INDIANAPOLIS (May 8, 2007) — Legislation passed in the final days of the 2007 Florida Legislature could have a significant detrimental impact on consumers. The one positive note for consumers, the lack of action on the state’s no-fault auto insurance system and allowing it to sunset later this year, could be threatened during an upcoming special session in June.
What started as a glitch bill to correct and clarify concerns about homeowners’ insurance legislation resulting from the special session in January became much more detailed. Instead of minor tweaks, the new legislation expands on special session provisions that result in severely reducing competition, driving up insurance prices, and, ultimately, putting Florida taxpayers on the hook for future storms, said Liz Reynolds, state affairs manager for the National Association of Mutual Insurance Companies (NAMIC).
“The legislation includes a wide range of provisions — many of them unfavorable to insurance consumers,” Reynolds said. “Chief among them is Gov. [Charlie] Crist’s battle cry to prohibit formation of new pup companies after Jan. 1, 2008.”
So-called pup companies are Florida-only subsidiaries of national companies. “It’s a way for companies wary of doing business in a state vulnerable to severe storms to enter the market,” Reynolds said. “Prohibiting them reduces the likelihood of companies doing business in Florida, which ultimately reduces competition for consumers and drives up prices.”
Two other provisions that could harm consumers are those that involve Citizens Property Insurance Corporation, the state’s insurer of last resort. One would allow homeowners to obtain coverage through Citizens if a comparable private market offer is 15 percent or greater than the Citizens premium, rather than the current 25 percent requirement. The other continues Citizens’ premium rate freeze created by the special session for an additional year, until Jan. 1, 2009.
“The effect of these provisions is to expand coverage through Citizens by making it easier and more affordable to obtain,” Reynolds said. “Unfortunately, the premium rates for Citizens are not actuarially sound and a severe hurricane season would make Florida taxpayers liable for the difference.”
On the plus side, the Legislature took no action on the personal injury protection auto insurance. The no-fault insurance system has been plagued by fraud and abuse, forcing consumers to pay more than necessary. The system is due to sunset in October. However, there could be efforts to extend PIP during the upcoming special legislative session in June that’s been set to deal with rising property taxes.
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Posted: Tuesday, May 08, 2007 12:00:00 AM. Modified: Wednesday, May 09, 2007 10:45:56 AM.
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