Florida Senate Committee Passes Insurance Market Rescue Bill 19-2
A Florida Senate committee on Monday overwhelmingly approved two measures that supporters say will go a long way to reducing roofing claims, litigation costs and reinsurance costs for struggling property insurers – but not before some Democratic senators have warned that he will do little to cut short-term bonuses. .
“People are really hurting and we’re deaf,” said Sen. Randolph Bracy, D-Orlando. “We could do a lot more for consumers.”
Senator Lauren Book, D-Plantation, urged the Senate Appropriations Committee to pass an amendment to the Senate Bill 2D. His plan would have frozen insurance rates for more than a year while the claims litigation deterrents had time to make a difference.
The amendment was defeated, but the committee voted 19 to 2 in favor of the bill itself, which would provide a wide range of solutions to Florida’s troubled insurance market. The two “no” votes were both Democrats, but six other Democrats voted yes.
“He now has bipartisan support. It is a bipartisan bill. That’s good,” said Michael Carlson, president of the Personal Insurance Federation of Florida, which represents a number of property insurers.
The Senate committee spent five hours debating SB 2D and a second bill, SB 4D, that would relax a portion of Florida’s building code that now requires complete roof replacement in most cases when only 25 % or more of one roof is damaged. The debate has been heated at times, with vocal opposition from litigators, restaurant companies and a few consumer advocates.
But the fact that the bill was approved with only minor changes, just three days after it was drafted, speaks to the level of cooperation between Governor Ron DeSantis and the Legislative Assembly. After the 2022 regular session of the Florida legislature failed to enact significant reforms aimed at addressing the insurance crisis, the governor last month called the five-day special session for this week. Sen. Jim Boyd, chairman of the Senate Banking and Insurance Committee, said he worked closely with the governor’s office and with House of Representatives leaders to craft the bills.
“I have full confidence that the House will pass these bills,” Boyd said after the meeting.
The House Appropriations Committee is picking up similar measures from the House on Tuesday.
The fact that a key element of SB 2D—the creation of a new lower-tier catastrophe reinsurance fund would be supported by $2 billion from Florida’s general fund—also speaks to the fact that the state government of Florida is brimming with cash and can save money in the event of a catastrophic hurricane season.
“Florida is in a very good financial position now,” Boyd explained. He doubted that losses from participating insurers would ever wipe out the fund, leading to a sales tax hike.
Instead of insurers paying premiums into the Reinsurance Fund to Help Policyholders, or RAP Fund, participating insurers would be required to provide rate relief to their policyholders. The program would be for one year only, to help some insurers who might not otherwise be able to reinsure in the private market.
For carriers who have already obtained reinsurance this year, they could access the RAP fund next year, Boyd explained. An actuary has calculated that the plan could result in average premium reductions of up to 4% for policyholders of participating insurers over the next few months.
But Monday’s debate touched only lightly on RAP fund savings, and some senators and speakers at the hearing worried that homeowners covered by other insurers could see their premiums cut for 18 months.
Some of the hottest exchanges took place between Sen. Jason Pizzo, D-Miami, and Florida Insurance Commissioner David Altmaier. Pizzo, an attorney, said much of the blame has been placed on plaintiffs’ attorneys and their fees, which SB 2D aims to limit. But despite a bill passed last year that requires insurers to track information about claims disputes and report them to the Office of Insurance Regulation, the office has yet to finalize a regulation detailing the data call.
Pizzo argued that Senate Bill 76 of 2021 required the data by January of this year. But Altmaier said he had read the law to mean that insurers should start collecting the data then and report it to the OIR in 2023. Boyd said it was unclear but that would work with Altmaier to expedite the process.
The data could be useful in determining the true costs of insurance claims litigation, both on the plaintiffs’ side and on the insurance side, lawyers told the hearing. Reggie Garcia of the Florida Justice Association, a group of litigators, said insurance defense costs could be as high as the plaintiff’s attorney fees and should be reviewed before more limits are imposed. imposed on the legal rights of the insured.
Citizens Property Insurance Corp., the state-created real estate insurer of last resort, for example, is one of the few sources of information on the matter, Garcia said. Citizens have spent $257 million on defense costs over the past three years, he said.
He also questioned the oft-cited statistic that Florida produced about 8% of homeowner claims in the United States, but saw as many as 79% of claims litigation in the country. The data comes from the National Association of Insurance Commissioners, but Garcia said his research shows the data did not include claims from New York, North Dakota, Texas windstorm in 2021, and information from a number of carriers who considered it a trade secret. .
Boyd responded that if all of this data was included in the NAIC report, Florida would likely still have more than 60% of claims litigation in the country.
The hearing also brought out other sobering information.
Jerry Theodorou, director of the finance, insurance and trade policy program at R Street, a think tank that has studied Florida’s insurance problems, said his research shows that the national average cost of defense and defense of insurers is about 1.2%.
“In Florida it’s 6%,” Theodorou said. “It’s extremely high.”
The average combined ratio, a measure of profitability, in the country is 103%. In Florida, it’s 120%, and many Florida insurers have been unable to offset underwriting losses from investment income, he said.
Sen. Jeff Brandes, R-St. Petersburg, which beat the loudest drum for insurance reform legislation, took issue with some of Boyd’s SB 2D. The bill would prohibit insurers from refusing to underwrite policies for homes with roofs less than 15 years old. Several carriers over the past two years have already stopped writing for roofs 10 years or less.
“No other state, not even California, has the 15-year requirement,” Brandes said. “You force insurers to underwrite older roofs, and that’s really all they have” to limit underwriting losses.
He urged his colleagues to remove the restriction, but his amendment failed.
Brandes also raised a question about the interaction of the two bills, which no one could answer. If more roofs are repaired than replaced in future years according to building code legislation, and part of a house’s roof is repaired in year one and another part in year five , how old is the roof, asked Brandes.
“I think that’s something we probably need to clear up,” Boyd said.
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