Property insurance bill that allows for larger Citizens rate hikes clears Florida Legislature

May 1—An overhaul of Florida's property insurance regulations that allows for larger rate hikes at state-run Citizens Property Insurance and makes other changes pitched as a lifeline for struggling private insurers cleared the Florida Legislature Friday.

Private property insurers have been raising rates as they complain about litigation costs, prompting lawmakers to respond. Supporters of the insurance bill say it will keep rates down by targeting what they describe as unscrupulous legal practices.

"I think you'll start to see the return to a vibrant insurance market," said bill sponsor Sen. Jim Boyd, R-Bradenton.

Homeowners and plaintiffs attorneys involved in insurance litigation have complained bitterly about the legislation, though, arguing it will make it harder to get legitimate claims paid. Homeowners impacted by Hurricane Michael testified at a recent committee hearing that they resorted to litigation after being lowballed by their insurance carriers.

Some Democrats also blasted the provision in the legislation that slowly increases the cap on Citizens' annual rate hikes from 10% to 15% and argued that many of the insurance industry's problems are self-inflicted.

"I'm very troubled by the fact that in this bill we are going to allow Citizens insurance to raise the rates; there is no sugar coating this," said Sen. Annette Taddeo, D-Miami.

Boyd agreed to an amendment removing a provision in his bill involving roof repairs that was particularly troubling for some consumer advocates. Boyd's bill originally allowed insurers to sell policies that shift some replacement costs for older roofs to homeowners.

"Roofs are covered under the amendment just as they have been in the past under your homeowner's policy," Boyd said.

The bill makes a variety of changes to insurance law, including reducing the time that an initial claim can be filed from three years to two years, with one additional year to file a supplemental claim. It also requires that homeowners give insurers 10 days notice before filing a lawsuit, changes how attorney fees are paid when there is litigation over a claim, prohibits building contractors from soliciting homeowners to file claims and prohibits contractors and public adjustors from offering incentives for roof inspections and claims.

Florida insurers have been clamoring for help as many report losses and move to raise rates by double digits. Insurers say much of the problem stems from rising litigation costs, but the industry has struggled for years in hurricane-prone Florida.

Republicans in the Florida Legislature have long criticized Citizens and have worked to shrink the company through reforms sought by private insurers.

Citizens' policy count has fluctuated, growing substantially after the devastating 2004 and 2005 hurricane seasons as private carriers shed policies. The state-run insurer then shrank significantly over the last decade, before starting to grow again in recent years.

Boyd said Citizens rates are lower than the private insurance market in some circumstances. Critics of Citizens say its lower rates undercut the private market. Boyd argued that allowing Citizens to implement larger rate hikes will have a "minor impact."

"It's not draconian by any measure to Citizens policy holders," Boyd said.

Consumer advocates blame the insurance industry's own practices for many of the problems facing the industry, saying they contribute to financially fragile companies that don't keep enough money in reserves and divert too much revenue to affiliated companies for services, making their finances look worse than they are.

Sen. Gary Farmer, D-Lighthouse Point, said Friday that insurance companies "cook the books."

"Here we are again, crisis dujour," Farmer said. "The insurance industry doing its best impersonation of Chicken Little — the sky is falling, the sky is falling ... it's a manufactured crisis."

The legislation does give the Florida Office of Insurance Regulation the ability to determine whether fees paid by insurers to affiliated companies are "fair and reasonable."

The property insurance reforms received bipartisan support. The bill cleared the Senate 35-5 and passed the House 75-41 Friday.

Follow Herald-Tribune Political Editor Zac Anderson on Twitter at @zacjanderson. He can be reached at zac.anderson@heraldtribune.com.

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