Senate Insurance Committee passes insurance rate hikes

Today, the Florida Senate Banking and Insurance Committee passed S 876, Sen Bennett’s bill to deregulate property insurance. The bill was passed with an amendment that limits rate increases to 5% the first year, 10% the second year, and 15% thereafter. Average. That means people in coastal areas could have much higher increases. Couple that with the 10% annual increase passed by this committee last week, and you have huge rate increases.

Our champions fighting against 876 were Senators Mike Fasano, Ronda Storms, and Alex Villalobos. Fasano is from Pasco County, Storms from Tampa, and Villalobos from Miami. All three are Republicans. Gov Charlie Crist appeared at the committee and asked the committee not to pass the bill. Sen Joe Negron, a Republican whose district covers Port St Lucie and Palm City, also voted with us.

Opposing us, besides Sen Bennett of Bradenton, was Sen JD Alexander, a member of the wealthy Ben Hill Griffin family. All the Democrats, Jeremy Ring of Margate, Al Lawson of Tallahassee, and Chris Smith of Oakland Park, voted against us. We have to work on getting those votes.

The final vote was 6-4. Two Democrats, Al Lawson, and Vice Chair Chis Smith consistently voted with the insurance companies. You can look at Smith’s campaign contributions here. Insurance is his second highest contributor. Al Lawson’s contributions are here. Lawson had some insurance money, but it doesn’t seem like a motivator. He represents the Tallahassee area, and so high insurance costs aren’t a problem for his constituents. I am not entirely sure of his motivation.

876 now goes to Senate General Gov Appropriations, where Lawson is vice chair. It is not a committee where legislation gets stopped.

The House companion H 447 is in the General Government Policy Council.

Strategy going forward is an open question, but we do have to hope that Gov Crist vetoes the bills when, and if they get to his desk. He has been reliably pro-consumer.

Troxler’s “Most Wicked Bill”

Howard Troxler wrote a column today highlighting the Legislature’s attacks on the now pro-consumer Public Service Commission. Ever since Gov. Charlie Crist appointed two outsiders to the PSC, a move which elevated consumer advocate Sen. Nancy Argenziano to the chair, the Legislature has been steaming and cooking up nightmare plans to dismantle the offending regulators.

This time, the cauldron is boiling in the House Energy & Utilities Policy Committee. This could be an interesting and leading committee, but it seems to be a swampy backwater. The Chair, Rep. Stephen Precourt from Orlando, is a civil engineer and was Legislator of the year for the Property Rights Coalition. I believe that means he is a fire breather, a kool-aid drinker, or whatever other label you might put on a hard core right winger.

The utilities have spent big on the legislature with FPL being the #1 contributor to the Republican party. The Party in turn gave some $240,000 to members of this committee. The Vice Chair, Clay Ford from Pensacola, received $56,000 from the party.

As for the bill, Trox’s column give all the details, but suffice to say, PSC Chair Nancy Argenziano gets beheaded in the Capitol Courtyard at high noon, and the PSC staff are retrained as prison guards. All consumers must pay fealty and surrender their credit cards to the local utility.

An unusual feature of the bill is that it has no sponsor. In other words, the executioner wears a hood. Most Proposed Committee Bills (PCBs) become that after the committee adopts the bill of a member. In this case, the committee itself has somehow originated the bill, which a cynical person might take to mean that the utilities themselves dreamed this up.

Consumers: on the phone, write those letters, complain loudly. PSC Chair Argenziano is our hero and we must save her from the vengeful utilities and their tools in the legislature! Thank you Howard, for exposing this evil doing.

FCAN Analysis of SB 2044

SB 2044 is the main insurance bill now making its way through the legislature. It passed out of the Senate Banking and Insurance Committee this week, and its next stop is Government Appropriations, which will pass it on to Rules, then it could head to the Senate Floor. The Rules Committee doesn’t normally do a lot of work on bills, but it is a fairly broad committee, and debate is possible. Villalobos, who voted against the bill, is chair. Storms and Fasano are also on the committee.

But really, it comes down to Senate President Jeff Atwater, our future CFO, barring unforeseen events.

Here is the Senate staff analysis of the bill, followed by my comments, in italics:

1. Directs the Office of Insurance Regulation (OIR), contingent on an appropriation, to develop a comprehensive insurance website for consumers which would provide the information necessary to make informed purchases of homeowners’ insurance. It would contain price comparisons, filed complaints, financial strength, underwriting and receivership information, and other data useful to consumers.

