Veto HB 1171 -- State Farm Bailout

Gov Charlie Crist is currently considering whether to sign or veto HB 1171, which we call the "State Farm Bailout" and which the Florida House calls "Consumer Choice." FCAN urges all its members to immediately call, email, or fax the Governor requesting a veto of this bill.

HB 1171 would allow insurance companies like State Farm to sell the policies they are currently selling at any price they wish and those policies would be exempt from assessments by the state. Unfortunately, an amendment requiring the companies to continue to sell their current policies at the state approved price failed, meaning the companies would be able to only offer the higher priced policies. Essentially, homeowner's insurance would be deregulated. State Farm was turned down recently for a 60% rate hike, so we assume that would be the new price of their policies.

The result of this bill will be skyrocketing insurance costs and a flood of consumers into the state run Citizens Property Insurance. What are the consequences? Certainly, higher profits for insurance companies, higher rates for consumers, and beyond that, the unknown. We don't know what would happen with Citizens or the rest of Florida's homeowner insurance market.

Background

Homeowner insurance is regulated for several reasons. Insurance policies are quite complicated, and regulation allows consumers to know that they are truly protected by their policy. Insurance companies are also regulated for solvency, meaning the state makes sure that they have sufficient funds to pay claims. This is very much in the public interest, because the rest of us would have to pick up the cost of those claims because of the Florida Insurance Guaranty Association or FIGA. FIGA is like FDIC for banks. It means you can rest assured your claims will be paid.

Insurers aren't required to be regulated. Unregulated companies are called "surplus lines" carriers and you are on your own in dealing with them. It is a "buyer beware" situation. Chubb is a large surplus lines carrier as is Lloyd's of London.

But State Farm and others like them don't want to be unregulated because they would then lose the protection of FIGA and the approval of the state for their policies. One of the largest benefits is the ability to purchase discount "reinsurance" from the state Cat Fund. Naturally, insurance companies don't want to give up that benefit and would no longer have to pass along those savings to consumers. They want to have their cake and eat it too.

State Farm tried to prove it deserved higher rates in hearings before the insurance commissioner, an administrative court judge, and an appeals court judge. They lost every time. So, according to the St. Pete Times, they spent $204,998 lobbying the legislature this year and it seems that HB 1171 could be the result.

Take Action

Our state insurance department has done a good job in regulating our insurance companies, and now it no time to roll the dice on our economic future. Floridians need the assurance of regulation to know their policies are worth what they are paying.

Contact Gov Charlie Crist at 850-488-4441 or email charlie.crist@myflorida.com The fax number is 850-922-4292. Tell him to VETO HB 1171!