Homeowners won’t see insurance rate cuts for 18 months, or maybe never, senator says [Orlando Sentinel]

TALLAHASSEE — Florida’s 7 million homeowners can forget about any immediate relief from rising property insurance rates coming out of this week’s special session.

Bradenton Republican Sen. Jim Boyd, sponsor of two bills aimed at stabilizing the ailing insurance market and curbing abuses in the roofing repair industry, said during the bill’s one and only committee hearing Monday that rate reductions would take up to 18 months or they might not happen at all.

“Right now in terms of rate relief there is no immediate impact,” said Boyd, an insurance agent himself. “I understand the concern, but these measures, if we put them in place, will factor into the rate-making process.”

That’s too long for property owners facing double-digit rate increases to wait, said Sen. Jason Pizzo, D-Miami, speaking in support of an amendment by Sen. Lauren Book, D-Plantation, that would have immediately frozen insurance rates for the next 12 months.

“The 18-month timing is unacceptable. Freezing rates and keeping the status quo for the next 12 months would provide immediate relief,” Pizzo said. “This would provide immediate relief for our constituents.”

A rate freeze could cause even more companies to go bankrupt or pull out, Boyd said. “And if they fail, the assessment goes to all the policy holders,” he said.

Book’s amendment failed, as did an amendment by Pizzo to address condominium safety, another issue the Legislature failed to tackle during the regular session.

Both bills were heard at the Senate Appropriations Committee, about 72 hours after they were made public Friday night.

After close to five hours of questions, testimony and debate, the committee voted 19-2 on the property insurance bill, SB-2B, with Democratic Sens. Audrey Gibson of Jacksonville and Darryl Rouson of St. Petersburg voting no, and 20-0 on the roofing bill, SB-4B.

The overwhelming support for the bill was surprising considering the amount of criticism from Democrats on the committee on certain aspects of the bill and the industry premise that litigation was the leading cause behind driving up insurance rates.

“How is any of this going to help seniors and families on fixed incomes?” Gibson asked.

A similar pair of bills sponsored by Rep. Jay Trumbull, R-Panama City, will be heard in the House Appropriations Committee on Tuesday.

The bills, forged during a week of back-and-forth negotiations between House and Senate leadership and the Governor’s Office, contain several measures designed to fix a market that’s been characterized as a patient on life support.

Blaming the high costs of reinsurance and litigation, several Florida-based companies have gone out of business in recent months, leaving tens of thousands of homeowners scrambling to find new insurance. Others have jacked up their rates to existing customers or dropped them entirely.

Insurance industry backing

The plan before the Legislature has the support of members of the insurance industry, especially a lawyer who represents all the major carriers in claims cases.

Aram Megerian, a Tampa lawyer with the Florida Justice Reform Institute whose firm has defended most if not all the insurance carriers in claims cases, said without these measures the industry will die. His firm has represented several companies that have liquidated and one that is about to close shop.

“What Boyd’s bill is attempting to do is provide a marketplace so other insurance companies can survive in this market,” Megerian said. “Without these reforms this is not going to work.”

But one lawyer testified that Florida homeowners weren’t getting a good deal.

“This has a lot of illusory promises to help homeowners, but the reality is it’s restricting the rights of homeowners,” said Tyler Chasez, an Altamonte Springs attorney. “In the end there are things we can work with here, but the majority of it is harmful to homeowners.”

Among its top measures are an extra $2 billion in reimbursements for reinsurance due to hurricane losses, which would allow insurers to tap into the Hurricane Catastrophe Fund before they reach the maximum claims payouts when they can normally get reimbursed from the fund.

That would help lower the cost of reinsurance, which companies must buy to protect themselves from catastrophic losses, Boyd said. Insurers that participate would have to reduce their rates to policyholders.

An insurer would be allowed to participate in the program if the insurance commissioner certifies it is in “unsound financial condition.”

Sen. Jeff Brandes, R-Clearwater, raised issues with a proposal to prohibit carriers from refusing to write or renew policies for people whose roofs are less than 15 years old and by requiring them to insure older roofs if an inspection shows they still have years of life left in them.

“By forcing companies to take on older roofs, we are pushing them into the deeper end of the pool,” Brandes said. It would have the unintended consequence of pushing rates up for all policy holders, he said.

But state Insurance Commissioner David Altmaier said it’s good for consumers and any potential increase in rates would be offset by other pro-consumer measures in the bill.

2% roof deductible draws fire

Another provision that drew questions and criticism would allow insurers to offer an optional 2% deductible for roof damages or 50% of the replacement cost. On a $300,000 home, the 2% deductible works out to a $6,000 out of pocket expense for the homeowner, Boyd said. With the 50% deductible, he said, it works out to a $7,500 expense on a $15,000 roof.

“We know car owners have a hard time paying their auto insurance deductible of $500 or $1,000,” Sen. Bobby Powell, D-West Palm Beach. “What happens if they don’t have it?”

Boyd reminded him that the deductible was an option and other insurance products would still be available to homeowners.

Other measures in the bills would clean up the definition of assignment of benefits to contractors, eliminate automatic payments for lawyers of contractors who are assigned benefits, and limit lawyers’ ability to charge double or triple their normal rates.

Another measure restricts how contractors can solicit homeowners to make a property insurance claim for roof damage without disclosing that the homeowner would be responsible for paying any deductible, by making it a third degree felony for a contractor to pay or waive an insurance deductible and to intentionally file a knowing false claim.

“We believe these policies will save homeowners significantly,” Boyd said.

The bills do not mandate rate reductions or set any rate increase caps, or contemplate expanding the role that the state-backed Citizens Insurance plays in the market, something industry analysts say would help reduce insurance premiums.

Nor do they address the issue of increasingly severe hurricanes that some scientists attribute at least in part to climate change. Insurance executives with Chubb and other major groups say climate change plays a huge role in calculating risk and whether they want to do business in a market, as a recent substack by Jason Garcia reported.

“Anthropogenic climate change is both an existential threat to the planet and an imminent risk to our industry,” said Kevin O’Donnell, the president and CEO of Bermuda-based RenaissanceRe Holdings Ltd., which is partially owned by State Farm and sells reinsurance in Florida.

Renaissance said it revised its internal North American hurricane model in part to reflect the increased risk of storms due to climate change, Garcia reported.