A bill is making progress in the Florida Senate that would reduce the size of Citizens Property Insurance and permit property insurers to increase their rates.
Senate Bill 1770, sponsored by Sen. David Simmons, R-Altamonte Springs, is a large insurance reform effort, containing many changes that the insurance industry has long advocated for. However, critics say that if the bill becomes law, property insurance policy holders will see their rates go up. The bill targets the government-run Citizens, but may also cause rate increases.
Sen. Simmons said that the bill would reduce the high level of risk the state faces in the event of a major hurricane and would also reduce reliance on state-run insurance. Some Senators from coastal areas said that the bill would result in unmanageable rate increases for homeowners’ insurance. Consumer advocates criticized the lawmaking process, saying that public comment had been limited.
The bill would make the following changes in current law:
The rates charged by Citizens would be required to be actuarially sound, to not compete with private insurers and to carry an appropriate risk load. These measures could cause rate increases for customers of Citizens, who currently have a cap of 10 percent for increases in their rates.
When insurance companies purchase reinsurance to cover a potential hurricane, they would be permitted to charge higher rates. This means that customers of Citizens may be charged an additional 3 percent per year, though the assessment they would face after a major hurricane would also be lower.
Some of Citizens’ $6 billion surplus could be lent to private companies that would take over some of its policies, a move that would reduce the insurer’s resources and could result in higher rates for Citizens customers that remain.
For new policyholders at Citizens, as well as existing policies for second homes and homes worth more than $300,000, Citizens will be required to charge rates higher than those charged by the top 20 private
When it comes time for renewal, Citizens policyholders will lose their coverage if a private insurance company offers a policy that can be up to 15 percent pricier than Citizens.
The bill has cleared the Banking and Insurance Committee and the Government Operations subcommittee. It must clear the Appropriations Committee before it faces a full floor vote in the Senate. If the bill passes both the Senate and the House, it will go to Gov. Rick Scott for his signature.
Learn more about Florida home insurance by visiting FloridaInsurance.com.