Crist vetoes insurance bill -- Future of State Farm in Florida still unknown

Crist vetoes insurance bill -- Future of State Farm in Florida still unknown

By BILL KACZOR
Associated Press Writer
Publication Date: 06/25/09

TALLAHASSEE -- A much debated bill that would have deregulated rates on some residential property insurance policies fell victim Wednesday to Gov. Charlie Crist's veto pen.

The bill (HB 1171) would have let willing homeowners buy higher-priced, unregulated coverage for hurricanes, fires and other property hazards but only from highly capitalized national companies.

In his veto message, Crist wrote that the "Consumer Choice" bill, instead, would have given the choice to those big insurers.

"These select property insurance companies will be able to cherry-pick, or sell only to profitable policyholder risks, while at the same time offloading their undesirable policyholders that are higher risk to their competitors and Citizens Property Insurance Corp.," Crist wrote.

Citizens was created by the state to offer coverage to consumers who couldn't get it on the private market.

With private companies bailing out of coastal areas and increasing their rates, Citizens has grown to become Florida's largest property insurer, with more than 1 million policies.

The bill's advocates included State Farm Florida, the state's largest private property insurer, which called the legislation "a positive step for Florida residents who expect and deserve their insurer to be there following a major disaster."

The subsidiary of Bloomington, Ill.-based State Farm Insurance has announced plans to pull out of the state after Florida Insurance Commissioner Kevin McCarty rejected a 47 percent rate increase. Company officials said without higher premiums they face the prospect of being unable to pay claims.

Crist has said Floridians will be "much better off without" State Farm.

The bill's supporters, including the business lobby Associated Industries of Florida, had hoped it would keep State Farm and other big companies from abandoning the Florida market.

"When they leave, they take their claims-paying capital with them," said Rep. Bill Proctor, a St. Augustine Republican who sponsored the bill. "I don't think the issue's dead."

He said he hoped legislative leaders will try to override the veto, which requires a two-thirds vote in each chamber. That's at least 27 votes in the Senate, which passed the bill 27-9 with four senators not voting. The House vote was a lopsided 105-13.

House Speaker Larry Cretul, R-Ocala, was among those disappointed by the veto.

"Florida has demonstrated that over-regulating the insurance industry can actually make things worse for consumers -- not better," Cretul said in a statement. "It seems reasonable to give homeowners as many choices as possible."

The Florida Property & Casualty Association comprised of smaller, Florida-based insurers opposed the bill and in a statement echoed Crist's argument that big national companies would have an unfair advantage by offering regulated premiums in low-risk areas and unregulated rates in high-risk communities.

Proctor responded that no one knows if that would happen because unregulated premiums have never been tried before.

Crist also wrote that the bill would have disrupted efforts to make Florida's insurance market more competitive by spinning off Citizens policies to private companies, most of them relatively small and new to the state.

He wrote that if the highly capitalized national companies "are allowed to 'redline' areas of the state they do not wish to write, this will harm consumers and investors who have worked in good faith to create a competitive marketplace."

The governor added that the bill also would not have prevented companies from collecting unregulated premiums and then leaving the state with "hardworking families' earnings."

Supporters argued the bill would have given consumers the ability to get policies with better financial backing if they were willing to pay for it.

They also said attracting or keeping more robust insurers could reduce reliance on the Florida Hurricane Catastrophe Fund, which provides backup coverage for insurers.

If the fund has insufficient resources to cover losses, the difference would be made up through assessments on nearly all types of property insurance, including auto.

Click here to return to story:
http://www.staugustine.com/stories/062509/state_062509_023.shtml

© The St. Augustine Record