TALLAHASSEE — State Rep. Rick Kriseman is a reluctant expert on property insurance.
A fire torched his home. His previous Florida-based insurer faltered. His rates jumped 90 percent in the last year.
And now the St. Petersburg Democrat is sounding an alarm about legislative efforts to revamp the system to benefit property insurers at the expense of customers.
"We are making major decisions that have serious impacts on our citizens without full vetting, and that's when bad policy comes out," Kriseman said.
The convoluted issue is often one of the last to coalesce in the Legislature, but this year appears especially murky with Gov. Charlie Crist's possible veto looming over the negotiations.
The House version of the legislation, at nearly 100 pages, holds considerable ramifications for homeowners: rate increases, unregulated policies, fewer hurricane mitigation credits, limits on sinkhole claims and more out-of-pocket expenses.
Rep. Bill Proctor, the House sponsor, said the measures are needed because Florida faces a "perilous condition for a major storm" just weeks before hurricane season. "This bill is not going to cure that overnight," the St. Augustine Republican said. "All we are trying to do is change the direction to some extent."
The state's risk?
The sobering assessment of the state's exposure comes in spite of several years without any major storms. At the same time, a number of Florida property insurers became insolvent in the last year and the bulk of the state's top companies reported losing money.
The state-run company, Citizens Property Insurance Corp., now holds $405 billion in risk and one in four Florida homeowner policies, and is moving toward financial security after lawmakers mandated rate increases last year.
But it still can't withstand coping with the severity of a storm that's expected once every 25 years.
"The goal should be for every property owner to pay for their exposure for loss; no more, no less," said David Daniel, a vice president at the Florida Chamber of Commerce, a force behind the overhaul.
He called the bills a small positive step, and said, "In the end, the status quo is going to save Floridians some money but it's going to require that we all pay enormous assessments after the fact, and really it puts our economy at risk."
In a sign of the issue's importance this year, the Cabinet heard a presentation from Florida's chief insurance regulator in March amid concerns of the market's stability.
Commissioner Kevin McCarty tried to reassure the state's top governing board, and identified cost-drivers hurting insurers, ranging from reinsurance costs to fraud.
The bills (HB 447 and SB 876) advancing toward the full House and Senate address the bulk of those items. But they also goes much further by incorporating a number of industry-friendly provisions.
The most controversial is a plan to allow property insurers to bypass state regulators and offer largely unregulated rates to homeowners instead of the current rates, which are moderated by the Office of Insurance Regulation.
Under current law, the Office of Insurance Regulation has the ability to turn down a rate increase that it deems excessive. The legislation eliminates that power, reducing the grounds for rejection to rates found to be discriminatory or too low to be fiscally sound.
The plan caps annual rate hikes at a statewide average of 10 percent with a 20 percent total ceiling on individual policies.
But another provision in the legislation allows for an additional 10 percent annual rate increase with expedited review to let insurance companies pass along costs of reinsurance and inflation.
All combined, it will lead to massive increases, said Kriseman, who stalks insurance committee hearings, carrying his policy renewal notice that shows a 93 percent increase in one year.
"Banks should be worried because this is only going to lead to more foreclosures," he said.
But Proctor, echoing the industry's argument, told fellow House members that the marketplace will help control unregulated rates because buyers won't agree to exorbitant increases. Homeowners "want the option … to buy from a company they know and can rely upon and have assurances that claims will be paid," he said.
The governor doesn't agree. A frequent critic of insurers, Crist vetoed a similar effort last year aimed at large companies. And he appeared at a recent Senate hearing to warn of the same again.
With property insurers apparently struggling to make profits, the companies also want to curtail discounts to homeowners who harden their homes against hurricanes, as required in a 2003 law.
The legislation would let companies drop the discount offer if it costs them too much, and lets them charge those with storm-prone homes surcharges. Insurers claim the program is too hard to monitor and ripe for fraud. But proponents believe more vulnerable homes will only lead to more expensive damage claims.
For homeowners who live in sinkhole-prone areas, the measure also makes a number of changes.
For the most part, the changes streamline the claims process to the benefit of insurers, giving them more protections from questionable claims. One provision gives a report from an insurer's engineer greater weight in a court proceeding than a claimant's review.
Sen. Mike Fasano, a Republican who represents sinkhole-prone Pasco and Hernando counties, suggested the reforms go too far.
"I don't know what more we can do in regard to sinkhole issues without taking away (homeowners') rights," he said.
A homeowner's ability to recover damages is a major point of contention when it comes to how a company pays for claims.
At present, residents can pay an extra premium for replacement cost coverage and be paid the cost to replace the property. Otherwise, they receive the cash value of property, which is depreciated.
Under the legislation, policyholders with replacement cost coverage would not get all the money up front. For home damage, homeowners would initially receive the lower cash value, and must obtain a contract to rebuild before receiving the full cost of repairs.
When it comes to contents inside a home, a policyholder would receive 50 percent of the replacement costs and must provide receipts to get the remainder.
Insurance companies argue this is necessary to address cases where homeowners pocket the money and don't replace the items.
But Kriseman suggests it means more out-of-pocket expenses and headaches. He learned how it works all too well after his house burned down in June 2008.
"I don't think that's right," he said. "You buy your insurance, you pay it every month and that's what you're paying for."
He said the experience changed his view of insurance, and he's using his knowledge to influence the legislation.
"It's only when you sustain a loss when you understand the impact of what you purchased and how the system works," he said.