A sweeping bill that would allow insurers to drop full sinkhole coverage and shorten the time policyholders have to file claims cleared the Senate by a 25 to 12 margin Thursday.
The bill, which has about 20 provisions, would:
Allow insurers to raise consumers' rates without approval from regulators to cover advertising costs and agent commissions;
Allow insurers to withhold full payment for a claim for damage to a home until policyholders sign a contract for repairs and repairs are made, except for homes that are destroyed;
Allow insurers to drop full sinkhole coverage but require state-backed Citizens Property Insurance to offer coverage for a property's main structure;
Shorten the time policyholders have to file claims;
Require new home insurance companies to have $15 million in reserves starting this year and existing insurers to have $15 million by 2021; and
Provide a perk aimed to attract an unnamed insurer to Florida.
The House bill does not include all of the provisions but has some that are not in the Senate bill. For instance, the House version allows insurers to avoid full regulatory review when charging customers for back-up coverage costs, as long as an individual policyholder's premium doesn't go up by more than 15 percent.
Key lawmakers will negotiate to come up with a version both chambers can agree on. They have one week until the end of the annual legislative session.
Lawmakers supporting the changes say they'll help bring insurers to Florida and reduce costs for insurance company. Both outcomes could help policyholders find more insurance options.
Housing market impact
Changes to sinkhole coverage drew the most fire from legislators on Thursday, with some saying the changes could destroy the state's housing market because some lenders require the coverage. If insurers can drop full sinkhole coverage, policyholders could be forced to buy from so-called surplus lines companies that aren't subject to state regulators' rate caps.
Sen. Garrett Richter, R-Naples, a banker who drafted the bill, named several large lenders that don't require full sinkhole coverage. He said some regulated insurers will continue to offer sinkhole coverage because of other provisions in the bill.
Some insurers don't want to offer sinkhole coverage because they say there are too many frivolous or fraudulent claims for minor cracks in walls and floors and the costs of paying or fighting the claims drive up premiums.
Several policyholders spoke up at legislative meetings to say what started as minor cracks in their homes grew over a few years into gaps in doors and windows as the ground underneath settled.
Insurers' financial health
State insurance regulators have approved dozens of rate increases in recent years because they say claims for sinkholes, water damage and fires rose during the recession and insurers reported premiums did not keep pace with claims and other costs.
One company that was flagged as having financial problems told its agents this week it will start dropping policies when they're up for renewal. Officials from the company, Argus Fire & Casualty Insurance Co., and its parent company, United Automobile Insurance in Miami Gardens, could not be reached for coment despite phone calls. It has roughly 14,000 home insurance policies.
But Sen. Ronda Storms, R-Valrico, said insurers are "making a killing," not just a profit.
U.S. property and casualty insurers reported net income of $34.7 billion after taxes last year, up 20 percent from the year before, according to a report by ISO, an insurance industry group.
Storms said part of the problem is that some insurers shift premiums to affiliates hired to run day-to-day operations or sell them reinsurance, insurance for insurers. In some cases, it's unclear if the money is being used to bolster profits instead of claims-paying reserves.
A Sun Sentinel review last year of 26 Florida-based property insurers that made up nearly a third of the market found that the companies collectively reported a $87.8 million drop in claims-paying reserves in 2009 and all but four paid a total of nearly $300 million last year to affiliates to help run daily operations. The insurers collectively received more than $247 million in low-interest loans from the state and more than $52 million in other bonuses.
Certain affiliates aren't required to report financial information — a loophole Storms proposed closing on Wednesday. The Senate narrowly approved the idea, but it's not in the House bill.
Consumers can weigh in by contacting their legislators at sunsentinel.com/findmylegislator and contacting Scott's office at flgov.com/contact.
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