Increased premiums, creating a clearing house for private firms to cherry pick accounts, or breaking up Citizens Property Insurance Corp. into more manageable pieces are among proposals being tossed about in the Senate to reduce the Florida-backed insurer and attract more private firms into Florida.
Floridas Chief Financial Officer Jeff Atwater implored members of the Senate Banking and Insurance Committee on Wednesday to craft broad legislation that would reduce the size and risk of Citizens before the state is hit with a Hurricane Sandy-sized event that puts a fiscal burden on all property owners.
For many, because they don't fully understand their policies, will find they are unable to pay the costs above the deductible to rebuild, he said.
Atwater also cautioned committee members to be leery of well-meaning bills being filed by legislators that seek to simply appease their constituents by capping existing rates, but in the long term put all Citizens customers and Floridians at greater risk.
Standing still cannot be the solution, Atwater said.
Committee Chairman Sen. David Simmons, R-Altamonte Springs, said any plan --and he suggested one that looks out over a number of years rather than just a patch for the current session --must include attracting free-market insurers back to Florida.
If we do the right thing, the results will be right, but were not doing the right thing right now, Simmons said. Were doing the wrong thing. Were manipulating the market and we have caused a flight of qualified insurers from this state by virtue of a policy adopted in 2007; we have traumatized the market.
Simmons has already discussed with House Insurance and Banking Subcommittee Chairman Rep. Bryan Nelson, R-Apopka, seeking a slight, 3 percent, increase to the cap to which Citizens rates can be hiked.
Insurance Commissioner Kevin McCarty suggested breaking Citizens into management pieces, such as separating sinkhole, coastal and wind accounts into the separate coverage areas.
Allow Citizens to no longer focus on several different perils, and focus primarily on being a truly residual market, McCarty said.
McCarty, who backed Atwater in saying that higher premium rates reduce higher assessment costs after a storm, offered a number of steps to bring more private insurers into Florida:
-- Enhance Floridas attractiveness as a place for insurers to do business.
-- Align policyholder risk and reward.
-- Expand risk-sharing opportunities.
-- Stimulate additional private sector capital.
-- Reduce the overall exposure of Citizens Property Insurance Corp. (Citizens)
-- Ensure policies and coverage benefits remain meaningful for Florida consumers.
He also expressed support for emulating the post-Hurricane Katrina Louisiana plan that imposed rates 10 percent higher than the market average on new wind policies as a means to encourage people into the private market.
With nearly 1.4 million policies, recently growing at 8,000 policies a week despite massive efforts to shed accounts into the private market, Sen. Alan Hays, R-Umatilla, suggested rates be put in line with actuarially or market equitably sound rates.
Im sure that 8,000 will drop precipitously, Hays said.
Citizens President Barry Gilway has said that if Citizens ended the inadequacy it would create severe hits in some parts of the state, with the extreme being Hernando County where rates would need to jump 230 percent. Customers in Monroe County would see a 73 percent increase, Pasco County would grow 60 percent and Miami-Dade would get a 20.5 percent hike.
Gilway said Wednesday that while the rates need to be competitive, educating consumers may be more important as most policyholders dont know the terms of the coverage or the risk that costs could grow through post-storm assessments.
Gilway also supported the idea of allowing the state to exceed the 10 percent cap on annual rate hikes but opposed the Louisiana plan."
Gilway added that progress is being made to reduce policies, noting that in the past couple of months the number of new polices a week has dropped from 8,000 to 7,000.
Reach Jim Turner at email@example.com or at (772) 215-9889.