Florida Legislative Session Ends Without Insurance Reforms

Published June 21, 2010

Florida’s 2010 Regular Legislative Session might be remembered mainly for one thing: Gov. Charlie Crist’s departure from the Republican Party on the eve of his deadline to qualify as an Independent candidate for U.S. Senate. He made the move because most polls showed him badly losing the Republican Party primary.

The governor’s decision sent shockwaves throughout Florida’s political landscape and scuttled important legislation, including bills designed to fix the state’s broken property and casualty insurance system and reform the state’s education system.

House Bill 447, whose lead sponsors were Rep. Bill Proctor (R-St. Augustine) and Sen. Mike Bennett (R-Bradenton), was derived from similar legislation passed in 2009 but vetoed by Crist.

The 2009 version of the bill would have permitted large, well-capitalized national property insurers to forego the state’s onerous rate regulation process. This “consumer choice” bill would have given people the option to purchase their coverage from these larger companies at market-based rates or continue doing business with companies whose rates remained regulated by the state. 
Deregulation for All
To address the governor’s stated concerns about the 2009 version, the “consumer choice” bill filed this year was changed to allow all insurance carriers—large and small—to participate voluntarily in the rate deregulation. Insurers taking advantage of this provision, however, would be barred from purchasing subsidized reinsurance coverage from the upper layer of the Florida Hurricane Catastrophe (CAT) Fund, the state-run reinsurer.

This upper layer of the CAT Fund, also known as the TICL (for Temporary Increase in Coverage Layer), is underfunded, and if tapped after a hurricane it is likely to impose financial liabilities that exceed the state’s ability to pay, even through borrowing.
After Crist signaled he would veto this year’s bill, lawmakers amended it to cap any increases in insurance premiums resulting from the deregulation of rates to 10 percent a year.

This amendment would have allowed insurers to raise or lower their rates within a 10 percent band in any given year without having to go through the state’s onerous rate filing process. Any reductions or increases beyond the 10 percent threshold would have to go through the state’s current rate filing process and be approved by the Office of Insurance Regulation. A similar “flex band” rating system was originally proposed as one of several solutions to the state’s insurance crisis.
No Consumer Choice Bills
As rumors of the governor’s imminent departure from the Republican Party reached a fever pitch following his veto of an education bill, the Republican leadership reportedly did not want to give the governor the opportunity to veto another “politically unpopular” bill. Thus despite overwhelming bipartisan support, legislative leaders decided to abandon attempts to enact insurance consumer choice legislation in 2010.
A property insurance reform package sponsored by Rep. Bryan Nelson (R-Apopka) and Sen. Garret Richter (R-Naples) did pass but was vetoed.

Senate Bill 2044 included expedited rate filing for rate increases due to inflation and increased reinsurance costs, up to 10 percent a year; a requirement that claims be filed within three years of a hurricane (instead of the current five-year limit); restrictions on abusive public adjusters’ solicitation and compensation practices; and penalties for home mitigation inspectors who violate the law. 

Overwhelming Support, Then Veto
Although the legislation was handily passed by both chambers with overwhelming bipartisan support and was endorsed by consumer advocates, the insurance industry, and the governor’s own Office of Insurance Regulation, Crist vetoed it June 1, the first day of hurricane season.

Crist said he vetoed the bill because it would have harmed consumers. In his veto letter, Crist wrote, “During these very difficult economic times, Florida’s consumers should not have to be concerned with an additional premium increase to their policy.”

He apparently went against the advice of Insurance Commissioner Kevin McCarty, who had urged him to sign SB2044. The bill would have made sure that “all potential rate increases are reviewed and approved or rejected by OIR [Office of Insurance Regulation] prior to one penny being paid by consumers,” McCarty wrote in a letter to the governor.

Suffering a similar fate was the education reform legislation, Senate Bill 6, also known as the “Merit Pay” bill. It would have tied a portion of teachers’ salaries to student achievement and eliminated tenure for newly hired teachers. Existing teachers, including those not yet tenured, would have been allowed to remain in the tenure system.

Many school boards and the state’s teachers union vociferously opposed the plan. Despite officially supporting the bill as it moved through the legislative process and assuring legislative leaders that he would sign the bill, Crist eventually vetoed the measure.
Strategically Killed Bills
Many political observers viewed the veto of SB-6 as a prelude to Crist’s departure from the Republican Party a few weeks later, which resulted in the strategic decision by lawmakers to prevent several of their own legislative proposals from reaching his desk.

With no meaningful property insurance legislation enacted this session, the state must again hold its breath and pray for another hurricane-free year.

The issue may arise again in 2011, as all three major candidates for governor have called for meaningful, market-freeing reforms to Florida’s broken property insurance system.

Christian R. Cámara ([email protected]) is director of the Florida Insurance Project of The Heartland Institute.