Gov. Charlie Crist, who is leaving office after just one term, is caught in a tight primary battle for the Republican nomination for U.S. Senate with former House Speaker Marco Rubio. Chief Financial Officer Alex Sink and Attorney General Bill McCollum are vying to replace Crist, while Senate President Jeff Atwater is running to replace Sink. Two Democratic state senators are in a crowded field for attorney general, while other incumbent legislators being forced out by term limits are challenging colleagues for open seats in Congress or the state Senate.

Deregulation Bill Returns

Florida's property market continues to face significant challenges despite several hurricane-free years and the recent agreement between State Farm Florida and Insurance Commissioner Kevin McCarty. Sam Miller, executive vice president of the Florida Insurance Council, argues that something needs to be done. What is happening to insurers is "extraordinary," he said, pointing to a recent study that more than half of the state's residential property insurers lost money last year.

"The Legislature has to deal with it," said Miller.

Miller may find an ally in Insurance Commissioner Kevin McCarty, who agrees that some steps need to be taken this year to ensure that domestic carriers remain in business.

"We will be working with the Legislature as well as our industry on how we can improve the solvency (situation)," said McCarty.

That alliance, however, could be tested by the return of the insurance deregulation bill, or what is called the "consumer choice" measure by its sponsors, Sen. Mike Bennett (R-Bradenton), and Rep. Bill Proctor (R-St. Augustine).

Despite a veto last year by Crist, the two legislators have brought back a revamped version that would allow most carriers to have limited regulatory review of rate filings. Bennett and Proctor say the legislation is desperately needed to attract more capital to the state and to reduce the number of people in Citizens Property Insurance Corp., the state-created carrier of last resort.

Crist, however, is already sending signals that he may once again veto the legislation. That has prompted Senate President Atwater to suggest a slightly different path to deal with what he calls the "politics of the year." Atwater said that he plans to tell legislators to back the same kind of "glide path" approach that they used last year for Citizens' rate hikes, where rate hikes are capped at a certain level. He said that was a better approach than leaving rates completely up to insurers.

"Homeowners can't withstand that kind of shock," said Atwater.

CFO Sink, however, cautions about giving insurers any kind of open-ended approach that would allow them to raise rates by a certain amount year after year.

"You can't let an insurance company raise rates year after year ad infinitum," she said.

Sink said that there may be a need for a tradeoff of granting additional power to the state's insurance consumer advocate to intervene in exchange for granting insurance companies the flexibility to raise rates.

FIC's Miller said that insurers at least need the flexibility to be able to quickly recoup reinsurance costs. He said one approach would be to allow insurers to raise rates up to 10 percent once a year, but then require them to "true up" the rates after three or four years and allow regulators to roll them back if they are too high.

Wind Mitigation Credits

The fate of wind mitigation credits is likely to become a hot topic during the 2010 session as well. State Farm and other insurers contend that the mandatory premium discounts handed to homeowners for improving their houses against hurricanes have been a major factor in their inability to build up surplus during years that have seen no major storms. Security First Insurance reported that its average windstorm credit for homeowners was $461 and that its surplus was $2 million lower in 2009 than it was a year earlier.

A state commission delivered a lengthy report to Gov. Crist and the Legislature in February that raised questions as to the validity of wind mitigation credits handed out by private carriers and Citizens.

The analysis from the Florida Commission on Hurricane Loss Projection Methodology recommended that determination of windstorm mitigation credits be taken away from the Office of Insurance Regulation, that statutory penalties for fraudulent home inspections be increased, that all homes in Florida be inspected, and that the commission be given the power to use its models to develop appropriate standards for discounts.

"A lot of folks have discounts that they are not entitled to," said Miller.

However, Sen. Atwater warned that legislators must tread carefully before embracing any sweeping plans to roll back existing windstorm mitigation credits. Atwater said that once "the marketplace" offers something, i.e, the discounts, there would be a backlash from consumers if those discounts were suddenly eliminated. He said it would be better for legislators to consider "incremental" changes to mitigation credits.

"The political reality about trying to take back a mitigation credit…that lift would be very heavy," said Atwater.

Health Insurance

While politics is likely to play a major role in determining the fate of property insurance legislation, the changing national political landscape has lowered the likelihood that Florida lawmakers will spend much time this session reshaping health insurance laws for private carriers. The initial prospect of massive federal health-care reform had led to predictions from Insurance Commissioner McCarty and others that the state would have to overhaul much of its existing regulations, from requiring minimum loss ratios to the possibility of reopening a high risk pool, to come into compliance with federal law.

While that concern has abated for now, it does not mean there will not be some battles over efforts by legislators to establish new mandates for health insurance companies. Republican legislators have filed bills again this year that would require health insurance companies to cover a broad array of mental illnesses. Its primary sponsor, Rep. Ed Homan, an orthopedic surgeon from Tampa whose son has battled mental and health disorders, is term-limited out of the Legislature this year. Whether this is Homan's "take home" legislation remains to be seen.

Although the federal health reform legislation seems stalled, Florida still may address requiring a minimum 85 percent loss ratio for health insurance companies. There are no medical loss ratios in commercial plans now. McCarty said there are concerns about having high medical loss ratios apply to long-term care and that he was not sure if the targets were appropriate for all companies. However, he added that, "We certainly want to appropriate medical loss ratio standards so that companies are giving the benefit to consumers."

(The only medical loss ratio required in Florida now is for Medicaid managed care plans, which are required to target 85 percent of their premiums on providing mental health coverage. A move in 2007 to remove that requirement was vetoed by Crist.)

There have been quiet discussions about modifying the Cover Florida Health Care Access Program in an effort to increase the number of participants (5,400 as of December 2009). Coverage currently is limited to those who have exhausted their COBRA, were recently laid off, or were uninsured for six months prior to applying. The latter condition is designed to prevent so-called "crowd out." There is support among health insurance agents for elimination of the six-month requirement to boost enrollment.

Other Insurance Battles

The 2010 session will see battles on a number of other insurance issues. Insurers and public adjusters will likely clash over whether there is a need to enact a statutory time limit on when claims can be filed following a storm. Miller said the fact that Hurricane Wilma from 2005 has now become the third most expensive storm in state history is "absurd." He places the blame on public adjusters convincing people to reopen, or present new claims, years afterward.

Sink's top priority for the 2010 session will be a renewed push to increase the regulation of annuity sales, including giving the Department of Financial Services more power to deny licenses to agents who have a "history of financial misconduct involving seniors."

McCarty is again asking legislators to consider barring insurance companies from using education level, credit scores, or occupation to determine auto insurance premiums. A similar measure supported by McCarty in 2009 was never heard by legislators.

"We continue the good fight hopefully to educate our Legislature on what we think is a discriminatory practice," said McCarty.