Governor Charlie Crist Vetoes Bill Allowing Large Insurance Companies to Raise Rates

Strategic Insights -

Florida Governor Charlie Crist vetoed a bill that would have allowed large insurance companies, including State Farm Florida, to raise their rates without being subject to denial by state regulators. The bill, sponsored by Rep. Bill Proctor and Sen. Mike Bennett, aimed to give consumers a choice by allowing companies to set their own rates, but opponents argued it would benefit a few large insurance companies at the expense of homeowners in high-risk areas.

Key Takeaways:

  • The bill would have allowed large insurance companies with a surplus of $500 million or more to set their own rates without state regulation.
  • Companies with a surplus between $150 million and $500 million would have been exempt from rate regulation if they had a net premium to surplus ratio of $2 or less.
  • State Farm Florida is the largest private property insurer in the state, with approximately 68,000 property insurance policies in force at the end of 2008.
  • The company had announced its intention to withdraw from Florida's property insurance market after a rate increase request was rejected by the state Office of Insurance Regulation.
  • Governor Crist cited concerns that the bill would result in "significant and unpredictable rate increases" that people could not afford during difficult economic times.
  • The veto decision came after intense lobbying from both sides, with advocates arguing that the bill would give consumers a choice and opponents arguing it would benefit large insurance companies at the expense of high-risk homeowners.
  • State Farm agents and customers had been in a wait-and-see mode about the bill and its potential impact on the company's decision to remain in Florida.

Statistics:

  • 68,000 property insurance policies in force at the end of 2008, representing almost 28% of the private property insurance market in Duval County.
  • 47% average rate increase requested by State Farm Florida that was rejected by the state Office of Insurance Regulation.
  • 500 million surplus required for companies to qualify for exemption from rate regulation.
  • 2 net premium to surplus ratio required for companies with a surplus between $150 million and $500 million to qualify for exemption from rate regulation.
  • 15 July deadline set for State Farm and the Office of Insurance Regulation to resolve issues related to the company's withdrawal from writing property insurance.

Sources:

  • "Gov. Charlie Crist vetoes bill allowing State Farm to raise rates." The Florida Times-Union.
  • "State Farm announces plans to pull out of Florida's property insurance market." The Florida Times-Union.
  • "Legislative summary of the bill" (exact wording not provided).
  • McClatchy-Tribune Information Services.