The insurance bailout bill
Palm Beach Post Editorial
Monday, April 27, 2009
The legislation to deregulate Florida’s property insurance market has changed, but it hasn’t gotten good.
The House version, CS/CS/HB 1171, passed last week by a sadly lopsided vote of 105-13. Only two members of the Palm Beach County and Treasure Coast delegations – Reps. Mark Pafford, D-West Palm Beach, and Priscilla Taylor, D-West Palm Beach – refused to accept the argument that allowing companies to charge what they want will solve the property insurance crisis. The state tried that approach, and rates went so high that the Legislature had to hold a special session in January 2007. Out of that session came two laws that the private industry opposed.
Previously, when the Office of Insurance Regulation rejected a rate increase, the decision went to a three-person arbitration panel. The industry usually won. Now, a rejection goes to a state administrative law judge. In 2007 and 2008, judges upheld the rejection of big rate increases for Allstate and State Farm.
Also in 2007, the Legislature offered more state-subsidized reinsurance, since companies blamed their demand for higher premiums on the cost of reinsurance. But the companies must pass those savings on to consumers. In 2007, the state sued Allstate, claiming that the company wasn’t following that law. Allstate backed down. State Farm didn’t. The company announced that it would leave the Florida property market, putting 1 million policies in limbo.
The deregulation bills are the Legislature’s attempt to placate State Farm. But the bills are based on myths. One is that major private insurers would keep their business and take some of the 1 million policies in state-run Citizens. No private company has made such a pledge. As for medium and small private insurers, they are capitalized to cover their current exposure. It is doubtful that many could suddenly and dramatically increase their exposure.
The House now would not exempt deregulated policies from assessments to cover losses by Citizens. That’s a sensible change, but the biggest falsehood of the 2009 session remains the idea that this legislation is designed to help the consumer.