Insurance: Look for lower premiums
|State Rep. Bill Galvano said the new insurance legislation would bring "major benefits" to Anna Maria Island. Islander Photo: Molly McCartney
Rate relief for Anna Maria Island and its insurance-battered residents, churches and businesses is on the way and should be in place before hurricane season opens in June.
That's the opinion of many insurance experts, as well as state Rep. Bill Galvano, R-Bradenton, familiar with the massive insurance reform bill that Gov. Charlie Crist signed into law on Thursday.
Insurance Commissioner Kevin McCarty released a statement describing the reforms as "significant and far-reaching." He said the changes will "bring badly needed rate relief."
Galvano, who has been a leader in the effort to find solutions to the state's insurance crisis, said the new legislation would provide Island property owners with "major benefits." Here are some examples:
• Premiums will decline for many people, although reductions will vary, depending on the individual, the carrier and the coverage. The biggest reductions will be in wind premiums. Some policyholders may actually get refunds.
• Rate increases proposed by Citizens Property Insurance Corp. have been repealed. Citizens, the state insurer of last resort, had intended to raise its Manatee County residential rate by as much as 73.3 percent in March and its commercial rate by 767 percent.
• Under the new rules, Citizens will be allowed to sell wind coverage to any commercial or residential property owner who can't find coverage on the standard market.
Many details about the law remain fuzzy, but The Islander has compiled the answers to 10 key questions, based on interviews with insurance experts, including a Tallahassee insurance analyst, a Citizens spokesperson and Galvano.
Here is what they say:
Q: How much will policyholders save under the new insurance law and what makes these savings possible?
One legislative study found that the new law could provide an average premium reduction of 20 percent for homeowner's coverage and 39 percent for wind insurance from companies other than State Farm and Citizens.
These savings of 20-39 percent would be possible primarily because the state is making more cheap reinsurance available to private insurers and requiring them to pass their savings on to consumers.
The state study said that the premium reduction for State Farm policyholders would average only 7 percent for homeowners and 19 percent for wind coverage because State Farm already has access to cheap reinsurance from its mother company.
The study did not include Citizens because it does not buy reinsurance from the private market.
But other changes in the insurance law and in the operation of Citizens are expected to lead to an average reduction in its premiums of 10-20 percent, the experts said.
They agreed, however, that the biggest savings for Citizens' policyholders will come from the repeal of the rate increases - 73.3 to 767 percent - that Citizens had scheduled to begin in March. Lawmakers canceled those rate hikes before they could go into effect.
The new law also rescinded the 31.3 percent increase that Citizens began to charge its Manatee customers on Jan. 1.
Q: Will there be refunds?
Yes, under certain conditions. Anyone who has paid the premium for a residential policy with an effective date of Jan. 1, 2007, or later, will receive a refund check if the policy contained the January 2007 rate increase. The amount of the refund will depend on the rating territory where the property is located. As for timing, Citizens is in the midst of major organizational changes and doesn't expect to be able to make refunds for several more weeks and possibly several more months.
Q: How does a commercial property owner outside the wind pool obtain wind and other coverage from Citizens under the new law?
Citizens is working to develop a plan and a system to sell multi-peril coverage for commercial property owners on a statewide basis, just as it now provides for residential customers.
The reasoning behind this is to let Citizens write the more profitable multi-peril coverage rather than limit Citizens to the riskier wind-only policies.
Q: What happened to the wind pool system that divided Anna Maria Island in the middle?
The new insurance legislation has the effect of eliminating the wind pool and its boundaries. Instead, any commercial or residential property owner in Florida will be eligible for Citizens.
Q: What are the qualifications for obtaining coverage from Citizens under the new law?
You will be eligible for Citizens if you can't obtain insurance - residential or commercial - from the private market or if you are quoted a premium rate that is at least 25 percent higher than Citizens.
The new law eliminates last year's requirement that Citizens make a distinction between homesteaded and non-homesteaded customers. Under the new rules, Citizens will treat customers with and without homestead exemptions the same.
Q: Are churches outside the wind zone now eligible for Citizens?
Churches, along with any other non-residential commercial property, will now be eligible, if they can't find standard coverage or if the quote they get from a standard insurer is at least 25 percent higher than Citizens.
Q: What happens to the Florida Property and Casualty Joint Underwriting Association, the state organization created last summer to provide wind insurance to small commercial properties unable to get Citizens coverage or standard insurance?
The PCJUA policies will be transferred to Citizens over a period of time, and the PCJUA will eventually shut down.
Citizens is preparing a transition plan, in keeping with the legislative requirements, to take over the PCJUA business and resolve any coverage issues. One of those issues has to do with the coverage limits. The PCJUA rules provided that it could only insure a commercial property valued at $1 million or less. The Citizens rules allow Citizens to insure a commercial property valued at more than $1 million.
It will be up to the Citizens board to establish the limits for its new commercial customers.
Q: What is the time frame for Citizens to expand its coverage under the new law?
Citizens is supposed to have its business expansion plan approved by the Financial Services Commission and the Legislative Budget Commission in March. Citizens hopes to begin offering its expanded coverage sometime in April.
Q: Will the insurance companies cooperate with the state?
That is the expectation of Galvano. "We did hear some murmurings up there that insurers would leave or try to find a loophole," he said, "but the bottom line is that this is the fourth, if not the third most-populated state in the union. There are very profitable lines of insurance in the state of Florida and we are banking on their capitalist instincts. They may have to make some adjustments and maybe their profit margins won't be as great on some lines, but they are not going to leave."
Q: Did the special legislative session resolve all the insurance reform issues or will the regular session meeting in March have more work to do?
Galvano said he was "absolutely" satisfied with the reforms approved during the special session. "I think we accomplished far more than would be typical of a special session, especially given the nature of the issue and the influences that exist. I watched in 2003 when we came back five times to try to hammer out a medical malpractice bill, and it was very, very difficult. So to be able to say we have addressed the Hurricane Catastrophe Fund, building codes, mitigation, regulations and the entire Citizens program is a big accomplishment."
But the biggest accomplishment, he said, was the change he observed in the mindset in Tallahassee.
"There was a total reversal," he said, compared to last year when his proposed amendment to expand the wind pool was defeated by a vote of 57-56.
"There were 57 people last year who were convinced the only way to solve the insurance issue was to let industry do what it wants."
This year, there was near unanimous approval in the special session for passage of consumer-friendly insurance reforms.
"At some point," Galvano said, "you have to realize that it is not a free market when consumers are trapped."
Insurance: Insurance briefing set for Wednesday
State Rep. Bill Galvano, R-Bradenton, will give an overview Wednesday night on the insurance reform legislation approved this month by state lawmakers and signed by the governor last Thursday.
Galvano will speak at a meeting of Manatee County Commissioner Jane W. von Hahmann’s District 3 Citizens Advisory Board.
The meeting will begin at 7 p.m. in the Utility Operations Department, Central Conference Room, 4410 66th St. W., Bradenton. The public is welcome to attend and participate in a question-and-answer session after the briefing.