Bennett, Proctor: End Home Insurance Rate Regulation
The state would no longer have any say over property insurance premiums under a bill filed in the Legislature that sponsors said was aimed at getting state taxpayers off the hook for storm losses.
The bill, filed by Sen. Mike Bennett and Rep. Bill Proctor, is a broader version of legislation that passed the Legislature last year but was vetoed by Gov. Charlie Crist. That bill would have removed the need for state approval for rate increases by only the largest insurers.
The bill (HB 447) that lawmakers now will consider would entirely end the state's role in approving property insurance rates.
“What we really wanted to do is trust the consumers,” said Bennett, R-Bradenton. “Anybody should be able to shop with any company they want.”
Last year, the measure was seen by many as a handout to State Farm – the state's largest private home insurer – which had sought rate increases and been turned down by the Office of Insurance Regulation before deciding it would pull out of the state. It would have been covered by last year's measure, allowing it to raise rates.
But Proctor on Tuesday, as he has in the past, insisted that the bill last year had nothing to do with State Farm – it was the result of a constituent wanting to pay higher rates to stay with his preferred insurer, USAA.
Now, the measure would apply to all companies, letting the market dictate rates, Bennett and Proctor said.
Some customers of certain insurance companies might want to keep their insurance, but face the prospect of losing it because the company decides it can't operate under the rates the state will allow, they argue.
Bennett likened it to a car customer who decides to spend $50,000 on what is essentially a Toyota just because it has the name Lexxus on it. “You should be able to do it,” Bennett said.
Over the last several years, policy makers in Florida have generally tried to keep insurance rates low, following heavy increases after the devastating storm seasons of 2004 and 2005. But with the state forcing rates lower, it meant having the state's taxpayers and customers of all insurance companies taking on more of the risk for paying out claims in the event of a big hurricane. Keeping rates artificially low isn't the way to address the state's property insurance woes, Proctor said.
“What we have done in the past years is put the state in the possibility of bankruptcy,” said Proctor.
When Crist vetoed the measure earlier this year, he portrayed his decision as a move in favor of consumers – who might see higher rates without state regulators looking at proposed rate increases.
So what has changed? Crist will still wield a veto pen, and now may be more sensitive to consumers' concerns because he's in a U.S. Senate race.
But Bennett said Crist's veto earlier this year was predicated on, what Bennett said was bad information from insurance regulators on how many smaller companies might be willing to come in and take new policies in a regulated Florida market. Bennett contends the numbers cited by the governor in saying that a regulated insurance market works just fine were inflated.
“He had misinformation from the department as far as the capitalization of new companies coming in,” Bennett said at a news conference at the Capitol on Tuesday. “With the proper information, I think the governor will see the light.”
Crist's office has only just seen the bill, said spokesman Crist spokesman Sterling Ivey. “He looks forward to reviewing it, and has not come to any conclusions related to support or lack thereof,” Ivey said.
The Florida Insurance Council, which represents the industry, hasn't taken an official position on the bill, which was just released on Tuesday. But its spokesman, Sam Miller, said there does need to be a change to allow rates to go higher in some cases.
“We do need some flexibility in the way rates are set,” Miller. Under the current process, it can take too long to build higher costs into rates, he said.
For the most part, however, the business community widely supports the measure.
Support was announced Tuesday by, among others, Florida TaxWatch, which said that the proposal was crcuial to reducing “the multibillion dollar exposure Floridians face in the residential property insurance market.”
Associated Industries of Florida and the Florida Association of Insurance Agents also endorsed the bill.