Insurance: Will law revisions help or hurt policyholders?
|State Rep. Bill Galvano predicts some changes in the state's new insurance law before this legislative session ends in early May, but "it is not clear yet" what the changes will be. Islander Photo: Molly McCartney
|State Rep. Ron Reagan says the revised version of his insurance bill is "more consumer-oriented than originally written." Islander Photo: Molly McCartney
Look for state lawmakers to correct before the current legislative session ends in May what they say are mistakes or inconsistencies in the new state insurance law. The question is whether the changes they make are going to help or hurt policyholders.
That was the word at the end of the week from state Rep. Bill Galvano (R-68th District), an attorney who represents Anna Maria Island and has been a leader in the effort to find solutions to the state insurance crisis.
"My prediction is that there will be some new legislation to fix the glitches in the insurance law, but it is not clear yet what the new glitch bill will be," he said.
Galvano said one issue that especially concerns him is the possible elimination of the 90-day deadline for insurers to settle claims with condominium associations and commercial policyholders.
Homeowners would continue to benefit from the 90-day deadline, but would be prohibited from filing a class-action lawsuit against insurers if the claim is not settled within 90 days.
Galvano was one of seven Republicans to join with Democrats in the House and vote against the glitch bill. They failed to defeat the bill, but their opposition helped slow it down and force its backers to reconsider some proposals.
"I want to make sure we protect people and not back off what we did in January," Galvano said.
He expects a revised glitch bill to come up for a vote before the session ends.
Galvano said he also intends to check with the governor's office to get Gov. Charlie Crist's view on the glitch bill.
"I don't think he wants consumers to lose any of the protections they got in January," Galvano said.
The bill, which runs more than 40 pages, was proposed by Rep. Ron Reagan (R-67th District), a Bradenton insurance agent who represents eastern Manatee County and chairs the powerful Job and Entrepreneurship Council.
Reagan told The Islander Saturday that he and his staff had reworked the bill to address the concerns expressed earlier in the week by Galvano and others and that the revised version is "more consumer-oriented than originally written."
"I'm convinced that all the problems have been taken care of," Reagan said.
He said the proposed change in the 90-day rule had been misunderstood. The problem with the glitch bill as originally drafted, he said, was that it had applied the 90-day requirement to all commercial policyholders, regardless of the size of their facilities.
The revised glitch bill makes a distinction between small businesses and big ones, he said.
"We want to have the 90-day provision for small businesses," he said. "But we want flexibility for big buildings. My proposal was to have the 90-day rule cover commercial property under $2 million … and to give insurers a few more months before the claim for bigger buildings has to be settled."
Reagan said his proposed revision would mean that "99 percent of all commercial business would be covered by the 90-day provision."
He also said that insurers would have to settle claims with condominium associations within 90 days, contrary to what some opponents have charged.
According to Reagan, individual homeowners would be permitted to sue their insurance company if the claim isn't settled within 90 days. "What we want to prevent is the class action suit," he said. "But there is nothing to keep an individual homeowner from suing."
Going bare, getting discounts
Opponents of the glitch bill have also complained it would eliminate the provision in the insurance law that allows condominium associations and commercial businesses the option of going without wind insurance.
Reagan said he is prepared to drop that segment from his bill so that condo groups and businesses - along with homeowners - can continue to go bare when they do not have a mortgage or some other legal commitment that requires that coverage.
A third area of controversy has to do with a provision in the glitch bill that critics say would allow insurers to decrease discounts for mitigation efforts made by the homeowner, such as installing hurricane shutters.
Reagan said he hasn't yet addressed this issue.
"We may pull that out (of the glitch bill) until we get more information about the effect of mitigation on window coverings, door protections and gable bracings."
Reagan said the revised version of the glitch bill would remedy these and other concerns that have been brought up. "I think we will end up with a good consumer protection bill," he said.
The bill also would allow policyholders with Citizens Property Insurance Corp. to make monthly premium payments rather than annual payments, he said.
The 10-day waiting period to obtain Citizens coverage is also being eliminated, Reagan said. His bill would permit Citizens to issue a policy on the spot and go into effect at once, he said.
Reagan said he is convinced that his revised glitch bill "will take care of all the problems" that have worried the critics.
Insurance company profits rose sharply in 2006 and are expected to be strong again in 2007, according to the A.M. Best Co. rating agency.
Best estimated that the property-casualty industry earned $68 billion last year, compared to $49 billion in 2005. Profits for the industry could total $62.2 billion this year, Best said.
An Associated Press report on insurance industry profits states that Allstate earned an "eye-popping" $5 billion profit last year. State Farm's profit climbed 65 percent for the year.
The AP report quoted J. Robert Hunter, director of insurance for the Consumer Federation of America, as saying that the industry is making exceptional profits because it is pushing more risk and more cost onto policyholders.
"They're making homeowners and business owners take on more of the risk through high deductibles, caps on replacement costs and other limitations," he said. "And they're refusing to renew tens of thousands of homeowners and business property policies, especially along the coasts."
Hunter said that state regulators "have not done the job to control excessive prices charged by the insurers."
Industry experts said industry profits were up because there were far fewer storms in 2006.
Robert Hartwig, president and chief economist with the New York-based Insurance Information Institute, told the AP that the 2006 profits "have more to do with the fact that insurers saw good results in auto insurance, workers comp and a variety of other areas and in states that don't have a coastline."
Note: If you have an insurance story to share with others about your experience with rate hikes, rate reductions, rate refunds or other insurance issues, please send a note to The Islander by emailing firstname.lastname@example.org.