Last Friday marked the end of Florida’s 2012 Regular Legislative Session, and what a roller coaster it was, literally to the very end.  When the dust cleared, many of us who supported reforms to the state’s broken insurance system saw two out of four bills pass late in the day, when only hours before we were expecting nothing more than a depressing nightcap at a nearby watering hole to lament the demise of what we felt were vital reforms.

The first of these was a proposal to eliminate Citizens Property Insurance Corp.’s “regular assessment” power. For those of you just tuning in, Citizens is the state-run insurance company originally created to provide coverage for properties legitimately unable to find coverage in the private market. This was the case until 2007, when populist-turned-backstabber Gov. Charlie Crist essentially converted Citizens into a property insurance version of the “public option,” making the state-run carrier an active competitor in the market with an unfair taxpayer-backed advantage over its private sector counterparts.

Needless to say, Citizens has grown to be the largest carrier in the state, has driven much of its competition out of the state and poses an enormous liability to the state’s taxpayers.

The bill the Legislature passed will eliminate assessments that are levied on every property insurer in the state whenever Citizens finds itself in a deficit following a sufficiently bad hurricane season. In theory, the insurance companies, according to current law, would write a check to cover much of Citizens’ shortfall, and then collect that assessment from their customers in the next year when they renew their policies.  The problem is, many of these companies may not have the funds to cover both the assessment and whatever losses they themselves have to cover for their own customers. This has served as a major disincentive for companies looking to do business in Florida. The bill will instead require Citizens to issue bonds to cover its losses, which could be spread out and paid back over the course of several years, instead of one enormous assessment in a single year.

The other bill that passed was one of Gov. Rick Scott’s three top priorities—a reform package to the state’s no-fault auto insurance system, otherwise known as personal injury protection, or PIP.  Throughout the process, those of us who favored meaningful reform preferred the House version of the PIP bill to the Senate’s significantly weaker bill, which many felt did not attack the root causes of the problem: fraud, over-utilization and over-litigation.

When the PIP bill passed the House, the Senate grafted its weaker version onto it and sent it back for the House to concur. Fortunately, the House sat on it for a day, refused to concur and sent it back with compromise (albeit still strong) language. In what was the session’s greatest nail-biter, the Senate took up the House bill and, in a tight vote of 21-19, agreed to the House bill. Had one member switched votes, the bill would have died on a tie vote, just like the parent trigger bill, unfortunately, did earlier in the day.

The two insurance bills that, unfortunately, were not approved by the Legislature were the Florida Hurricane Catastrophe Fund reform package and the surplus lines take-out bill.  The latter bill would merely have opened up surplus lines insurers to Citizens customers who consent to leave for coverage with a surplus lines carrier.  This would have helped in “depopulating” Citizens, thus reducing the massive liabilities taxpayers face.  Unfortunately the Senate attached an unacceptable amendment to it that essentially gutted the bill, and the House refused to concur with it.

The Cat Fund reform bill died much earlier in the process.  Although it moved in the Senate, the House version of the Cat Fund bill was essentially killed when it was placed on the agenda to be considered by its first subcommittee of reference, only to be yanked from that agenda by the chairman of the parent committee. At that point, it became apparent the bill would not move any further in the House, and that is exactly what happened.  On the Senate side, a weaker version was attached to the aforementioned Citizens assessment reform bill, but it was subsequently removed by an amendment on the Senate floor, due to fears that the House would not pass the bill with the Cat Fund language.

All the bill would have done is to reduce the size of the Cat Fund to a point where it could actually pay its claims. Allowing this reform to die may be the single most detrimental decision made by the Legislature this year. If a major storm hits the state in 2012, and the Cat Fund cannot pay its claims, many insurance companies may go bankrupt, many Floridians may not get their claims fully paid and the state may find itself in an economic quagmire. The Legislature, and those specifically responsible for killing this reform have essentially declared that it is perfectly acceptable for the State of Florida to peddle a form of insurance coverage that it cannot reasonably cover. This is bad policy, and it may one day instigate the worst economic crisis in the state’s history.

But other than that, the session was cool.

Featured Publications