Florida gives insurance firms a helping hand
By JIM SAUNDERS
Tallahassee Bureau Chief
TALLAHASSEE -- When Gov. Jeb Bush signed a bill Tuesday aimed at fixing Florida's hurricane-ravaged property insurance system, he repeated a theme that has become common during the past two weeks: The bill is an important "first step."
But while Bush and legislative leaders hope the measure will spur insurance companies to sell policies in the state, it will not provide short-term relief to residents and business owners who are getting hit by massive rate increases and the threat of losing coverage.
The bill signing came just four days after State Farm sought statewide rate increases of more than 70 percent, and Allstate announced it will shed 120,000 policies. State and industry officials said Tuesday they expect to see other insurers propose similar measures, while a government-backed insurer of last resort will swell with customers who can't find coverage elsewhere.
Bush acknowledged he is worried about property owners facing higher insurance premiums. But with the insurance industry reeling from eight hurricanes during the past two years, he said there was little choice.
"There's really no other option right now," he said.
Some critics of the bill, however, said lawmakers did not go far enough in trying to reform the insurance market. Jeff Grady, president and chief executive officer of the Florida Association of Insurance Agents, called it a "pretty weak start."
"That bill needed to send flashing green lights to private insurers," Grady said. "I'm not even sure it sends flashing yellow lights."
Daytona Beach insurance agent Richard Brown, a former chairman of Grady's group, said he particularly sees problems with insurers refusing to renew windstorm policies for businesses. He said lawmakers did not adequately address such issues, which he expects to worsen in the coming months.
"What the Legislature has done to address that problem is they've done nothing," said Brown, president and chief-executive officer of Hayward Brown Inc.
The bill, which lawmakers passed May 5 in the final hour of the annual legislative session, is designed largely to provide incentives for private insurers to write policies in the state and to limit the financial risks of the government-backed Citizens Property Insurance Corp.
As examples of steps to help the private market, lawmakers set aside $250 million for loans to companies that want to do business in the state. Also, a change will help small insurers get a crucial form of backup coverage known as "reinsurance."
Reinsurance costs have skyrocketed since the 2004 and 2005 hurricanes, helping to drive many of the rate increases. William Stander, a Tallahassee-based official of the Property Casualty Insurers Association of America, said the bill's reinsurance provisions will help some small insurers continue writing policies in the state.
"A lot of these smaller companies were not being offered reinsurance at any price," Stander said.
Lawmakers also agreed to spend $715 million in tax dollars to help defray a $1.7 billion deficit that Citizens Property Insurance ran up in paying claims during the 2005 hurricane season. Policyholders throughout the state -- including those who are not Citizens' customers -- will have to pay the rest of the deficit over 10 years.
Hoping to curb the future financial risks of Citizens, the bill will lead to major rate increases for Citizens' customers over the next three years. The amount of the increases is unclear, but when combined with an already-proposed 45 percent rate hike, they could top 100 percent.
Citizens, which provides coverage in areas where private companies won't do business, had grown to 850,000 policies as of the end of April, up 20,000 policies from the previous month, spokesman Justin Glover said. With three financially troubled insurers getting taken over by the state and other companies not renewing policies, Citizens is expected to continue growing in the coming months.
Tallahassee Bureau Chief
TALLAHASSEE -- When Gov. Jeb Bush signed a bill Tuesday aimed at fixing Florida's hurricane-ravaged property insurance system, he repeated a theme that has become common during the past two weeks: The bill is an important "first step."
But while Bush and legislative leaders hope the measure will spur insurance companies to sell policies in the state, it will not provide short-term relief to residents and business owners who are getting hit by massive rate increases and the threat of losing coverage.
The bill signing came just four days after State Farm sought statewide rate increases of more than 70 percent, and Allstate announced it will shed 120,000 policies. State and industry officials said Tuesday they expect to see other insurers propose similar measures, while a government-backed insurer of last resort will swell with customers who can't find coverage elsewhere.
Bush acknowledged he is worried about property owners facing higher insurance premiums. But with the insurance industry reeling from eight hurricanes during the past two years, he said there was little choice.
"There's really no other option right now," he said.
Some critics of the bill, however, said lawmakers did not go far enough in trying to reform the insurance market. Jeff Grady, president and chief executive officer of the Florida Association of Insurance Agents, called it a "pretty weak start."
"That bill needed to send flashing green lights to private insurers," Grady said. "I'm not even sure it sends flashing yellow lights."
Daytona Beach insurance agent Richard Brown, a former chairman of Grady's group, said he particularly sees problems with insurers refusing to renew windstorm policies for businesses. He said lawmakers did not adequately address such issues, which he expects to worsen in the coming months.
"What the Legislature has done to address that problem is they've done nothing," said Brown, president and chief-executive officer of Hayward Brown Inc.
The bill, which lawmakers passed May 5 in the final hour of the annual legislative session, is designed largely to provide incentives for private insurers to write policies in the state and to limit the financial risks of the government-backed Citizens Property Insurance Corp.
As examples of steps to help the private market, lawmakers set aside $250 million for loans to companies that want to do business in the state. Also, a change will help small insurers get a crucial form of backup coverage known as "reinsurance."
Reinsurance costs have skyrocketed since the 2004 and 2005 hurricanes, helping to drive many of the rate increases. William Stander, a Tallahassee-based official of the Property Casualty Insurers Association of America, said the bill's reinsurance provisions will help some small insurers continue writing policies in the state.
"A lot of these smaller companies were not being offered reinsurance at any price," Stander said.
Lawmakers also agreed to spend $715 million in tax dollars to help defray a $1.7 billion deficit that Citizens Property Insurance ran up in paying claims during the 2005 hurricane season. Policyholders throughout the state -- including those who are not Citizens' customers -- will have to pay the rest of the deficit over 10 years.
Hoping to curb the future financial risks of Citizens, the bill will lead to major rate increases for Citizens' customers over the next three years. The amount of the increases is unclear, but when combined with an already-proposed 45 percent rate hike, they could top 100 percent.
Citizens, which provides coverage in areas where private companies won't do business, had grown to 850,000 policies as of the end of April, up 20,000 policies from the previous month, spokesman Justin Glover said. With three financially troubled insurers getting taken over by the state and other companies not renewing policies, Citizens is expected to continue growing in the coming months.
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