Florida Senate Approves Citizens Reform Bill; Path Ahead Remains Uncertain

Florida lawmakers have taken the first step towards reforming the state-backed property insurer, but not before significantly scaling back its impact on policyholders while the chances for final legislative approval remain uncertain.

Senate lawmakers have been working for months on a comprehensive reform package with the goal of depopulating the 1.2 million-member Citizens Property Insurance Corp. by increasing rates and finding ways to incentivize homeowners to seek coverage in the private market.

Initially, the bill (SB1770) would have changed Citizens rating methodology so that its rates would become actuarially sound so that it would no longer compete with the private market. Among other things, new policies no longer would have fallen under the so-called “glide path,” which restricts rate increases to 10 annually.

Prospective policyholders also would have been funneled through a clearinghouse whereby they would be offered to private insurers. Homeowners who received an offer of coverage within 15 percent of Citizens would be ineligible for coverage.

However, faced with concerns by Gov. Rick Scott and other lawmakers over the potential impact of rate increases on policyholders, proponents of the bill had to substantially lower their aims to secure approval of the bill by a 24-15 margin.

Sen. David Simmons (R-Altamonte Springs), who delayed a vote on the bill for two weeks, acknowledged that the bill fell short of its initial goals.

“This bill does not raise rates and has one defect, which is it does not take effect immediately,” said Simmons. “We do not have a solution yet.”

Central to gaining the support of other lawmakers, Simmons offered a last minute rewrite of the bill to ensure that all present Citizens policyholders would see no change in their rates with the exception of the 10 percent annual increase allowed under current law.

The bill states that all Citizens policies in force as of January 1, 2014 would fall under the glide path, even those policyholders on the coast that Simmons said are unfairly being subsidized by other policyholders.

Additionally, policyholders who are assumed by a private insurer only to see their policy non-renewed in 18 months could return to Citizens at their prior rates. The bill also removed the provision that homeowners receiving an offer of coverage within 15 percent of Citizens would no longer be eligible for coverage.

Simmons said those provisions are mitigated by the fact that in many Citizens’ territories the insurer’s rates are at and above actuarial rates. He said that combined with the use of the clearinghouse, those provisions over time would correct some of the rate inequities that currently exist.

“If there is no increase in insurance rates how is this bill effective,” said Simmons. “The answer is it stops the bleeding.”

Even with the changes made by Simmons, however, there was staunch opposition to the bill from lawmakers who are concerned over the state’s real estate market and ongoing fears that any changes to Citizens will eventually harm their constituents.

“This bill is simply too much, too soon and would have too much of an impact,” said Sen. Jeff Legg (R-Lutz).

While the Citizens reform bill has moved through the Senate, how House members will address it remains to be seen.

The House has approved several bills addressing Citizens including the creation of the clearinghouse, but has steered away from anything addressing rates. And with just two days left in the legislative session it remains to be seen if any comprise will make it to Scott’s desk.