Commentary: A Look at the Florida Market

Editor's note: A commentary from our friend, Andy Simpson, Insurance Journal (www.insurancejournal.com) Southeast editor.


By Andrew G. Simpson

In May, when Gov. Charlie Crist vetoed a bill (SB 714) to fix a glitch in the state's condominium insurance laws because he did not like a minor fire sprinkler provision in it, a frustrated Jeff Grady, president of the Florida Association of Insurance Agents, had this to say:

"After all the fuss over the 'glitches' in last year's condo bill, after all the re-drafting, the meetings, the coalitions, and striving to explain insurance concepts to a world of those who already thought they understood them, we finally get the bill drafted, amended, and passed, and the governor vetoes SB 714. That's right, affectionately called the 'condo glitch bill,' it was the one sure to be signed into law. But it won't become law because of a provision dealing with fire sprinklers!! So, it's back to square one; meaning nothing changes as we had hoped."

Grady's "back to square one" assessment captures very well the political season that has come to a close in the Sunshine State.

After considerable judicial and political wrangling over the past year, there is once again a limit on the fees insurers must pay attorneys involved in workers' compensation cases. The state's high court last year found that the attorney percentage fee schedule set forth in a 2003 law conflicted with its other requirement that fees be reasonable. Just as the adoption of the cap had lowered rates, its lifting by the court ruling meant rates had to rise. Now a new law signed by Gov. Crist that eliminates the term "reasonable" has corrected the conflict in favor of the fee schedule. Rates are being cut again to reflect the expected savings from the reinstatement of the cap on legal costs.

So it's back to square one in workers' compensation.

Similarly, courts last year threw into doubt a long-recognized exemption from rate and form regulation for surplus lines insurers in the state. Surplus lines insurers complained that without this exemption, they could not adequately respond to the insurance needs of thousands of high risk businesses and property owners. So the industry and lawmakers went to work to pass a law clarifying that surplus lines insurers do indeed enjoy a break from regulation. They succeeded and Gov. Crist signed this measure into law, too.

So, it's back to square one, with a retroactive effective date of Oct. 1, 1988, in Florida's surplus lines market.

Meanwhile, what about the property insurance market? Now here's where it really shows how it can take tons of time, money, effort and good intentions to get back to the beginning, even when nobody wants to end up there.

Crist did sign a measure allowing state-backed Citizens to raise rates for some policyholders and reducing the exposure of the state's hurricane fund. But he vetoed another measure that some believed would have helped the market by deregulating rates for larger carriers. Meanwhile, the state is still underfunded for a major storm.

So, in effect, nobody's very happy with the state's property insurance market.

Square one-- again.