MANATEE — One of the state’s largest consumer groups is urging Gov. Charlie Crist to veto a bill passed Friday by the Florida Legislature that foes call “The State Farm Bailout Bill,” but that supporters named the “consumer choice” bill.
The controversy concerns House Bill 1171. A similar version, Senate Bill 2036, addressing property insurance issues, was sponsored by state Sen. Mike Bennett, R-Bradenton. H.B. 1171 passed 27-9 in the Florida Senate and 105-13 in the Florida House.
It permits certain large insurance companies to offer policies with rates unregulated by the state. Except for the rate, the state Office of Insurance Regulation retains regulatory authority over all other aspects of the policy, and continues to maintain full rate regulation of most other insurers in the market.
Supporters said the measure would allow consumers to decide for themselves if they’re willing to pay an actuarily-sound rate, even if it’s more than what they’re paying as, for example, customers of the state-run insurer of last resort, Citizens Property Insurance Corp.
Sign Up and Save
Get six months of free digital access to the Bradenton Herald
“It’s a choice to give people an option to stay where they are, or pay a higher premium to another company. It gives people more choices,” said Reagan.
The worst type of insurance is the kind where you pay, and the company doesn’t pay you back in the event of a claim, said Dino Falaschetti, associate professor of law and economics at Florida State Law School.
“I’m pretty sure everybody agrees that Citizens and the CAT (Florida Hurricane Catastrophe) Fund do not have the funds to fully pay their claims,” he said.
Those who object to the bill, such as leaders of the Florida Consumer Action Network, among the state’s largest consumer groups, said it is really an insurance company choice, not a consumer’s choice. They said big companies can choose to charge higher rates with unpredictable consequences and potential disruption of the market.
“We advise people currently in Citizens to stay there,” said Bill Newton, executive director of the network. “If you can go to one of the smaller companies in the market, you should go. They’re backed up by the state, protected, completely safe in my opinion. We need to foster more competition, you can’t have a market dominated by the big four or five.”
He has urged the governor to veto the bill, he said.
Meanwhile, Crist announced Tuesday he would sign legislation that increases property insurance rates by 10 percent on more than 1 million customers of the state-backed Citizens.
The governor said stabilizing the marketplace by helping Citizens reach soundness offsets the rate increase. Supporters of the legislation, House Bill 1495, said Citizens’ customers would have been subject to rate increases between 40 and 55 percent Jan. 1 if lawmakers failed to pass legislation that allows 10 percent increases spread over several years. It also reduces the state’s $20 billion exposure on the Hurricane Catastrophe Fund by phasing out the upper levels of a backup pool by $2 billion a year over a six-year period.