Crist Vetoes Omnibus Florida Property Insurance Bill at Start of Hurricane Season

Florida Gov. Charlie Crist vetoed an omnibus property insurance bill, saying it would make it easier for insurance companies to raise premiums for homeowners.

The legislation, S.B. 2044, had the backing of insurance trade associations, a group of domestic insurance company executives, at least one consumer advocate and the state’s insurance commissioner (BestWire, May 21, 2010). However, Crist said he was particularly concerned about an expansion of the expedited rate filing procedure for property insurers.

“During these very difficult economic times, Florida’s consumers should not have to be concerned with an additional premium increase to their policy,” the governor said.

Crist rejected a measure that would have helped bring much-needed stability to Florida’s property insurance market, said Cecil Pearce, vice president of state relations for the American Insurance Association. Pearce and others in the industry said the bill would have addressed cost drivers identified by insurers as reasons many companies are experiencing financial woes even without a hurricane. Crist’s action came on the evening of June 1, the last date in which he could veto the legislation and the first day of hurricane season.

The bill would have expanded an expedited rate filing procedure adopted last year for property insurers to include a rate adjustment for reinsurance costs, financing products, and an inflation trend factor determined by the Florida Office of Insurance Regulation. Increases were to be capped at 10% per policy. As a result of the veto, file-and-use will expire at the end of the year instead of being extended to 2012.

Since the bill passed the legislature, Crist has left the Republican party and announced he will continue his U.S. Senate campaign as an independent. Crist’s shift in political allegiance was probably not a factor here, said Christian Camara, director of the Heartland Institute’s Florida Insurance Project.

“He has been pretty consistent on one thing: rejecting any market-freeing reforms in the property insurance market,” Camara said.

Crist also objected to “troubling changes” in how mitigation discounts would have been applied, saying they could have unfairly penalized policyholders. Under the legislation, if an insurer showed the aggregate of state-mandated mitigation discounts would result in a revenue reduction, the insurer could have recovered the loss through a rate increase.

Other components of the bill would have included:

– Public Adjusters: Limiting the amount of time a homeowner can file a claim to three years after a storm instead of five years. It would also have limited public adjuster commissions and solicitations following a storm. Public adjusters, independent contractors who work directly for policyholders instead of for insurers, have quadrupled in Florida since 2004.

? Regulatory Oversight: Residential insurers would have had to keep $15 million in minimum capital and surplus instead of $5 million. S.B. 2044 would have allowed troubled companies to cancel a portion of its business within 45 days instead of 100 or 180 days, depending on the time of year.

Crist’s veto throws out the product of more than a year of negotiations, said Neil Alldredge, senior vice president of state and policy affairs for the National Association of Mutual Insurance Companies.

“Many other stakeholders invested countless hours in discussions and negotiations to achieve a bill that may not have made everyone happy but certainly would have resulted in some improvement in Florida?s insurance marketplace. Gov. Crist has decided all that work was worthless,” Alldredge said in a statement.

Lawmakers and industry representatives will try again next year, with a new legislature and a new governor, Pearce said. Still, “I don’t think they’re going to get everything done in one year,” he said.

The top five writers of homeowners multiperil in Florida in 2009, according to BestLink, which provides online access to A.M. Best’s Global Insurance & Banking Database, were: State Farm Group, with a 16.3% market share; Citizens Property Insurance Corp., with 14.5%; Universal P&C Insurance Co., with 9.3%; USAA Group, with 6.4%; and St. Johns Insurance Co. Inc., with 4.9%.