Numbers to be real test of insurance legislation

Property insurance was “the” issue for the special session of the Legislature in January, and it remains “an” issue during the regular session that begins today.
Legislators and Gov. Crist got justified credit two months ago for taking a first step toward reducing rates in exchange for higher overall public risk. Based on what has happened since that special session, however, it’s even clearer that property insurance reform must remain as much of a priority as property tax reform, the issue of the moment.

As news reports have shown, the rate “relief” from the special session will vary greatly and will underwhelm many Floridians who read last week’s state-issued prediction that rates could drop by an average of one-third.
The centerpiece of the bills in January was one that increased the amount of cheaper, state-subsidized reinsurance available to companies. Private reinsurance, which most carriers buy on the worldwide market to insure themselves, accounted for much of the premium increase last year. But State Farm Florida, one of the largest private home insurers, was getting low-cost reinsurance from its parent company in Illinois. State-run Citizens Property Insurance Corp., which now has the most policies in the state because private companies have canceled so many customers, has been buying reinsurance from the state.
As a result, those policyholders will see less reduction in their premiums. Indeed, the greater “savings” to Citizens customers probably will be from the state canceling two rate increases of 21 percent and 56 percent. Though the second was not justified, the first probably was necessary to build up Citizens’ resources. One early, key item for the Legislature will be to review the business plan from Citizens that would enable the company to sell “multi-peril” policies — wind, fire, theft, liability — in the high-risk zones where it now only can sell wind coverage. The extra revenue would help Citizens pay hurricane claims and reduce the need for more statewide assessments to cover losses.
Customers whose policies renew before June 1 may have to wait until next year for relief. Only after that date do companies have to factor the cost of cheaper reinsurance into their rate filings. A busy storm season could change that calculation.
Numbers were as plentiful as eggs at Easter when the Legislature estimated how much customers would save from the law that came out of the special session. Real numbers will hit Floridians during the eight-week regular session, and each number will be a gauge of how much work remains on property insurance “reform.”