2000-23797 RESO
RESOLUTION NO.
2000-23797
A RESOLUTION OF THE MAYOR AND CITY COMMISSION
OF THE CITY OF MIAMI BEACH, FLORIDA URGING THE
STATE LEGISLATURE TO REPEAL THE CURRENT STATE
ARBITRATION PANEL PROCESS WITH REGARD TO
INSURANCE RATES AND TO RESTORE THE STATE
INSURANCE COMMISSIONER WITH THE FINAL
AUTHORITY TO SET INSURANCE RATES AND FIRMLY
SUPPORTING LEGISLATION PROPOSED BY STATE
SENATOR RON SILVER TO ACCOMPLISH THIS PURPOSE.
WHEREAS, on Thursday, February 3, 2000, a State arbitration panel voted 2-1 to allow the
rate increase in hurricane coverage sought by the Florida Windstorm Underwriting Association in
the State of Florida; and
WHEREAS, said rate increase will result in rates for hurricane coverage that will double or
triple over the next four years; specifically, rates will go up 20% the first year, 30% the second year,
and 40% in subsequent years; and
WHEREAS, property owners most affected by such rate increase are along Miami-Dade
County's coastline and, in particular, the City of Miami Beach which is a high hazard coastal
community; and
WHEREAS, the current state system, that allows insurance companies to circumvent the
~uthority of the elected State Insurance Commissioner by proceeding to an arbitration panel which
has the final say on setting rates, should be changed to the prior system which allowed the Insurance
Commissioner to make rate determinations in this regard. Under the prior system, insurance rate
determinations were appealed to an administrative law judge who would then make
recommendations to the State Insurance Commissioner who had the final say in insurance rate
matters; and
WHEREAS, the current system of an arbitration panel was adopted after extensive lobbying
by the insurance industry and is biased in favor of insurers; and
WHEREAS, State Senator Ron Silver is sponsoring legislation in the upcoming State
legislative session which will eliminate the State arbitration panel system and restore final authority
in the setting of insurance rates to the State Insurance Commissioner; and
WHEREAS, State of Florida Insurance Commissioner Bill Nelson has opposed the
arbitration system which has been in effect since 1996 and is supporting the legislation sponsored
by Senator Ron Silver in the upcoming Legislative session that would eliminate the arbitration
system and return to the previous system which gives the State Insurance Commissioner final
authority in setting insurance rates; and
WHEREAS, a return to the prior system of setting insurance rates, which restores authority
to the State-elected Insurance Commissioner, is in the best interests of the City of Miami Beach, as
well as all property owners along Miami-Dade County's coastline who must pay for hurricane
protection insurance.
NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA that the State Legislature is
urged to repeal the current arbitration panel process with regard to the setting of insurance rates and
to restore final authority to set insurance rates to the Insurance Commissioner for the State of Florida,
and the legislation proposed by State Senator Ron Silver in the upcoming legislative session to
accomplish this purpose is hereby firmly supported.
PASSED and ADOPTED THIS
9th
day of
February
,2000.
~/J1
MAYOR
A7Jk r f auL--
J CITY CLERK
APPROVED AS TO
FORM & LANGUAGE
& FOR EXECUTION
/'/ ZIlf(kjL '~
City Attorney ~
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C
AN UNCONSCIONABLE RATE HIKE
t FOR WINDSTORM COVERAGE
The Florida Windstorm Underwriting
. Association stuck it to South Florida
honieowners again last week, hiking hurri-
cane premiums to the stratosphere. That
should make South Floridians mad enough
to demand that their state senators and
representatives scrap the rigged arbitra-
tion system.
Like Howard Beale in the movie Net-
work, we should be sticking our heads out
the window and screaming: "I'm mad as
hell and not going to take it anymore."
Here's why: Rates for an average
$150,000 home with some hurricane pro-
tection in Miami Beach and coastal neigh-
borhoods will more than triple to $2,091
from $626 over four years. Rates will go up
20 percent the first year, 30 percent the
second and then another 40 percent.
