Insurance Rate Showdown

By KEVIN BEGOS and JEROME R. STOCKFISCH The Tampa Tribune

Published: Jan 5, 2007

TALLAHASSEE - He's been in office for just three days, but the honeymoon may already be over for Gov. Charlie Crist.

On Thursday, the most powerful business lobbying group in Florida challenged Crist's inaugural pledge to roll back soaring property insurance rates.

"We believe that rates have been suppressed. And we believe that rates are going to have to rise," said Barney Bishop, Associated Industries of Florida chief executive officer.

That sets up a showdown between the normally pro-business Crist and a sector that contributed tens of millions to his election campaign. Crist received $19.6 million in direct campaign contributions, along with estimates of $20 million to $25 million in additional soft money contributions that the state Republican Party used to help support his campaign.

After eight years of Gov. Jeb Bush's iron-fisted rule, the battle over insurance rates may be a way of testing Crist, some said.

"There's a new sheriff in town. People want to know how he's going to react and how far they can push him," said Stephen MacNamara, a former high-ranking legislative staff member and professor of communications at Florida State University.

Crist stood his ground when asked Thursday about the Associated Industries position.

"Currently there's a problem. … You have rates that are exorbitantly high. My greatest concern is that we lower rates overall," he said.

That can't happen right away, said Bill Phelan, co-chairman of the Associated Industries of Florida Hurricane Crisis Coalition. "The truth is that Floridians are not going to see significant and meaningful rate relief immediately."

In California, where regulators have pressured the insurance industry to reduce rates in light of record profits, consumers got a very different message this week.

The State Farm Group announced it would cut homeowners insurance rates in California by 20 percent, according to the Los Angeles Times. That's in addition to a 6.2 percent cut in 2005.

In Florida, Bishop said that Associated Industries opposes the growing call to repeal legislation passed in May that dramatically increased rates for Citizens Property Insurance Corp., the state-run insurer of last resort.

"That sounds unfortunate to me," Crist said. "There are some things that do need to be repealed. Some of that bill needs to be changed, in my humble opinion."

Critics claim the increases for Citizens are, in essence, cover for private insurers to raise rates, and Citizens executives oppose the now-mandatory rate increase.

An Associated Industries proposal unveiled at a news conference Thursday was a virtual checklist of "solutions" that favor the insurance industry, which had record profits nationally in 2006. Among them:

•Allow insurers to offer higher deductibles of 20 percent or more.

•Expand funding for the taxpayer-funded Mitigation Program, which reinforces homes.

•Advance fund the state hurricane loss program from consumers or state money.

Last fall, the Florida Office of Insurance Regulation refused requests by several companies to increase property insurance rates by up to 40 percent, citing insufficient evidence of need. Instead, the companies were granted increases of 8 and 16 percent.

Nationally, for the first nine months of 2006, insurance industry profits rose 50.1 percent from the previous year, from $29.7 billion to $44.9 billion, according to the Insurance Information Institute. That's on track for a record-setting $60 billion yearly profit.

Florida companies had about $3 billion in profits from homeowner policies in 2006, according to a recent report.

But Bishop claimed the industry was a house of cards in danger of collapse.

At the news conference, Bishop was challenged on his claims. Why, reporters asked, were insurance companies unable to provide proof to state regulators for the huge rate increases they asked for?

"Uh, I'm not an insurance expert," Bishop replied. "I've looked at the rate filings before. They're very voluminous - a bunch of numbers. I don't know where the flaw is."

Bishop also claimed that Insurance Commissioner Kevin McCarty is subject to political pressures as an elected official, when in fact McCarty is appointed, not elected.

Crist may be facing an early test, but other governors have, too. Former Gov. Bob Graham got the nickname "Governor Jello" for having been too willing early in his administration to negotiate with an unruly, independent Legislature. Graham was a Democrat who served from 1978 to 1986, and later as a U.S. senator.

Reporter William March contributed to this report. Reporter Kevin Begos can be reached at (850) 222-8382.