Florida Gov. Rick Scott apparently had no reaction to the Citizens reform bill that landed on his desk last week. His office said only that he was "reviewing the proposal." There was no hint that he was either disappointed or relieved that the rating methodology changes did not make it into the final bill. Legislators and homeowners alike will just have to wait to see what happens.
As we said in our last post, the bill leaves in place the glide path that limits rate hikes to 10 percent per year. The original proposal included a dramatic overhaul of the rating system that would have, according to proponents, put Citizens Property Insurance Corp. back in its rightful place of being the state's insurer of last resort.
The bill kept the clearinghouse idea but tweaked the criteria the will kick homeowners out of Citizens and into the private market. A comparable rate from a private insurer is all that's required, instead of a quote within 15 percent of the Citizens rate.
Lawmakers decided, too, that one way to move homeowners to private insurance is to make Citizens' coverage less attractive. The new bill limits coverage to $700,000 over three years. Another depopulation tactic is a change in eligibility criteria: Citizens will no longer offer property insurance for homes built right on the water.
Consumer advocates prevailed on the administrative and governance fronts. The company will have an Inspector General and will be required to follow state contracting rules. Importantly, the board of directors will include a designated consumer advocate.
The debate about reform has been interesting to watch. The business lobby has maintained that the glide path artificially depresses Citizens' rates and, as a result, keeps the insurer's reserves at levels too low to cover claims in the event of a major storm. If Citizens comes up short, of course, the state will levy every insured.
At the same time, the housing industry has complained that eliminating the glide path and hiking rates will slow the desperately needed housing recovery. A complicated and consumer-unfriendly homeowners insurance market would discourage building and discourage people from relocating to the state.
Chances are good the debate will continue even after the governor makes his decision.
Source: Miami Herald, "Citizens Property reform bill - minus big rate increases - heads to governor’s desk," Toluse Olorunnipa, May 2, 2013