Fla. ‘Consumer Choice’ Bill Angers Consumer Groups

NU Online News Service, May 26, 3:38 p.m. EDT
A Florida bill that would allow some insurers to charge rates above
those approved by the Office of Insurance Regulation provided they meet
certain capital requirements has drawn the ire of consumer groups.
In order to charge rates above those approved under H. B. 1171—also
called the “consumer choice” bill—a carrier must have a surplus of at
least $200 million and a ratio of net written premium to its surplus of
no more than 2-to-1.
The consumer groups drafted a letter earlier this month urging Governor
Charlie Crist to veto the measure, as did Florida Insurance Commissioner
Kevin McCarty.
Commissioner McCarty and the consumer groups contend the bill would not
make the Florida insurance market more competitive, and would instead
hurt consumers by sending rates spiraling upward.
Commissioner McCarty said the 2004 and 2005 hurricane seasons resulted
in dramatic increases in homeowners insurance rates. Since then, H.B. 1A
was passed in Jan. 2007, which lowered rates by an average of 15.9
percent.
“H.B. 1171 will reverse the trend begun by H.B. 1A by exempting certain
insurers from a determination that their rates are ‘excessive or
unfairly discriminatory,’” Commissioner McCarty wrote. He said
significant and unpredictable rate increases could result.
He further noted the bill will affect emerging Florida domestic
companies by treating them differently than other established companies
that meet the bill’s requirements.
“Largely because of this new capital [from new Florida domestics], more
than 400,000 policies were taken out of the state-run Citizens
Property20Insurance Corporation in 2008, reducing its exposure by more
than 20 percent,” Commissioner McCarty’s letter said.
The consumer groups—consisting of Consumer Federation of America, Center
for Economic Justice, United Policyholders and Consumer Watchdog—said
consumers are already at a disadvantage when shopping for insurance.
“Normally, if a seller of a product asks too much for it, the consumer
can walk away,” they wrote. “But home insurance is not like that.
Lenders require maintenance of hazard insurance as a condition of
keeping the mortgage effective.”
This bill, they noted, puts them at an even greater disadvantage while
allowing insurers to hike rates.
But Julie Pulliam, spokesperson for the American Insurance Association
AIA), said she does not understand how consumers could be hurt because
they would have the choice to go with a company that is operating under
the bill or one that is not. “So consumers are in the driver’s seat
here,” she said.
While the consumer groups argued that, given the option, all insurers
would choose to operate under the bill and therefore charge rates that
are not regulated, Ms. Pulliam said insurers have to meet certain
requirements to operate under the bill, and some companies may choose
not to do that. Additionally, she said consumers could always go with
Citizens.
A spokesman for Governor Crist said the governor has not yet received
H.B. 1171. He said it should reach the governor’s desk in the next week,
after which Governor Crist will have 15 days to either sign or veto the
measure.
The spokesman said Governor Crist has no position as of yet.