Florida governor signs legislation designed to lower property insurance costs

By Associated Press Thursday, January 25, 2007 - Updated: 03:30 PM EST

TALLAHASSEE, Fla. - Florida’s new governor signed a bill Thursday that could lower property-owners’ insurance costs, although it means that the state could have to pay billions of dollars if a catastrophic hurricane hit.

The measure was passed by lawmakers in a special session Monday. It was the first signed by Gov. Charlie Crist, who took office earlier this month.
The bill aims to cut into the skyrocketing cost of home insurance that many Florida residents, especially those on the coasts, have seen since the busy hurricane seasons of 2004 and 2005. Many have seen premiums more than double or triple.
Although the measure will provide some relief to a large number of home owners, how much remains murky. Estimates range from 5 percent for many inland customers to averages of nearly 20 percent for others, particularly those on the coast.
Also unclear is exactly when people will see savings.
A key provision of the bill forces an immediate rate decrease for Florida’s largest insurance company, state-created Citizens Property Insurance Corp., and cancel another planned increase for the company.
The bill also seeks to lower rates to make more state backup insurance available to private insurance companies. By taking on more of the responsibility to pay out of the Hurricane Catastrophe Fund if there is a large storm, the state will reduce insurers’ ultimate risk, cutting their need to raise rates. But the state and its residents take on that risk.
The backup coverage also will be cheaper than the private reinsurance that most companies buy, immediately cutting one of their biggest costs. Those savings will also be passed on to consumers.
The measure also makes an effort to allow consumers to change their coverage to try to save money. Besides going without wind coverage, some might be able to have a higher deductible, for example. Many of those changes, however, won’t be available to homeowners who haven’t paid off their house, because mortgage lenders often dictate how much coverage they must have.
The state’s second-largest insurer, State Farm Florida Insurance Co., and other private insurance industry officials generally don’t like most of the bill, complaining that it discourages companies from wanting to do business here by artificially suppressing rates.