The House insurance committee approved the bill, HB 245, by a 13 to 1 vote. The legislation intends to reduce the size and risk of Citizens, the state's largest insurer with nearly 1.5 million policies. Nearly all Floridians are subject to paying fees to offset potential Citizens' deficits after a major hurricane.
Surplus lines insurers and their customers are exempt from fees other policyholders pay to support the Florida Insurance Guaranty Association and they may be cheaper because they aren't subject to Florida rate regulations.
But there are risks: If a major storm hits, their policyholders can't tap FIGA, a fund that helps pay claims when insurers fold. Regulators can't intervene if a surplus lines insurer refuses to pay homeowner claims or drastically raises rates.
The bill requires the insurer to tell prospective policyholders that FIGA wouldn't cover claims but Rep. Richard Steinberg, D-Miami Beach, asked about other disclosures: "Does the person have to be that told that the rates are going to be unregulated?"
Rep. Jim Boyd, R-Bradenton, who sponsored the bill, said the insurer must tell consumers if there are major differences in coverage but it doesn't have to say anything about rates being unregulated. Boyd agreed to work with Steinberg to add the requirement.
Boyd said the bill only allows insurers that have strong financial ratings and at least $50 million in claims-paying reserves to participate, so they're unlikely to fold. Consumers who don’t want to leave Citizens wouldn’t have to, he added. That means surplus lines companies would have to charge a reasonable price if they want a Citizens policyholder to switch.