‘Cherry-picking’ proposal becomes law

Almost immediately after taking office, Crist convened a special legislative session to address insurance costs and availability. Lawmakers passed measures expanding windstorm mitigation credits and stronger building codes, along with immediate 10% rate cuts for Citizens customers and a short-term freeze of Citizens rates. They also provided small insurers access to cheaper reinsurance though the Hurricane Catastrophe Fund, as long as they agreed to pass some savings along to customers.

Additionally, they passed a version of Crist’s cherry-picking ban, with a provision barring companies from selling auto insurance in Florida if they sell homeowner insurance in any other state but not in Florida. Insurers with affiliates that sell homeowner insurance in Florida were exempted.

But the legislature declined to enact another Crist proposal that would have given the provision teeth: He wanted to prohibit large insurers from concentrating their business into spinoff companies — or affiliates — that were allowed to price their policies based solely on loss risks in Florida, and not their entire books of national business.

After Hurricane Andrew pulverized parts of southwest Miami-Dade County in 1992, the state allowed the large companies to spin off Florida-based subsidiaries in hopes of persuading the insurers not to leave the state entirely. State Farm created State Farm Florida Insurance Company. Allstate had Allstate Floridian (later Castle Key). Nationwide had Nationwide Insurance Co. of Florida.

Because of those Florida-only companies, the affiliate exception in Crist’s cherry-picking provision would have protected those large carriers from the possibility of losing their licenses to write auto insurance in Florida.