TALLAHASSEE — A contentious overhaul of Citizens Property Insurance Corp. passed the Florida Senate on Thursday, after the bill's sponsor made key changes to protect hundreds of thousands of current policyholders from large rate hikes.
SB 1770 would drastically reform the state-run insurance company, mostly by pushing up rates for new policyholders and steering current policyholders into the private market.
The 24-15 vote followed more than two hours of testy debate, and two weeks of delay as concerns over huge rate hikes threatened to torpedo the bill.
"Members, this bill does not raise rates," said Sen. David Simmons, R-Altamonte Springs, trying to garner support on the Senate floor, where controversial insurance proposals often die in tight votes.
Simmons was able to corral a slim majority by filing a 101-page amendment Wednesday night, drafting language to soften some of the bill's rate impact. SB 1770 now goes to the House, where lawmakers have pushed a much less aggressive insurance reform package.
If the Senate bill passes both chambers and is signed into law, it would force new policyholders to pay insurance rates that are "actuarially sound," while protecting current homeowners with a 10 percent cap on increases. In some parts of the state — mostly areas near the coast with "wind-only" coverage — rates would have to double to be "actuarially sound."
Simmons said market-level rates for new customers were necessary because a massive hurricane could lead to "hurricane taxes" on consumers if Citizens ran out of money.
Thursday's vote broke down along geographical — rather than party — lines. Democrats and Republicans from inland areas supported the bill, while most lawmakers from coastal areas like Tampa Bay and South Florida voted against it. Most of Citizens policies are in coastal counties, and insurance rates are highest in areas closer to the ocean.
Homeowners in those areas have already seen their property insurance costs shoot up in the past few years. Annual hikes of 10 percent and canceled discounts have cost consumers hundreds of millions of dollars.
While Simmons tried to convince his colleagues that the bill would not raise rates further, opponents accused him of "dancing" around the true impact of SB 1770.
"This is a vote about people who want to raise rates versus those who don't," said Sen. Jeff Clemens, D-Lake Worth. "If you want to raise rates, vote for this bill."
Rates for wind-only policies in places like Tampa Bay and South Florida could go up 70 percent for new homeowners. The cost of a new policy in a non-coastal area could also increase faster than the current 10 percent cap.
In addition to "actuarially sound" rates, the bill creates a "clearinghouse" program to steer homeowners away from Citizens and into the private market, reduces Citizens' coverage limits from $1 million to $500,000 over five years.
An amendment to the bill also limits rate hikes for some new homeowners who can't find private coverage.
SB 1770 also allows Citizens to loan out a portion of its $6 billion surplus to smaller private insurers and creates an inspector general at the company, which has become infamous after several scandals last year embarrassed top company executives and angered Gov. Rick Scott.
The bill was amended more than 35 times as Simmons tried to gain support. Lawmakers and Scott have weighed in on the bill over the past few weeks, forcing Simmons to scale back the reform effort.
Stripped from the bill: Proposals that would require Citizens to charge rates that were higher than the top 20 private insurers, allow insurance companies to charge unlimited rates to consenting customers and boost the 10 percent rate cap to 13 percent. "The only problem with this bill is that it does not move fast enough," said Simmons, acknowledging the tricky politics of insurance reform in Florida.
Scott, who is up for re-election in 2014 (when most of the bill's impact will take place), said he wanted homeowners to be protected from huge rate hikes.
"The governor wants to keep the cost of living low for Florida families while reducing the risk of all home and auto insurance policyholders paying a hurricane tax in the event of a major storm," said John Tupps, the governor's spokesman.
House Speaker Will Weatherford, R-Wesley Chapel, said the House would take an "incremental" approach to reforming Citizens, so the bill may be scaled back further before the legislative session ends next Friday.
Opponents of the bill questioned the need for any major reform, citing Citizens' record surplus. The state-run insurer of 1.2 million policies has saved up billions of dollars since the last hurricane struck the state in 2005 and the private insurance market is expanding rapidly. Citizens has reduced its potential liability by more than 42 percent in the last year alone, and the risk of hurricane taxes has plummeted. Under the state's 10 percent "glidepath," annual rate increases have brought Citizens' prices closer to the private market.
"It's working," Clemens said, borrowing a slogan from Scott. "The glidepath is working. For us to come in and say that it's not, and there's a catastrophe around the corner, is disingenuous to our citizens."