk to a set of elevators.

It's an opportune location for the state's chief financial officer during this week's special session on insurance, because she can see them coming and going, but they can't see her.

Sink is using the spot to snag lawmakers she's keen to meet as legislation begins to take shape on Florida's insurance crisis. She also met one-on-one with a half-dozen lawmakers Thursday.

The clear trend in Tallahassee now is to write legislation that would lower insurance premiums by having the state assume more of the risk from hurricane damage.

As the guardian of the taxpayers' dollar, Sink has been working behind the scenes to temper enthusiasm for plans that push too much risk on to the state's shoulders. But she also must balance her role as fiscal caretaker with the populist ideals that got her elected.

During Thursday morning's Cabinet meeting, her first, Sink encouraged Brevard County visitors who arrived looking for lower insurance premiums: "We pay more attention to the people in the T-shirts" than lobbyists in suits.

Later she explained the difficult balance that must be struck.

"The question becomes: How much government intervention and ... where is that tipping point, that the price we may have to pay in the future is so outrageous that we can't take it?"

That balance has pushed Sink, a Democrat who spent a career in the banking industry, into taking a slightly more conservative position on some insurance proposals than her Republican counterpart in the Cabinet, Gov. Charlie Crist.

For example, like Crist, Sink agrees that rates should be frozen for customers of Citizens Property Insurance Corp., the state-run insurance pool of last-resort. But she adds that rates may have to go up next year to make sure Citizens can balance its books.

At the moment, there are two primary proposals for bringing down insurance premiums. Of the two, Sink prefers the House approach because it keeps insurance companies paying more into the state's Catastrophe Fund, which reduces the state's risk. But, the potential savings to policyholders is lower than the Senate's plan.

The House plan would save policyholders an estimated 21 percent off their windstorm premium, or the part of their homeowner's policy that covers hurricane risk, according to an estimate released by the Office of Insurance Regulation late Thursday. (That estimate doesn't include Citizens or State Farm Florida, the two insurers that write 49 percent of Florida homeowners.)

By contrast, Crist prefers the Senate approach, which could offer more than double the savings on insurance premiums but would leave taxpayers' on the hook for any hurricane that causes $26-billion in damage or more. The Senate plan would save about 48 percent off windstorm premiums, according to the same OIR estimates.

"I like the lesser exposure," Sink said Thursday. "If we get lucky and don't have any storms, we'll be able to take those reinsurance premiums (collected from insurers) and build up our fund."

In fact, when Sink first heard of the Senate's approach last week in its beginning stages, the plan didn't have a concrete cap for the state's risk.

"That's when I, as the chief financial officer, am sitting here, and started kind of getting uncomfortable, and thinking, 'Oooh, unlimited exposure?' " Sink said. " 'We can't have that.' "

Sink is also in favor of some of the options in the Senate package that would allow consumers to lower their premiums by agreeing to take on more risk through a higher deductible or excluding coverage of their household contents.

She opposes a House plan that allows homeowners to carry only enough coverage to pay off their mortgage, because it's too risky, she said.

If a bad storm destroys a home that's only partially insured, the entire insurance check would go to the bank, leaving the homeowner homeless.

She added that if any of the plans to allow homeowners to take on more risk get passed, she would lobby the Legislature for funding for public service announcements to explain the consequences.

"If we are going to have more choices, we need to make absolutely sure they understand that if you choose this, this is the risk you're undertaking," Sink said.

Times staff writers Joni James and Steve Bousquet contributed to this report.


Reconciling bills

Negotiations begin today to marry insurance legislation passed by the House and Senate. The conference committee will meet at 10:30 a.m. and is scheduled to continue through the weekend. The special session on insurance ends Monday.