TALLAHASSEE — In their zeal to shed policies in the state-run Citizens Property Insurance, the Florida Senate is poised to approve a bill that gives homeowners a low-cost — though unregulated — insurance alternative.
Opponents say the new policy — which would allow Citizens customers to select a "surplus lines carrier" when their policy is up for renewal — is a wolf in sheep's clothing that could mislead homeowners into thinking they are getting the same insurance for less. Proponents say the idea is a free-market alternative and that homeowners must weigh their own risk.
"This is something that is provided as an option to a consumer,'' said Sen. David Simmons, R-Altamonte Springs. "Should we as a Legislature prohibit them after having the opportunity?''
Under the bill, SB 1672, unregulated insurance sold by surplus lines carriers would be included in the list of options homeowners can choose from in the state-run clearinghouse when their policy is up for renewal. These companies would have to offer the same coverage as Citizens, with rates at least 15 percent less than Citizens. They must also include a disclaimer that surplus lines insurance is not regulated.
Unlike traditional insurance companies, surplus lines were created as insurers of last resort for those who couldn't obtain coverage in traditional insurance markets.
"This is a classic bait and switch,'' said Rep. Frank Artiles, R-Miami, who is opposing a similar bill, HB 1109, awaiting a vote in the House. "People decide with their wallets and if they are given a choice between an admitted carrier (traditional insurance) and surplus lines, many people are not going to read their policies and realize they're not apples and oranges."
Florida lawmakers have been trying to trim the number of policies in the state-run Citizens Property Insurance Corp. to reduce its exposure.
Last year, legislators passed a requirement that homeowners cannot renew a Citizens insurance policy if a licensed insurance company offers comparable insurance to what Citizens offers. Citizens is allowed to raise it rates 10 percent each year.
As of March, 10 insurance companies were listed on the state-run clearinghouse as an alternative to Citizens. But if a homeowner is not offered an alternative policy from one of those companies and wants to leave Citizens, the bill allows him to select a surplus lines carrier.
Since the state launched its aggressive push to de-populate Citizens several years ago, the number of policies held by the company has dropped from a high of 1.6 million to about 940,000, said Christine Ashburn, vice president of legislative affairs at Citizens.
While Citizens didn't ask for the surplus lines bill, she said, the company doesn't oppose it. She acknowledged that homeowners might be tempted to go with the unregulated insurer, especially if the surplus lines carrier offers a competitive premium.
"Where we are in insurance in Florida is everyone is buying based on the price,'' she said.
That worries Pasco County Tax Collector Mike Fasano. The former state senator fought to defeat a similar bill last year and is warning constituents this year.
"Allowing surplus lines insurers to participate is a dangerous step that could lead to financial ruin for seniors, families or others struggling to keep up with high insurance premiums,'' he wrote in a letter to the Tampa Bay Times this week.
"Surplus lines companies, which are not regulated by the state of Florida, can raise rates at will. These companies often entice homeowners into signing with them by offering a low 'teaser' premium for the first year, and then rapidly increasing that premium during subsequent renewal periods.''
Simmons said that, unlike other insurance options, homeowners have three years to drop their surplus lines policies and return to Citizens and will be given detailed disclosure information alerting them to the risk they take with an unregulated carrier.
Artiles, who works as a public adjuster for insurance policies, fears that if enough people sign up for lower-cost surplus lines coverage, it could destabilize the private insurance market in Florida.
"How can an admitted carrier compete against an unregulated one?" he said. "It's like giving somebody a shotgun and the other guy a spoon and say they can compete. They can't."
A similar bill died in the House last year in a 61-40 vote and he fears that election-year pressures have persuaded several legislators, many of them Democrats, to switch from opposing the bill last year to supporting it this year.
"There are a lot of people who are changing their votes because they are running in re-election and they need to raise money,'' he said. "This is nothing more than back door deregulation and they're masking it under free market while knowing that people don't read their policies.
Contact Mary Ellen Klas at meklas@MiamiHerald.com and @MaryEllenKlas.