Governor of Florida Vetoes Property Insurance Reform Proposal

Published: Thu 03 Jun 2010

Perry Begay

Tuesday, the governor of Florida, Charlie Crist, vetoed a property insurance reform bill.

Governor Crist explained in a memo that he was worried the bill would make it easier for property insurance companies to raise residential premiums in the state. He also said he objected to modifications to mitigation discounts. In other words, Florida homeowners who have made improvements to their homes to protect them against hurricanes may be unnecessarily penalized.

"During these difficult economic times, Florida's consumers should not have to be concerned with an additional premium increase to their policy," Gov. Crist wrote in the memo.

Kevin McCarty, the Florida Insurance Commissioner, has stated that the legislation would create additional regulatory tools to protect the solvency of private insurance companies. Proponents of the bill argue that it would ease regulatory pressure on insurers and generate additional competition in the Florida marketplace, which they believed would even out premiums for residents.

High-Risk Florida Insurance Market

The insurance industry alleges that it lost $700 million last year in the disaster-prone Florida market, despite the fact that no hurricanes struck the state. Insurers claim that revenues have dropped 30 percent in the last three years because of a premium rollback mandated in a special session in January 2007 concurrently with an increase in the size of discounts homeowners receive for hurricane-mitigation improvements, such as strapped roofs and shutters.

Property insurance profits have also been eroded by a number of other variables, including the economic recession.

The property insurance market in Florida has been held up for years by the Florida Hurricane Catastrophe Fund and the state-run Citizens Insurance.

If a major storm occurred, Agriculture Commissioner Charles Bronson questions Citizens' ability to afford claims, which would drive up costs for all other homeowners and auto insurance policyholders in Florida, as they would have to pay a surcharge. Currently, Citizens is the biggest property insurer in the state, insuring more than one million people.

Since the messy aftermath of 1992's Hurricane Andrew, a solution to Florida's property insurance woes has eluded state officials. One decade after Andrew, the state was devastated by eight severe storms in 2004 and 2005 that forced many private insurers to either leave the Florida market altogether or cut back the number of policies offered.