There's simply no way this should hap- .
pen. It.s a flawed increase based on con-
troversial computer projections, which
Insurance Commissioner Bill Nelson con-
tends are neither accurate nor reliable.
Moreover, this latest decision shows
clearly that the arbitration panel is skewed
in favor of the insurance industry. The
process for reviewing and justifying rate
increases must change. The Legislature
should make abolition of this panel a pri-
ority when it reconvenes in March.
From the insurance pool's first filing for
increases, the cards were stacked against
policyholders.
The windstorm pool is run by a board
dominated by Florida's largest insurers.
Earlier this year, insurers asked Mr. Nel-
son to approve rate hikes. He firmly said
No. The companies in the pool then took
the issue before an arbitration panel. Mr.
Nelson gets to pick one member of that
panel, the industry another. Together the
two that have been chosen pick a third
member. To approve the rate hike, the
panel required only a quick Thursday con-
ference call. In eight meetings, the panel
has overruled the commissioner seven
times, always by the same 2-1 margin.
Mr, Nelson is considering a court chal-
lenge to block the rate increase. That
requires him to find a technicality, how-
ever slight, to challenge the panel's
authority. He should do just that.
The best course, however, is a legisla-
tive fix. A lawsuit would buy some time
for the Legislature, which established the
do-whatever-insurers-ask panel, to restore
the insurance commissioner's authority to
make final decisions over rates. After all,
the commissioner is still the official
elected to oversee the insurance industry.
Legislators should also authorize and
provide funding for the State University
System to provide independent computer
modeling of comparative risk and rates.
Twice, legislators have failed to act on
such changes. Yet the current system isn't
working. Lawmakers have one more
chance before homeowners get their bills
and storm voting booths.
t..a.. ", m.. ^ ..tT ~"tr..".a: 1;'
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8
F RID A Y, FEBRUARY 4, 2000 t FIN ALE 0 I T ION
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Insurance
for. storms
will soar,
panel says
Coastal coverage
to triple for some
BY BARBARA De LOLLIS
bdeloIli5@herald.com
Hurricane insurance premiums {or
homeowners living along the coast
will double or triple over the next
four years, under a rate increase ap-
proved Thursday.
A state arbitration panel voted 2.1
to allow the rate increase sought by
the Florida Windstorm Underwriting
Association, the insurer of last resort
jor storm coverage.)nsurance Com-
missioner Bill Nelson had rejected the
increase as toc high.
Under the plan, the FWUA will
push rates highest along Miami-,
Dade's coast, and give discounts to
homeowners who pay jor protection
measures, such as hurricane shutters
or braced garages.
. Rates {or an average 5150,000 ma-
sonry Miami Beach home with some
hurricane protection measures, {or in-
stance, will triple {rom 5626 to 52,091
over four years.
The increase will be phased in a bit
more slowly than the FWUA had re-
quested. Rates will go up 20 percent
the tirst year, 30 percent the second,
and 40 percent in subsequent years.
The FWUA had wanted increases of
40 percent annually.
:- The decision adds fuel to Nelson's
fight a!l:ainst the arbitration system,
which since 1996, has had the final say
on setting rates. Nelson maintains
FROM THE FRONT PAG~i
Insurance rate boost approved ~~1
I
.
!
;
State policies for coast to soar
>> INSURANCE, FROM lA
:hat the system, adopted arter
extensive lobbying by the in-
surance industry, is biased in
(avor or insurers.
"This is the Armageddon
we've been rearing under an ar-
bitration system that allows the
-:ompanies to go around the
people's elected commission-
er," Nelson said in a statement.
The Legislature voted in the
arbi~rat:on system in 1996. At
:he time, supporters said it
took the politics out or' rate
making.
~
Nelson, who has repeatedly
supported legislation to repeal
the system, is getting behind
:mother bill i.l the upcoming
legislative session that would
do the same thing.
OVERTURJ."fED
Since the system took effect,
seven or eight decisions by
Nelson rejecting rate increases,
including this one, were either
wholly or partially overturned.
