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Bill to deregulate property insurance market appears dead

A push to let Florida property insurance companies aggressively raise rates with unregulated policies appears unlikely this legislative session, a victim of Gov. Charlie Crist's threatened veto.

Sen. Mike Bennett, R-Bradenton, sponsor of the Senate version of the deregulation bill (SB876), conceded Wednesday "we just didn't feel this was the right year" for passage. One of the biggest obstacles, he said, is Crist's strong opposition to the bill and his support for Insurance Commissioner Kevin McCarty, another critic.

"The governor continues to listen to a person who has proven to me to be totally inept," Bennett said. "Until the governor decides to replace Mr. McCarty, the way he should have last year, when he lied to the governor and the Cabinet, I don't think we have a chance of any insurance reform."

It is also a political calculation. Legislative leaders don't want to give Crist another easy victory with a veto, which he did with teacher merit pay and campaign finance overhaul bills earlier this session. Crist, who is trailing Marco Rubio in a Republican primary for U.S. Senate and weighing a run as an independent, received a recent jolt on the campaign trail after vetoing an education overhaul bill.

Last year, the governor rejected a similar deregulation measure aimed at major insurance companies like State Farm.

Crist on Wednesday defended his veto threat and said he was "very happy" it forced lawmakers to withdraw the legislation.

"We do need to try to protect the consumers of the state," he said, emphasizing that to him that means "not allowing those rates to be increased on their backs at this time in this economy."

With a week and a half remaining in this session, it's still possible a compromise could emerge, but it would need Crist's consent to go forward.

Another insurance measure is pending in the Senate. Containing a hodge-podge of proposals, the bill (SB2044) could lead to higher insurance rates, fewer hurricane mitigation discounts and more red tape to get full replacement costs for damaged property.

Other pieces of insurance legislation still on the table include a three-year limit on hurricane insurance claims, a streamlined sinkhole litigation process and a provision to let regulators better supervise payments struggling insurers make to so-called managing general agencies (MGAs) that oversee them.

But the legislation is less controversial than the deregulation bill. It would let insurance companies raise rates up to 10 percent on a statewide average with a cap at a 20 percent hike. The Florida Office of Insurance Regulation under McCarty currently has authority to reject rate requests that are deemed excessive. But insurance companies contend the freedom is needed because present rates are artificially low. Rep. Bill Proctor, the bill's House sponsor, said the measure gives homeowners in risky areas an option to keep their insurer if they want to pay more.

A House version of the deregulation bill (HB447) stalled Wednesday after concerns were raised about how insurers would handle replacement cost coverage.

"I don't think they wanted to vote on those amendments because they are consumer-friendly amendments," said Rep. Rick Kriseman, a St. Petersburg Democrat and lead opponent.

Bob Ritchie, president and CEO of Tampa-based American Integrity Insurance Group, has called for a systemic overhaul of insurance. But he didn't think deregulation would be the politically palatable vehicle for it.

"For us the deregulation bill was never a priority, and frankly I think it was flawed," said Ritchie, one of the leaders of Florida-based Property Insurers CEO Group.

Ritchie also contends deregulation is unnecessary, given the insurance commissioner's recent propensity to approve double-digit rate increases "and in some cases going back to the carrier and saying, 'Take more.' "

Instead, Ritchie and other insurers have pegged their hopes on winning a string of more modest legislative changes "that collectively would have a meaningful, beneficial impact," said Jay Newman, chairman of Sawgrass Mutual Insurance Co. and former executive director of the state-run Citizens Property Insurance.

Despite several years without a major hurricane, the state's property insurance market is riddled with problems and question marks. More than 50 Florida-based insurers suffered a combined net loss of $275 million last year.

Market leader State Farm has backed off a threatened full exit from the market, but like many out-of-state insurers, it is still dropping thousands of policyholders while raising rates for its remaining, shrunken base.

Floridians are still paying assessments on insurance premiums for hurricane damages from 2005 and will be until 2016. The tab so far: almost $5 billion.

Bill to deregulate property insurance market appears dead 04/21/10 [Last modified: Thursday, April 22, 2010 8:37am]
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