In their zeal to shed policies in the state-run Citizens Property Insurance, the Florida Senate is poised to approve a bill that gives homeowners a low-cost, but unregulated, insurance alternative.
Opponents say the new policy -- to allow Citizens customers to select a surplus lines carrier when their policy is up for renewal -- is a wolf in sheep's clothing that could mislead homeowners into thinking they are getting the same insurance for less. Proponents say the plan is a free-market alternative that is a simple case of buyer beware.
"This is something that is provided as an option to a consumer,’’ said Sen. David Simmons, R-Altemonte Springs. "Should we as a legislature prohibit them after having the opportunity?’’
Under the bill, SB 1672, unregulated insurance sold by surplus lines carriers would be included in the list of options homeowners can choose from in the state-run clearinghouse when their policy is up for renewal. These companies would have to offer the same coverage Citizens offers and rates must be 15 percent and include a disclaimer that surplus lines are not regulated, but there is no assurance the rates won’t change.
"This is a classic bait and switch,’’ said Rep. Frank Artiles, R-Miami, who is opposing a similar bill, HB 1109, awaiting a vote in the House. "People decide with their wallets and if they are given a choice between an admitted carrier (traditional insurance) and surplus lines, many people are not going to read their policies and realize they’re not apples and oranges."
Unlike traditional insurance companies, surplus lines were created as insurers of last resort for specialty risks that couldn’t obtain coverage in traditional insurance markets.
Florida Legislators have been trying to reduce the number of policies in the state-run Citizens Property Insurance Corp. because if a damaging hurricane were to hit the state and the company ran out of money to pay its claims, anyone who carriers an insurance an auto or property insurance policy in the state would be assessed a fee to cover the deficit.
Last year, legislators passed a requirement that homeowners cannot renew a Citizens insurance policy if a licensed insurance company offers comparable insurance at a price that’s less or comparable to what Citizens offers. Citiznes is allowed to raise it rates 10 percent each year. Story here.