Reneging on insurance promises
By PAMELA HASTEROK
TALLAHASSEE — Lawmakers are putting Citizens’ customers on a glide path out of the state.
That’s legislators’ latest term for hiking rates on the poor shlubs who insure their homes through state-run Citizens Property Insurance. The House would glide Citizens’ rates up 20 percent a year, the Senate 10 percent. Neither would limit how many years in a row the insurer could raise its rates.
Representatives from Citizens say they need to increase premiums at least 55 percent for customers who hold wind-only policies and 40 percent for everyone else.
Lawmakers would also force Citizens’ customers to pay a 25 percent surcharge in the event of a major storm, up from 15 percent.
If that weren’t enough, the Legislature is ready to reduce the amount of cheap reinsurance the state sells to insurance companies. Cutting the catastrophe fund’s ability to pay insurance companies’ losses could shove homeowners’ premiums up another 30 percent.
Lawmakers must take these drastic actions, they say, or the state will go bankrupt.
Who, you might ask, was so foolish as to double the hurricane catastrophe fund just two years ago? Who froze rates for Citizens customers for three years in a row? Legislators did.
Florida was in an economic vise in 2007 as property insurance rates skyrocketed after the hurricanes of 2004-5. People abandoned the state because they couldn’t afford to insure their homes.
Florida, lawmakers said, would soon be bankrupt.
Led by newly inaugurated Gov. Charlie Crist, legislators rushed to put homeowners out of their pain. They froze rates for Citizens’ policy holders and made lots of cheap reinsurance available to hold down premiums for private customers.
So what is it? Is Florida going bankrupt because nobody can afford to insure their homes? Or is the state going bankrupt because property insurance rates are too low?
It’s whatever lawmakers say it is today.
Watching the debate is like watching children swat a tether ball back and forth. Three-year-olds, however, have a longer attention span.
Our elected representatives seem unfazed by their fickleness. Most unabashedly admit they’re reneging on the promises they made just two years ago to keep home insurance affordable.
That was then, they say.
As for the governor who made the issue a centerpiece of his campaign, Crist appears willing to let rates rise. How much, he won’t say. His office contends the 2007 reforms brought in 40 new insurance companies, increasing competition and keeping premiums under control.
Lawmakers claim only one of the new firms has a secure financial rating. They point to the impending exit of the state’s largest private insurer, State Farm — because state regulators denied it a 47 percent increase — as part of the problem. Paying higher premiums, legislators say, is better than allowing a property insurance system that cannot pay its claims.
More than two-thirds of Floridians live near the coast and almost 80 percent of the state’s real estate value is located there. But the 2004-5 hurricanes hit communities from Orlando to Opa-Locka. Legislators ought to realize that all Floridians are in the path of a storm. Sharing the risk, rather than parceling it out, could be the solution to creating a financially solvent system.
People started leaving the state in droves in 2006. If lawmakers glide insurance rates up sharply, more will follow.
– Call Hasterok at (386) 681-2223.