Florida Homeowners Insurers Seek ‘Flex-Rating’ Up to 15%

Florida lawmakers are considering giving homeowners insurers more flexibility to raise rates.

The Florida Senate and Banking Insurance Committee recently approved a bill that would allow insurers to raise their rates up to 15 percent without first getting approval from the state insurance department. Increases on individual policyholders would be capped so that their rates could be no higher than twice the statewide average.

The role of the Office of Insurance Regulation (OIR) would be limited to reviewing the rates to see if they are inadequate or discriminatory.

Under current law, every property insurer in the state must make an annual rate filing with the OIR, which may either approve or disapprove the rates. The process can take months, especially if the filings are disputed.

Senator Alan Hays, who sponsored the bill, said that while the bill is no “magic-bullet,” it would bring more latitude to the market. “This is an issue of consumer choice that hopefully leads to a more competitive market,” he said.

Other lawmakers, however, disagree. Senator Eleanor Sobel (D-Hollywood) cast the bill as a “statewide experiment” that could leave residents confused over whether a rate is fair or not.

Supporters of the bill have cast it as a means to attract more capital to the state, hopefully resulting in lower rate hikes, while critics say it is an automatic annual increase to policyholders.

Mark Delegal, State Farm Insurance Co., rebutted charges that the alternative rate-making process would lead to a market out-of-control. “To say this is wide-open deregulation is wrong,” he said. “Right now there is no cap on what you can ask. If you decide to take this fork in the road you are imposing your own limits.”

Others, however, said there is no justification for changing the current rate making process. Jeffrey Farmer, of the trial lawyers’ Florida Justice Association, warned lawmakers they are being hoodwinked by an industry that hasn’t suffered any significant losses in five years. “Sometimes, they have to pay claims,” he said.

Complicating the market equation is the state-backed insurer Citizens’ Property Insurance Corp. Some lawmakers are hoping to discourage more policies in Citizens by requiring Citizens policyholders to sign a form indicating they understand the potential assessments and surcharges they could face in the event of a deficit. Citizens’ policyholders are on the hook for a surcharge of up to 15 percent and an emergency fee of up to 10 percent.

Senator Gwen Margolis (D-Miami) opposes the bill because she said it could raise rates. “I am very concerned that people are no longer coming to Florida anymore because it’s too expensive,” she said.

The bill would also require insurers to accept more liability. They would not be allowed to buy temporary increased reinsurance coverage from the Florida Hurricane Catastrophe Fund.

Topics Florida Carriers Legislation Homeowners