PEMBROKE PARK, Fla. – Florida lawmakers passed 185 new state laws — but only one was related to the property insurance crisis — and it does nothing major on affordability.
Florida Rep. Hillary Cassel, an attorney who worked for insurers, was behind the bipartisan support needed to pass the bill into law in Tallahassee.
During This Week In South Florida on Sunday, the Democrat from Dania Beach explained the new law in detail and said there is an urgent need for reform.
“It’s not a matter of if; it’s a matter of when,” Cassel said about the risk of a destructive hurricane. “We have got to make some big changes here in Florida.”
Consumers have had to prepare for annual rate increases. Cassel is concerned that the new law also doesn’t address the increasing demand for the Citizens Property Insurance Corporation, a nonprofit designed as the state’s carrier of last resort.
“We are really kind of kicking the can down the road a little bit further because when they go to price it, they are not going to stay with that surplus line carrier that may be 30%, 40%, 50% — they are going to go back into a Citizens policy,” Cassel said about the CPIC, which was created to provide homeowners with windstorm coverage and general property insurance away from the private marketplace.
Cassell added CPIC has now become the state’s major insurer, but the rates don’t need to be competitive with the private marketplace place, and any attempt to do that hurts consumers.
“Citizens is not the private marketplace for a reason. They don’t have to worry about paying taxes. They don’t have to worry about paying executives at the end of a successful year,” Cassel said. “The commission that they pay to agents is less than what a private insurer pays.”
The current strategy has CPIC aiming to help 500,000 property owners find coverage in the private market through a depopulation program. Meanwhile, the CPIC range increased from $700,000 to $1 million to allow more people to participate. Cassel explained the contradiction: “We are increasing who is also eligible for Citizens while at the same time, saying, ‘We are trying to depopulate them.’”
The new law gives consumers a break. Florida property owners have had a requirement that if they are in a flood zone and they have CPIC coverage they have to have flood insurance. Cassell said the new law changes that.
“It was also requiring you to have coverage, not only on the cost of the dwelling of your house, but to also cover contents coverage, and that was increasing that premium cost, Cassell said. “We said, ‘Listen, you only have to have the dwelling coverage’ for purposes of qualifying for meeting that mandate. You don’t have to cover contents under a flood insurance policy.”
Most of the 1.2 million CPIC policyholders are in South Florida. The new law affects some 75,000 property owners. Cassel said it also mostly affects companies not based in Florida that stand behind surplus lines insurance carriers, which protect against a financial risk that a regular insurance company will not take on.
“They are able to write policies in the state, but they don’t have to get the same level of approval that one does with the Office Of Insurance Regulation,” Cassel said about the state agency tasked with regulating Florida’s property insurance industry.
The requirement: “That they carry an ‘A’ from to AM Best,” Cassel said adding, “AM Best is one of the national independent rating companies that determine the solvency of a corporation ... That’s a huge thing. I wish we applied that to our domestic market.”
As a coastal state on the path of hurricanes every season, Floridians face a high risk, but Cassel said the lack of regulation also contributes to the crisis because small domestic carriers are not required to be rated by independent companies to provide assurances about solvency.
“They don’t have the same level of rating that we require from our larger independent companies,” Cassel said about the small domestic carriers that could go under after a storm.
Another tangible solution to the state’s property insurance crisis, Cassel said, is for Florida to adopt the coastal wind-only policy program that has been “extremely” successful in Texas.
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