State Senate looks to slash insurance premium tax
State Senate looks to slash insurance premium tax | Insurance Business America
Property
State Senate looks to slash insurance premium tax
But some politicians argue this isn’t effective – or enough
Property
By
Matthew Sellers
In a move to combat surging insurance costs that plague the state’s homeowners, Florida Senate leaders have proposed a tax strategy that could see a 1.75 percent reduction in insurance premium taxes for properties valued at $750,000 or below.
The bill would also excuse flood insurance policies enacted or renewed after July 1 from premium taxes for twelve months.
These proposals, part of Senate bill SB 7074, have sparked enthusiastic debate among industry professionals about their potential effectiveness and target audience.
Insurance professionals are acutely aware that the affordability and availability of coverage remain critical issues for clients. There are daily reports (and home-grown experience) of clients cutting coverage to be able to afford some modicum of insurance.
The bill in question, SB 7074 has been designed by its authors to ease financial burdens by offering tax cuts and credits to policyholders. It is claimed that the cuts will save $363 million over two years.
Yet, there is contention, with Democratic leaders contending that the measures don’t comprehensively tackle the state’s insurance woes, and that the bill is skewed towards business interests.
Florida’s insurance landscape is currently awash with challenges, including the nation’s highest premiums averaging $6,000 annually (an increase in 2023 of 42% over 2022’s average), extreme weather events, and a highly litigious environment—all of which contribute to an unstable market.
The addition of six new insurers has done little to stabilize the market, leaving many Floridians struggling with coverage costs. Economist Benjamin Keys from the Wharton School was quoted by Newsweek expressing concern that the real estate sector could be crippled without access to affordable insurance, thereby affecting the broader economy.
Despite these challenges, the bill is seen as a step towards mitigating the burden of rising insurance costs, if only marginally.
Potential Savings Under SB 7074
The proposed legislation promises modest relief for homeowners. Forbes estimates that for a $750,000 home, the savings could amount to roughly $870.72 per year.
The scale of savings varies with property value, with a $500,000 home potentially seeing annual savings of $590.16, while homes valued at $350,000 and $200,000 could save $425.52 and $280.20 respectively.
Democratic Representative Anna Eskamani expressed concerns to the Florida Phoenix that the tax cut plan is insufficient, labeling it a “band-aid solution.” Her sentiments are echoed by Mark Friedlander from the Insurance Information Institute, who acknowledged to the Tallahassee Democrat that the savings are minimal and more of a token gesture.
An earlier attempt to help homeowners reduce premiums, My Safe Florida Home program ran out of money after it was besieged by homeowners wanting to make their homes more weather resistant – and cheaper to insure.
Broader Tax Relief Efforts
The Senate’s tax relief proposal goes beyond insurance, encompassing a $900 million package with sales tax holidays and small business allowances, highlighting GOP leaders’ commitment to tax reduction.
Looking Ahead
With unanimous backing from the Finance and Tax Committee, SB 7074 is now ready for further discussions in the Senate. Should it pass, the next steps include a House vote and potential ratification by ex-presidential hopeful Governor Ron DeSantis, with a prospective effective date of July 1 this year.
New players in Florida’s insurance market
Some of the new players in Florida’s insurance market:
Condo Owners Reciprocal Exchange (CORE), led by HCI Group’s CEO Paresh Patel, began operations last November, marking HCI’s entry into commercial residential insurance
Tailrow Insurance Company, a subsidiary of HCI Group, received approval in April to write homeowners multi-peril insurance, becoming the first company authorized after legislative reforms
Mainsail Insurance Company, a subsidiary of Spinnaker Insurance Company (owned by Hippo Holdings Inc.), was approved in August to offer a variety of insurance lines, including auto and property
Orion180 and Orion180 Select were greenlit in August to write property and casualty policies, initially offering wind-only products with plans to consider a broader homeowners product this year
Orange Insurance Exchange, with a starting surplus of $25 million and led by former Tower Hill Insurance Group executives, was approved in October and started in December.
How do you see Florida’s proposed tax strategy to combat insurance costs? Please tell us below
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