Oh really.

2. Mediation Procedures for Property Insurance Claims – Requires the Department of Financial Services to prepare information for consumers relating to the mediation program and mandates that during a dispute, insurers and insureds provide documents specifying the costs to repair or replace damaged property.

Mediation isn’t good for consumers. Mediation reduces your chances of getting a favorable settlement. If your insurer knows your next stop is lawyering up, you’re going to get a better deal. If your insurer knows they can snow you in a mediation process you aren’t prepared for and don’t have time to participate in, they can reduce your settlement, and you may have to take their offer.

3. Surplus Requirements for Insurers - Increases the minimum surplus requirements for “new” residential property insurers.

This favors the big insurers, who have more money. It will make it harder for new, little insurers to gain a foothold in the market. On the other hand, it makes companies a little more stable. Consumers claims get paid either way, because the insurance guaranty fund covers claims. But the state wants to reduce the risk.

4. Insurance Consumer Advocate (ICA) - Specifies that the Consumer Advocate’s annual report card, which grades personal residential property insurers, must be prepared by June 1, 2012, and must “objectively” grade such insurers. (and blah, blah, blah)

This will probably prevent the ICA from doing what it should be doing, which is fighting for consumers. OIR should be presenting this data and is better suited to do so. Amendments were rejected which would strengthen the ICA, which is actually run by the CFO anyway. So much for the “promise” that this bill would have something for consumers.

5. Insurance Rating Law - Extends the current prohibition on “use and file” rate filings until December 31, 2012.

Wait a minute, here’s something good for consumers. But it should be permanent, not just another year.

6. Expands the current expedited rate filing procedure for property insurers to include a rate adjustment for reinsurance costs, financing products used to replace reinsurance, and applicable inflation trend factors published annually by the OIR. All costs contained in the filing are capped at 10 percent per policyholder and an insurer could make only one filing under this provision in any 12-month period. Prohibits the OIR from directly or indirectly prohibiting, impeding or otherwise compromising an insurer’s right to include acquisition costs in a rate filing or including agents’ commissions, advertising or the right to acquire policyholders.

This is the automatic 10% a year rate increase clause. There are a lot of loopholes here, and insurers will find a way to get through them, especially with smaller competitors reduced. Note the “financing products used to replace reinsurance.” That refers to State Farm’s method of sending millions of dollars to their parent company each year.

This whole thing is just really bad. Why not continue to allow OIR to handle rate increases. This provision is swiss cheese and a gift to insurers which they don’t deserve.

7. Replacement Cost Coverage – Revises the replacement cost adjustment requirements for homeowners’ insurance policies for damages to dwellings and personal property: for dwelling losses, an insurer must pay the actual cash value of the loss, and subsequently pay the reservation or holdback of any depreciation in value, if the insured executes a contract to replace or repair the dwelling or property; for personal property losses, an insurer may pay the greater of the actual cash value or 50 percent of the replacement cost value, and must subsequently pay the reservation or holdback upon the insured providing receipts for the replaced property.

Bad. Bad. Bad. Why is it any business of the insurer or the state what you do with your insurance settlement? Maybe you just want to move to North Carolina. But no, this would require you to put your settlement back into your house, or only get 50%. That’s ridiculous.

8. Mitigation Credits and Discounts – Provides that if an insurer demonstrates that the aggregate of mitigation discounts results in a reduction of revenue that exceeds the reduction of the aggregate loss that is expected to result from mitigation, the insurer may recover the lost revenue through an increase it its base rates.

Basically eliminates insurers paying for mitigation or strengthening homes even though they get a lot of the benefits. If homes are stronger, they don’t blow down in hurricanes and insurance companies don’t pay as many claims. Residents should get credit on their premiums. But no, $35 Billion in profits in 2009 isn’t enough for insurers, they have to make it harder for us to avoid future losses. This is very shortsighted on their part. No wonder their customers don’t like them.

On balance, this bill has nothing for consumers and some gifts for insurance companies that they don’t deserve. Call Sen. Atwater and tell him you won’t vote for him for CFO (even though he’s probably going to win anyway) unless he withdraws this bill or fixes it up. FCAN has some suggestions:

1. Independent Insurance Consumer Advocate

2. ICA right to intervene in rate cases

3. ICA supoena powers

4. Citizen group right to participate in rate cases

5. Intervener compensation in insurance rate cases

THAT would be a consumer friendly bill.