One .of those decisions, in
1996, gave the FWUA a state-
wide average increase or' 12
percent, which translated into
increases or' 30.6, 24.9 and 15.7
percent in Miami-Dade,
Broward and Palm Beach coun-
ties. The decision was a com-
promise between Nelson's re-
jection and the agency's desire
to hike rates an average or 20
percent three years in a row.
Nelson is strongly advocat-
ing going back to the old sys-
tem. That system let insurers
appeal rate rejectior.s to an ad-
ministrative law judge, who
would then make a recommen-
dation to Nelson, who had the
rinal say. The system is acrually
still an option. but insurers
choose arbitration.
Local insurance agents were
surprised by the arbitration
panel's decision.
"I think the rates seem to be
adequate enough. Or' course,
I'm not an insurance company,
I'm an insurance ager.t." said
Bill Beckham, president of
Head-Beckham AmerInsur-
ance. "They're looking at the
once-in-a-lOO-year storm. Who
knows how big that storm's go-
ing to be?"
WAYS TO SAVE
The FWUA says policyhold-
ers can save monev bv ins~all-
ing hurricane prote~ti~n devic-
es, such as window shutters,
RISING WINDSTORM RATES
Here's how Florida Windstorm Underwriting Association
premiums have risen for a hypothetical $150,000 home in
Miami Beach with contents coverage of $i5,000. Example
assumes a mascnry house, a porch with a sliding glass door
and a gabled roof. The house has hurricane shutters and
sheathing, to take advantage of some of the FWUA's
discounts. The premiums do not include what a homeowner
might pay for hazard and flood insurance.
September 1996 March 1997
$367 $459
August 1998
$626
Premiums under the current proposal:
First year Second year Third year
$876 $1,227 $1,717
Fourth year
$2,091
1
I
Savings for storm mitigation
The homeowner could save money in the third and fourth
year of the new rate structure by taking other
wind-protection measures, such as putting a water
resistant coating on the house or installing a better garage
door. With improved mitigation, the rates would be:
First year Second year Third year Fourth year
$876 $1,227 $1,497 $1,497
water-resistant coatings, roof
straps and garage bracing.
Some of the other discounts -
for example. reim'orced mason-
ry and hip roofs - apply only
to existing homes and would be
difrIcult to charlge.
The F\VUA contends that 85
to 90 oercent of it!; customers
have 'made some improve-
ments to protect their homes
from storms. That estimate,
however. is based on a state
survey of residents, not just
FWUA policyholders.
At this point, FWUA custor:::
ers have little choice but to e'
ther pay the higher premium
or pay ror improvements t.
their homes.
The largest insurers in th
state are generally not writin
new windstorm policies fo
homeowners. Local insuranc
brokers say some companie
are writing new business, b,-,
it's mostly as a favor {or pre
ferred customers.
OFFICE OF THE CITY ATTORNEY
~ t/JKiomi 1I~
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MURRA Y H. DUBBIN
City Attorney
Telephone:
Telecopy:
(305) 673-7470
(305) 673-7002
COMMISSION MEMORANDUM NO. ~
TO:
Mayor Neisen O. Kasdin and
Members of the City Commission
Murray H. Dobbin I\A10 " ~ V
City Attorney ti1~ VIiW
DA TE: February 9, 2000
FROM:
SUBJECT: RESOLUTION URGING URGING THE STATE LEGISLATURE TO
REPEAL THE CURRENT STATE ARBITRA TION PANEL PROCESS WITH
REGARD TO INSURANCE RATES AND TO RESTORE THE STATE
INSURANCE COMMISSIONER WITH THE FINAL AUTHORITY TO SET
INSURANCE RATES.
Pursuant to the request of Commissioners David Dermer and Simon Cruz, the above
referenced Resolution is submitted for consideration by the Mayor and City Commission.
cc: Lawrence A. Levy
City Manager
F:IA TTOITURNICOMMMEMOIWINDSTRM.INS
Agenda Item R -, ::5
Date 2-9-00
1700 Convention Center Drive -- Fourth Floor -- Miami Beach, Florida 33139