LEGISLATURE PASSES INSURANCE BILL by Roxanne Escobales

01/23/07
WMNF Drive-Time News Thursday

After meeting for its special session on property insurance, the state legislature passed legislation that would increase the state’s role in the insurance company. Governor Charlie Crist is likely to sign the bill into law.

 

ACT: “We’re going to cut rates in a meaningful way, and it’s actually going to happen.”

 

To reduce rates, the legislature shifted the risk from the private insurance industry and made it public. The most talked about provision expands the role of Florida’s catastrophic fund to back-up insurer’s if a storm causes damages between 6 billion and 34 billion dollars. This is known as re-insurance and usually comes at a high price. With the cheaper, taxpayer-funded state variety, however, insurance companies must pass on savings to policy holders.

 

Consumer advocate Bill Newton is head of the Florida Consumer Action Network and part of its insurance coalition. He said the state faced no other alternative if it wanted to lower rates, but it comes at a risk.

 

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Newton says that because of the financial exposure that Floridians potentially face, its up to the state to shoulder some of the responsibility in addressing the factors that cause increased hurricane activity.

 

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The insurance industry also says the state’s expanded role in the re-insurance business unnecessarily exposes Floridians to costly bail-outs. William Stander is the assistant vice president and regional manager of Florida’s Property Casualty Insurance Association of America. He says the re-insurance provision ultimately benefits insurance companies, but at great cost to taxpayers.

 

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State Senator Mike Fasano of New Port Richey says the risk of sustaining enough damage from a hurricane to drain the catastrophic fund is minimal.

 

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Another provision expands the role of the state’s insurance program – Citizens – to actively compete with private insurance. Previously, Citizens was the insurer of last resort, that had artificially high rates so it would not interfere with the private market. Now it can go beyond writing policies for windstorm damage, and it’s rates will be frozen at 2006 prices. The insurance industry says that’s unfair. William Stander of the Property Casualty Insurance Association of America.

 

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The insurance industry came out the worse for wear with the new legislation. Companies will be regulated against excessive profits. And they will no longer be able to cherry-pick which types of insurance they will offer in the state. If they offer car insurance, they must also offer property insurance. Consumer insurance advocate Bill Newton says this will actually help insurance companies.

 

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But the insurance industry’s William Stander says the industry has opposed this move from the beginning.

 

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Senator Fasano says that while the special session produced good results in a short amount of time, the bill does not go far enough. He anticipates the issue will be revisited during the regular legislative session this March. One thing’s for sure, Fasano says, Monday’s legislation would not have happened a month ago.

 

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Other provisions in the insurance bill include allowing the policy holder to choose higher deductibles in exchange for lower premiums and making it easier for foreign-based re-insurance companies to sell coverage in Florida.

  

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