Matt Reed: Bill lets top insurers charge premium rates
April 28, 2009
If you like the security that comes from buying homeowner’s insurance from a giant, national-brand insurance company — and don’t mind paying a fortune for it — the Legislature has just the bill for you.
Passed by the House last week, the proposal would let the biggest, best-financed insurers opt out of the state’s rate regulatory system and charge whatever they want. Customers of those companies, on the scale of a State Farm, Nationwide or USAA, would be warned in bold type on policies that their prices were no longer monitored by the state.
The bill’s goal is to make Florida more attractive to corporations that can’t seem to function under a law that requires them to show that rates are "not excessive, inadequate, or unfairly discriminatory." You may recall that State Farm failed to win a 67 percent rate increase under that standard and will spend the next two years "non-renewing" its customers.
And lest any Economics-101 students out there think the freedom from regulation will increase competition and thereby lower everyone’s prices, it won’t. The whole point is to draw companies with deeper pockets by letting them charge more.
Then, let consumers choose.
All five of Brevard County’s state representatives voted for the bill, which now is before the Senate in Tallahassee.
More competition?
Would that new freedom lure more name-brand companies to Florida — or encourage those here to expand?
Florida Insurance Commissioner Kevin McCarty doesn’t think so.
"When I pointedly ask industry representatives how much more business they would write if they could get any rate they wanted, the serious answers I get back range from marginally more to none," McCarty said in a prepared statement.
McCarty pointed to a similar effort, in 2002, when the former Department of Insurance allowed a large national insurer to write condominium insurance at unregulated rates.
"This company massively increased rates over the next several years and shortly thereafter canceled every policy in the state," he says. "There is no reason to believe that this proposal will result in anything different."
Florida history aside, lobbyists and think-tank types love the deregulation plan.
"The passage of this legislation would truly be a positive step toward a real free market solution to Florida’s insurance crisis," Christian Cámara, a director of the Competitive Enterprise Institute in Tallahassee, said after the bill passed the House. "Many Floridians would prefer to have the choice of staying with their insurance provider of many years rather than lose them to onerous bureaucratic regulations."
Choice to pay more
I agree with the part about choice, especially after talking to jilted State Farm customers. Some seemed prepared to pay double.
Yet, a review of statutes that govern insurance regulation in Florida shows they are hardly "onerous."
I counted more than a dozen home insurers that have expanded into Brevard County since the Legislature passed its most onerous consumer protections in 2007.
Meanwhile, most insurers this year will likely pay 10 percent more for backup "reinsurance," prompting them to request rate hikes for most of us. Under current law, they should have little trouble making their case for those price increases — and for a healthy profit, to boot.
Contact Reed at 242-3631 or mreed@floridatoday.com.