2013 Legislative Session – Citizens changes

Citizens will shrink, but not because of higher rates. A legislative session wouldnt be complete without an insurance reform bill. The bill that crossed the finish line, SB 1770, started off big and controversial, calling for substantial rate increases for many of Citizens nearly 1.3 million policyholders and all new policyholders. The end product is still big — 75 pages — and includes a Florida Realtors priority: create a clearinghouse to enforce Citizens eligibility requirements. But it does not include a requirement sought by Sen. David Simmons R-Altamonte Springs that all new policies be actuarially sound. Simmons chaired the Senate Banking and Insurance Committee this session and negotiated a compromise between an ambitious Citizens reform bill passed by the Senate and a “lighter” version proposed by the House.”There were so many insurance bills this session that seemed to go in so many different directions, including huge rate increases. But early on we identified the one reform — an eligibility clearinghouse — that would do the most good for the most people without unleashing rate increases that could hurt Floridas economic recovery,” says John Sebree, Senior Vice President of Public Policy. “The legislation that did pass was the result of many long hours of negotiations between legislators, insurance companies and agents, consumer groups and Realtors.”Heres what the bill accomplishes:• All applicants for Citizens coverage will have to go through a clearinghouse to establish eligibility. If applicants can obtain private market coverage at a cost thats within 15 percent of the Citizens premium, they are ineligible for Citizens. Incidentally, this is current law but easily circumvented.• Currently, homes with a replacement cost of up to $1 million are eligible for Citizens coverage. Beginning in 2015, the maximum replacement cost will drop $100,000 a year for three years. In 2017, then, homes with a replacement cost greater than $700,000 will not be eligible for Citizens coverage. This wont apply to homes in areas where the Office of Insurance Regulation determines theres no “reasonable degree of competition,” such as the Florida Keys.• Removes Citizens eligibility for homes built or substantially improved seaward of the Coastal Construction Control Line after July 1, 2014.• Expands the Citizens Board of Governors to include a consumer advocate, who will be appointed by the governor.Effective: July 1, 2013, unless otherwise provided.