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Insurers' loopholes shut

The state Cabinet approves a noncancellation rule and a rate freeze.

By TOM ZUCCO
Published January 31, 2007


The tweaking has begun.

After sometimes-heated debate Tuesday, Gov. Charlie Crist and the Florida Cabinet closed two loopholes in the recently passed property insurance reform bill by barring insurance companies from canceling policies for much of this year and temporarily freezing rates for about 20 companies that have not made a new rate filing.

After filing an emergency order late Monday, Crist said he was acting on fears that insurance companies would respond to last week's legislation by simply canceling policies.

The new cancellation rule is in effect only until May. But coupled with a law that makes it difficult for insurers to cancel policies through most of the hurricane season, Tuesday's action effectively covers nearly all of 2007. The hurricane season runs from June 1 through Nov. 30

The freeze is intended to stop insurance companies from filing for rate increases that do not take into account recent legislative changes.

Most companies, including State Farm and Allstate, have already won approval for their rates and would not be affected by the freeze.

And rates for state-run Citizens Property Insurance have already been frozen by the Legislature at their Dec. 31 level.

But Nationwide, which has about 250,000 policyholders in the state, still has its filing under review. The third-largest insurer in the state is currently in arbitration over a 71 percent rate hike requested last summer, although a company spokesman said Tuesday it would accept half that amount.

Both the rate freeze and cancellation policy were passed unanimously by the Cabinet, but not without drama.

Chief Financial Officer Alex Sink, the only Democrat on the four-member Cabinet, said she was not made aware of the emergency order until early Monday evening. Sink's department oversees the Office of Insurance Regulation.

"With all due respect," Sink said, "I have a number of questions about this order. Had I known last Friday, my staff could have spent all weekend analyzing it.

"My preference is to approve the rate freeze, but defer the noncancellation of policies to the next Cabinet meeting."

But Crist said he wanted to ensure policies were not canceled and rate increases weren't "slipped under the door."

Sink countered that she wants to encourage private insurers to come back to Florida, and the order "sets a dangerous precedent."

"Sometimes companies need to nonrenew because of their capitalization situation," Sink said.

Guy Marvin, president of the Florida Insurance Council, the state's largest insurance trade group, went further, saying the rule "will have a drastically negative impact on the financial statement of some of our members."

And Nationwide lobbyist Mark Delegal said his company was being unfairly punished.

"It's not that Nationwide came in the dark of night," Delegal said. "They made a filing July 6 to include the increased costs. They were denied Oct. 18 and filed for an arbitration hearing in November. The hearing was postponed, and will take place in mid March with a decision in April.

"This rule ensnares Nationwide."

Crist shot back, "What were the profits for Nationwide last year?"

Delegal said he didn't know, but that Nationwide's Florida subsidiary has lost money in the state.

"We have a serious problem with aggressive profits," Crist said. "What we're talking about is this Cabinet having the backbone to do what's right.

"If there's no emergency order, companies can stick their nose under the door and cancel policies, like Allstate just did to 106,000 of its customers."

That's of little consolation to Rose DeRosa, 61, a retired Spring Hill banker who got a notice Jan. 17 that Allstate would not renew her policy. That was three days before lawmakers passed the new legislation.

"It's kind of like somebody tipped them off," she said.

Tom Zucco can be reached at zucco@sptimes.com or (727)893-8247.