Territory Map Plan Struck From Fla. House Bill; Senate Passed It

A proposal that would create a single Florida-wide territory map and eliminate individual rate territories based on predicted hurricane risks and expected loss models was removed from House legislation, but was approved on April 6 in Senate Bill 1488 with numerous other provisions made by the Senate Banking and Insurance Committee.

SB 1488 would bring many changes and cause a huge amount of paperwork for the insurance industry. Some of the provisions include a cap on any rate increase next year by Citizens Property Insurance Corp.; all insurance companies would have to use a standardized territory map on premiums; and policyholders could choose higher hurricane deductibles.

In addition, the bill, sponsored by Sen. Rudy Garcia, R-Hialeah, would require insurers to give customers a checklist so they know what’s in their policies and would remove the ability for insurance companies to appeal rejected rate increases to an arbitration panel.

Garcia, chairman of the Senate Banking and Insurance Committee, had already postponed a vote on the bill so he could have more time to fine-tune the legislation.

The biggest change: Limiting any Citizens rate increases next year to 5 percent of a policyholder’s premium, a move Garcia said he made because he says there isn’t sufficient information on which Citizens can justify its present rates.

“I didn’t want to use a cap in this proposal,” Garcia told the South Florida Sun-Sentinel. “But that’s what we need for the moment until I have more questions answered.”

The cap on Citizens rates also put that company on a slippery slope because its directive in the past, as the state’s insurer of last resort, has been to make sure its rates are higher than other insurers in the state.

Citizens spokesman Justin Glover declined to comment on the rate cap because company officials had not yet been able to examine the provision.

The Senate Banking and Insurance Committee OK’d SB 1488 with a single no vote from Sen. J.D. Alexander, R-Lake Wales.

And one South Florida senator vowed to change a part of the bill that addresses the state’s “valued policy law,” which requires insurance companies to pay the full amount of an insurance policy if the property is deemed a total loss.

The problem is figuring out who pays if a home is damaged by both storm surge and wind, losses covered by two separate insurance policies. Some legislators fear homeowners might find themselves on the hook for a massive repair bill if each insurer says it covers only part of the total cost to rebuild.

Sen. Walter “Skip” Campbell, D-Fort Lauderdale, told the Sun-Sentinel he thinks homeowners in such a situation should get what they think they paid for: the full value of their insurance policies, up to the cost of replacing their properties.

Campbell called it “a fairness issue.”

Insurance companies see a fairness issue, too: not having to pay more than they think they owe, Mark Delegal, a lobbyist for State Farm, Florida’s largest insurer, said.

If forced to, Delegal said, companies would end up having to raise rates. “That’s contrary to the best interest of Floridians,” he said.

The provision of a state-wide map was suggested because none of Florida’s estimated 200 insurance companies use the same map to determine their rates. Legislators feel that standardizing the rate map would make it easier for consumers to compare insurance coverage from one company to another, and eliminate the current situation in which one homeowner can obtain a standard policy, while his next-door neighbor’s only choice is a policy with Citizens.

SB 1488 would eliminate the present system, under which insurance companies use proprietary maps to set rates, based on predicted hurricane risks and expected loss models.

Tom Gallagher, chief financial officer, has championed the territory idea.

“I’ve always been in favor of it because it truly gives the consumer an opportunity to compare and it also makes it a lot easier for us to publish what rates are in certain territories. It’s absolutely impossible for us to that now,” Gallagher said.

Industry lobbyists said the proposal is unfriendly to consumers and that it could result in higher rates for some.

“We build our own mousetrap because we think it makes us more competitive. With a standardized, cookie-cutter system, you’re going to take competition out of the system,” Mark Delegal, a lobbyist for State Farm, Florida’s largest property insurer, told the House committee.

Gallagher said there’s no reason for that: “My attitude is, don’t tell anybody how you do your territories, do ours,” Gallagher said. “We’ll tell you what the territories are and then you price them. We’re trying to give the consumer a fair leg up.”

A single territory map also would make it easy for regulators to see where companies are not writing policies.