TALLAHASSEE - The Florida Senate approved a bill Wednesday that imposes a host of new mandates on Florida's property insurers, including new standards for setting rates and paying claims.

But House Republicans said the Senate's get-tough approach may do more harm than good. The measure could deter private insurers from writing new policies in Florida, leaving the state's taxpayers and policyholders footing much of the bill to repair Florida's homes after a major hurricane.

"To some degree, we're playing chicken with corporate America," House Majority Whip Ellyn Bogdanoff said. "If we go too far with the insurance companies, they will leave.

"I think there's a better solution, and we're working through it."

The Senate bill was approved in a 32-7 vote and sent to the House for consideration.

A small group of senators representing residents living far from the coast voted against the measure, saying it allows state-run Citizens Property Insurance Corp. to charge homeowners on the coasts below-market rates while homeowners in between continue to pay inflated rates.

"What you're basically doing in Citizens is overcharging the interior parts of the state to subsidize the coastal parts," said Sen. Paula Dockery, R-Lakeland.

Last year, the Legislature froze Citizens' rates through the end of this year, a measure designed to pressure private insurers to lower their rates. The comprehensive property insurance bill passed Wednesday would extend that freeze through June 2009.

The problem is the premiums paid by Citizens' coastal policyholders aren't high enough to pay the claims resulting from a major hurricane. As a result, premiums paid by homeowners living far from the coast would be used to rebuild Florida's most vulnerable homes should a hurricane hit the state.

"I don't think it is good policy to artificially hold rates down for Citizens, especially when they're insuring million-dollar homes," Dockery said. "What we need is a healthy, competitive insurance market, and I think this bill prevents that from happening."

Timing Is Bad, Critics Say

Critics said the bill would discourage private insurers from increasing their presence in Florida at a time when the state needs to shed some of the risk it took on last year to lower premiums. If a major hurricane hits the state, assessments from the state's Hurricane Catastrophe Fund could reach $25 billion, the amount the state would have to borrow to cover claims.

"I think the bill slows down or reduces the potential to move away from a public insurance system to more private options," said Sen. JD Alexander, R-Winter Haven. "Since we can't pay the debt for the obligation we have, I think delaying that is not the best idea."

Although the bill extends Citizens' rate freeze, it allows the company to raise rates to actuarially sound levels over time. After next July, Citizens can raise rates up to 5 percent for the first year for multiple-peril policies and 10 percent in each of the next two years.

The extension of Citizens' rate freeze and the bill's other "consumer-friendly" provisions would tighten the state's regulatory grip on an industry that has dropped thousands of Florida policyholders, deceived state regulators, imposed unjust rates and failed to pay undisputed claims in a timely manner, said Sen. Jeff Atwater, R-North Palm Beach, the bill's author.

Atwater said the bill would "bring hope and relief to the people of Florida who are finding it more and more difficult to afford homeowners insurance."

Among other things, the bill would:

•Require insurers to pay undisputed portions of a claim within 90 days.

•Dramatically increase the fines regulators can levy against insurers.

•Prohibit companies from setting rates based on hurricane-loss models not approved by the state.

•Allow Citizens to continue to insure homes worth $1 million or more.

•Prohibit insurers from rejecting or adjusting claims based on a customer's race, education, income level and other personal characteristics.

The Legislature last year expanded the state's Hurricane Catastrophe Fund, a source of low-cost backup coverage for insurance companies, from $16 billion to $28 billion. Insurance companies responded by dropping thousands of policyholders and seeking double-digit rate increases.

State Targets Allstate

This year, state regulators suspended Allstate from writing new auto insurance policies after the company refused to turn over documents to justify an increase in homeowners rates. Allstate challenged the suspension, but a state appeals court recently rejected its appeal.

"Allstate not only ignored the law, they ignored the Office of Insurance Regulation," said Sen. Mike Fasano, R-New Port Richey. "They didn't comply. That's why we have this legislation today, to protect the homeowner."

Sam Miller, spokesman for the Florida Insurance Council, said the state already has clout with insurers. Regulators prevented Citizens homeowners' rates from rising during the past year, he said, and suspended Allstate from writing new auto insurance policies in Florida after the company failed to justify a request for a double-digit rate increase on homeowners policies.

"Where is the need for new, one-of-a-kind insurance laws that may drive away insurers and cause Citizens to get larger?" Miller said. "The real crisis is whether Citizens, the cat fund and private insurers can timely pay claims after a major hurricane this year. Nothing in the Senate bill addresses that."

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