Florida Gov. Crist Vetoes Property Insurance Bill

As he hinted he would do, Florida Gov. Charlie Crist has vetoed an omnibus property insurance bill (SB2044) that the industry and even the state’s insurance commissioner had urged him to sign.

Crist, who was elected governor as a Republican but who is running for the U.S. Senate as an independent, said he vetoed the bill because he believes it would have made it easier for insurance carriers to get rate hikes to cover reinsurance costs up to 10 percent a year. The insurance commissioner still would have had to approve these hikes but the process would have been streamlined under the bill.

In his veto letter, Crist said he was “most concerned” about this expedited rate filing procedure. “During these very difficult economic times, Florida’s consumers should not have to be concerned with an additional premium increase to their policy,” Crist stated.

Crist apparently discounted the advice he got from Insurance Commissioner Kevin McCarty, typically an ally of his, who had urged him to sign SB2044. The bill will make 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 had written to the governor.

In vetoing the bill, however, Crist actually allows insurers to go ahead and implement new rates before getting state approval under a use-and-file system. The bill would have required approval before use.

Crist also said he opposed the bill’s provision reining in premium discounts for homeowners who strengthen their homes against hurricanes. A state audit had found this mitigation program riddled with fraud and overly-generous discounts. But Crist said he was troubled that honest policyholders who took responsible steps to fortify their homes would be penalized under the tighter rules.

The bill, sponsored by Sen. Garrett Richter, R-Naples, also would have addressed solvency concerns by imposing a higher capital requirement of $15 million for a new home insurer.

It also would have more closely regulated the transactions between carriers and their affiliated companies, a reform Crist said he supported at a Cabinet meeting earlier this year.

Crist released his veto message just a few hours before the midnight deadline after which the bill would have become law without his signature.

The insurance industry had backed the bill as one way to get at some the forces driving up costs, including rising sinkhole claims and millions of dollars in claims from Hurricane Wilma that are being re-opened by claims adjusters five years after the storm. The bill would have more closely regulated public adjusters and their fees. It also would have allowed insurers to retain a portion of replacement cost claims payments until there is proof repairs are being made.

The veto was disappointing for insurers.

The Florida Property & Casualty Association, a group of Florida-based insurance companies and consultants, said SB2044 would have reduced fraud and claims abuse, making insurance more affordable and accessible.

“Unfortunately, it was erroneously portrayed by critics as a bill that would have raised rates without regulatory oversight. Nothing could be further from the truth. The veto of this bill will ultimately saddle all insurers with continued escalating losses resulting in less availability and higher rates,” the group said in a statement.

William Stander, assistant vice president and regional manager for the Property Casualty Insurers Association of America (PCI), said the legislation would have been a “step toward bringing private marketplace solutions to Florida.”

Stander said there were a number of consumer-friendly provisions in the bill Crist vetoed including a new web site to help homeowners shop for insurance.

“SB 2044 would have delivered common-sense solutions that would have protected insurance consumers and helped control rates by addressing a number of the cost drivers associated with increased premiums,” said Stander.

“While we are disappointed that these provisions did not become law, we recognize that many of us want the same thing: a healthy, stable and competitive insurance market that delivers economic security and peace of mind to consumers. We are all in this together.”

Neil Alldredge, senior vice president of State and Policy Affairs for the National Association of Mutual Insurance Companies (NAMIC), expressed the frustration of his group’s member companies.

“Florida Governor Charlie Crist just doesn’t get it. Florida needs to create a business climate and competition-based pricing in which the free market is alive and well for the purchase of insurance. Such a market helps build a clear understanding of the true cost of risk, which would promote wiser decisions with a long-term view regarding land-use planning and resource management. Only then will consumers have plentiful and sustainable choices for coverage,” said Alldredge.

“But the governor decided to begin hurricane season by vetoing SB 2044 – legislation that would have continued the slow but steady progress that had been occurring for insurance consumers and companies in Florida.”

Jeff Grady, president and CEO, Florida Association of Insurance Agents, anticipated the veto. “It does appear likely that he will veto the bill. If so, bad day for Florida,” he told Insurance Journal the morning before the veto happened.