Some customers of Citizens Property Insurance might have their homeowners policies taken over by private companies under a bill passed in the House and heading to the Senate.
Passage of the bill Friday came over the objection of many coastal legislators who said allowing private companies known as "surplus line" firms take over some Citizens Property Insurance policies, because they're largely unregulated by the state, could end up raising rates. They also may still not have enough money to pay claims.
Republican backers of the bill responded that the marketplace will work it out: If people don't like being a customer of a surplus lines insurer, they can always ask to return to Citizens, the state-backed company that is now the state's largest property insurer.
The measure, sponsored by Rep. Jim Boyd, R-Bradenton, passed 66-48 and now goes to the Senate.
The bill, HB 245, is aimed at shrinking Citizens. The company's growth -- and years of trying to keep its rates low to be palatable to customers who have no choice about who insures their coastal property -- makes many lawmakers nervous at best, outraged at worst. Because the state underwrites the company's liability, a massive storm would result in the state's residents being assessed fees to make up any shortfall, and the state's taxpayers could be on the hook as well.
Many conservatives say the state shouldn't be in the insurance business -- that it's essentially a socialist model.
The bill, backers say, will give some customers a choice of remaining in Citizens or going into an unregulated surplus lines company that's willing to take on their policy.
Opponents say it's a false choice for a couple of reasons.Customers will be notified by letter if a surplus lines company is taking over their policy, and many of them may never see that letter. Opponents said during Friday's debate that non-English speakers, or even people who will think the letter is junk mail, could easily miss the notice. And the bill requires homeowners to opt out of the switch, rather than to opt in. That is, they'll be switched unless they ask not to be.
That's backward, said Democrats, including Rep. Richard Steinberg, D-Miami.
"Ladies and gentlemen, if it was about choice, wouldn't the letter say 'Do you want to come out of Citizens?'" Steinberg asked.
But the bigger objection was that customers could be unprotected if they are covered by some surplus lines companies. The companies could raise rates, and may not have enough in reserves to guarantee they'll be able to pay claims, either, in the event of a big storm. And there's no state backing if the company were to fail.
"I would have to hope and pray ... that my carrier did not become insolvent, because if they did, I would have no safety net and I would be out of luck," said Rep. Rick Kriseman, D-St. Petersburg. "Insolvencies happen. They happen all the time."
Republican backers of the bill said not only could customers return to Citizens, but that the solution to the insurance problem in Florida has to come from the private marketplace. At some point, they argue, the state has to stop being the main insurer of property. And without deregulatory changes in the law, private companies simply won't cover Florida property.
And the market will prevent large increases, backers argued.
Two of the backers of the bill acknowledged that the move to unregulated surplus lines companies may not be popular, and may even raise rates.
Rep. William Proctor, R-St. Augustine, said people will pay either now or later. They may pay more to a private company, but will be less likely to get hit with assessments later because rates are too low, as they are with Citizens. Or they can continue to be with Citizens and enjoy "suppressed rates," but will pay a big assessment if there's a big storm later. But, he said, they ought to have a choice.
Rep. Dennis Baxley said the easy vote would be to protect people from the possibility of higher rates in the short term. But that would ignore the simmering long-term problem of a Citizens Property Insurance company that can't stand on its artificially low rates.
"Do what's responsible, not what's popular," urged Baxley, R-Ocala.
The debate wasn't completely along party lines -- some Republicans, particularly from South Florida, opposed the bill -- including some members of the GOP leadership team in the House, though few of them spoke.
Republicans who voted against the measure were Reps. Michael Bileca, R-Miami; Richard Corcoran, R-Trinity; Jose Diaz, R-Miami; Brad Drake, R-Eucheeanna; Eric Fresen, R-Miami; Jim Frishe, R-St. Petersburg; Matt Gaetz, R-Fort Walton Beach; Eddy Gonzalez, R-Hialeah; Tom Goodson, R-Rockledge; John Legg, R-Port Richey; Carlos Lopez Cantera, R-Miami; Peter Nehr, R-Tarpon Springs; Jeanette Nunez, R-Miami; Jose Oliva, R-Miami Lakes; Rob Schenck, R-Spring Hill; and Carlos Trujillo, R-Miami;
Three Tallahassee-area Democrats --Reps. Michelle Rehwinkel Vasilinda, Alan Williams, and Leonard Bembry --split with their caucus and voted in favor of the bill.
