BY ASHLEY AMASON
Governor Charlie Crist’s veto of House bill 1171, known as the property insurance bill or consumers’ choice bill, has made waves nationwide, but the biggest ripple effect will be that of State Farm Insurance leaving Florida. State Farm spokesman Justin Glover said, “We’re disappointed that House bill 1171 was vetoed.”
Crist’s veto was no surprise, yet it was in direct opposition with the majority vote. 85 percent of the House was in favor of the bill, as were 60 percent of Floridians according to a Florida Chamber of Commerce poll.
State Representative Brad Drake told the Herald, “I was very disappointed. That bill was written at the request of consumers throughout the state…they asked the legislature to write law so that they could choose themselves whether or not they wanted to do business with certain insurance carriers. The legislature addressed that and the governor vetoed that.”
House bill 1171 would have allowed insurance companies to raise homeowners’ insurance premiums, which are currently regulated by the state, to better reflect their loss potential. The current artificially low rates have been the source of constant debate in recent, hurricane-heavy years.
In the June 30 article “Hurricane Charlie” in “The Wall Street Journal,” the facts are displayed like elementary math, “The bill would have trimmed the cost of a state-run enterprise that insures homeowners against storm damage. The program has an $18 billion unfunded liability and has taxpayers on the line for tens of billions in property losses from the next major hurricane… By way of background, two years ago Mr. Crist gave a big gift to coastal property owners by converting the state of Florida into one of the world’s largest property insurers. The Citizens Property Insurance Corporation provides below market-rate insurance policies directly to homeowners. Meanwhile, the Florida Hurricane Catastrophe Fund (CAT) regulates how much private insurers can charge homeowners and requires companies to purchase low-cost reinsurance from the government.
“Here’s the problem: This system isn’t even within a coastal mile of being actuarially sound. The state government acknowledges that in many high-risk storm areas the premiums are from 35 to 65 percent below what is needed to cover potential claims. That subsidy has made Mr. Crist popular with many coastal residents even as the state plays Russian roulette with the weather.”
Facing financial devastation in Florida because of the inadequate premiums, State Farm sent a letter from Jim Thompson, president of State Farm Florida to Governor Crist before the action, “[stating] if the bill had been implemented along the lines of legislative intent, it could’ve allowed us to reconsider our decision [to leave Florida]” said Glover.
Vetoing the bill all but sealed the deal for State Farm to continue its withdrawal from Florida. In the June 25 edition of “The Miami Herald,” State Farm executives were quoted saying “regulators are not allowing them to charge realistic rates that cover their potential storm losses.”
On whether the House would overturn Crist’s veto, Drake said, “I would support it, but I don’t think it will happen. The Speaker of the House and the President of the Senate would have to make that decision and right now, it doesn’t seem that either one of them have an appetite to do that.”
Drake said he has spoken to several legislators throughout the state noting his support to overturn the veto.
Currently, State Farm’s withdrawal plan is still awaiting approval from the state. Customers will be given 180 days notice before nonrenewal to find replacement insurance.
“We’re trying to make it as smooth a process as possible for our customers.” State Farm is working with the state to form a program in which its customers can find replacement insurance with a private company and still rely on their State Farm agent. Essentially, Glover said the company is trying to provide a “soft landing.”
Glover stressed “the most important thing State Farm customers need to know is they don’t need to take any action now. The [withdrawal] plan has not been approved by the state. We will not take any action to nonrenew a policy until the plan is approved…If they have any questions about the process, call their State Farm agent.”
Contact Ashley Amason at email@example.com.