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Crist cites rates, critics cite politics, as he vetoes property insurance bill

TALLAHASSEE — On the first day of the 2010 hurricane season, Gov. Charlie Crist vetoed an expansive property insurance bill, citing concerns about making it easier to increase rates for policyholders.

"During these very difficult economic times, Florida's consumers should not have to be concerned with an additional premium increase to their policy," Crist wrote in his veto message, released two hours before the midnight decision deadline.

Crist's move reaffirmed his populist posture against the insurance industry, but went against the advice of the state's top insurance regulator and other advocates who argued the legislation would help stabilize the market ahead of what is expected to be an active storm season.

The decision vexed the bill sponsor, Sen. Garrett Richter, R-Naples, who said the Governor's Office worked closely with the lawmakers and the industry to craft the legislation.

"The only way I could rationalize a veto is pure politics," said Richter, who suggested similarities to the uproar concerning Senate Bill 6, a hotly contested education bill that Crist's administration supported earlier this year before he killed it.

The industry-backed bill (SB 2044) included a kaleidoscope of measures designed to tweak the state's troubled insurance market, with supporters and critics finding components to like and dislike.

Even though Crist vetoed the bill to protect from higher rates, his action voids a little-noticed provision tucked inside the 110-page bill to extend the ban on "use and file" rate filings, a system that upends the existing regulatory scheme.

Under current law, an insurance company requests a rate hike from the Office of Insurance Regulation, which has the authority to approve or reject it before it takes effect. But with the veto, effective Jan. 1, insurers can charge consumers higher rates for months, if not years, before state regulators decide whether they are appropriate.

The veto came as Florida's insurers cast a wary eye toward the tropics, given the state's exposure to storms and precarious insurance market.

Despite four hurricane-free seasons in a row, the majority of insurers say they lost money and several startup insurers went out of business. To limit future failures, the legislation would have required new property insurers to keep larger capital reserves to pay claims, moving the minimum from $5 million to $15 million and giving existing companies a grace period.

Another reason for higher rates, according to state regulators and the industry, are public adjusters who helped homeowners reopen claims from the 2004 and 2005 hurricane seasons, and fraud in a program that gave policyholders discounts for hardening homes against storm damage.

"A good-faith effort was made to pass a bill that tackled those problems," said Sam Miller of the Florida Insurance Council, a trade group representing about 200 insurance companies. "Unfortunately, the governor disagreed. There's just a gentlemen's disagreement."

Critics contend limiting claims to three years after a storm and cutting mitigation discounts only hurt consumers.

Crist expressed concern about the possibility of reducing incentives to strengthen homes.

"Responsible Floridians who have already made investments to harden the homes could be unfairly penalized," he wrote.

On the upside, Citizens Property Insurance, the state-run insurer, has become more financially viable after mandated rate increases and calm storm seasons. The insurer is sitting on a $4 billion surplus and has ability to pay more than $14 billion in claims heading into the summer.

Likewise, the Florida Hurricane Catastrophe Fund, which provides an added layer of coverage for insurers after a major hurricane, is considered fully financed. But the market still holds dangers, particularly as private insurers and failed companies shed policies to Citizens, which is adding at least 70,000 policies to its current 1 million as the hurricane season gets under way.

Everyone in the state is tied in to the fate of Citizens because all insurance policies can be assessed to pay for storm damage that Citizens can't cover.

Bob Ritchie, president and chief executive of American Integrity Insurance in Tampa, said Crist's decision to veto didn't surprise him, even with the support of the state's insurance consumer advocate. He linked it to the election season and Crist's bid for the U.S. Senate.

"He's looking for a short-term political gain," he said, "for the sake of what's going to be long-term damage."

John Frank can be reached at jfrank@sptimes.com or (850) 224-7263.

Bill's provisions

The property insurance bill vetoed by Gov. Charlie Crist included provisions to:

• Let insurers to more easily hike rates up to 10 percent each year to cover reinsurance and inflation costs.

• Allow companies to withhold a full claims payment until homeowners repair damage, even for those with replacement cost value policies.

• Restrict hurricane claims to three years, instead of five, to limit the ability of public adjusters to reopen claims.

• Require new insurers to have $15 million in capital, up from $5 million, with a 10-year grace period for existing companies.

• Offer fewer discounts to policyholders who strengthen homes against storms and charge fees to those with inferior protection.

• Give regulators limited ability to review finances of an insurer's related companies, tightening but not closing a loophole that allows companies to mask profits.

Crist cites rates, critics cite politics, as he vetoes property insurance bill 06/01/10 [Last modified: Wednesday, June 2, 2010 8:25am]

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