Sun Sentinel Palm Beach Edition
Bill promotes private flood insurance market
A long-term effort to promote private flood insurance in Florida is continuing in the Legislature this year.
Sen. Jeff Brandes, Republican from Florida’s flood-prone west coast, is again pushing to make the state more friendly to private flood insurance options.
This year, Brandes has introduced a bill that would enable companies selling private flood policies to set their own rates without needing approval from state regulators for six additional years, through 2025.
The extension would replace a deadline of Oct. 1, 2019, set after enactment of a bill Brandes introduced in 2014.
The new bill was advanced by the Senate Banking and Insurance Committee on Feb. 21 and referred to the Community Affairs committee. A House version, sponsored by Larry Lee Jr., D-Fort Pierce, is scheduled for consideration by the House Insurance and Banking Subcommittee today.
Brandes and a number of lawmakers on the state and federal levels have been promoting private flood coverage as a way to reduce the size of the National Flood Insurance Program — which has 5.1 million policies and is $24 billion in debt — and promote competition in the private market, which the lawmakers hope will help keep future prices in check.
The 2014 law was a response to the Biggert-Waters Act of 2012, which resulted in dramatic cost increases for many property owners before Congress rolled back the pace of increases in 2014.
About 35 percent — 1.8 million — of National Flood Insurance Program customers are in Florida.
Brandes, who could not be reached for comment Monday, has voiced concerns that Florida residents and lawmakers don’t realize how vulnerable the state is. Noting that most homes that get flooded don’t have flood insurance and aren’t in flood zones, he told the website floridapolitics.com that homeowners think the federal government will rescue them. “It doesn’t work that way. They don’t have the resources,” Brandes told the site.
But so far, private carriers aren’t making major inroads into the flood insurance market, according to data submitted to the state Office of Insurance Regulation.
The office’s website lists 13 companies as “primary” flood insurance writers, meaning they underwrite entire policies rather than piggyback on federal policies that limit structural coverage to $250,000. Nine of the companies are listed as also offering so-called “excess” policies, which provide coverage over the NFIP limit.
In recent rate filings, Chubb Personal Insurance reported 718 excess flood policies in force with premiums averaging $9,596. American Home Assurance Company had 2,202 excess flood policies with premiums averaging $5,415.
Brandes’ bill and the House version would also remove a requirement that flood insurance agents be turned down three times by carriers regulated by the state before being allowed to place a policy with an unregulated — known as “surplus lines” — carrier. However, the surplus lines carrier would have to have a financial strength rating of “excellent” or “superior” by A.M. Best Rating Services.
Policyholders would also require 20 days’ notice if agents are handling a change in insurers to a property insured under the NFIP. The agent would have to obtain an acknowledgment of the change or place the policy back with the NFIP.
Policyholders would have to be told that if they left the federal program, with its subsidized rates, they could face steeper rates if they try to return because they would no longer be grandfathered in.
The Senate Banking and Insurance Committee advanced Brandes’ bill over the objection of Sen. Gary Farmer, D-Fort Lauderdale, who said he fears consumers will be adversely affected by the growth of surplus lines policies. Some require clients to waive their right to a jury trial or travel out of state to file a claim, Farmer said.
Surplus lines were “never really intended as a substitute for regulated insurance,” Farmer said. Typically they were developed to cover unusual risks, he said. “Things like Liberace’s fingers. Dan Marino’s knees. Things of that nature.”
And they were subject to intense negotiation between the insurer and the consumer, he said.