Our views: Hurricane alley
Shoring up Citizens sensible, but Crist should veto deregulation measure
May 31, 2009
We’re all crossing our fingers Brevard County and Florida are spared hits from destructive hurricanes in 2009, as happened the last several years.
But hurricane season starts Monday, so get ready.
Forecasters predict an average season with up to 14 named storms, four to seven hurricanes and one to three major hurricanes of Category 3 or worse.
Bottom line, there’s no telling what lies ahead.
Brevard residents haven’t forgotten the 2004 onslaught that brought four hurricanes to the state in six weeks, or Hurricane Katrina’s devastating impact on New Orleans and the Mississippi Gulf Coast in 2005.
And they shouldn’t be complacent about preparing for possible storms this year.
You know the drill — stock up on food, water and batteries, check your generator, and review your evacuation route if you live beachside.
Be smart, and take those steps, so needless tragedy is avoided.
Shoring up Citizens
But there’s another beast out there with Florida homeowners on its radar.
The Sunshine State’s insurance industry remains in a precarious state, with big insurers dropping policies and seeking huge rate hikes.
State Farm is threatening to leave Florida and dump 1.2 million policies statewide by 2011 — including 34,000 in Brevard — because the Office of Insurance Regulation refused its outrageous request for a 47 percent rate increase.
It also wants to dodge conditions for leaving set by Insurance Commissioner Kevin McCarty, such as allowing its agents to sell policies to other private companies.
McCarty should stick to his guns in negotiations.
Otherwise, many ex-State Farm customers could wind up in Citizens, the troubled state-run pool already swollen with 1.3 million policies.
Citizens’ rates have been frozen since 2006, putting Florida in the risky position of possibly not having enough reserves to pay hurricane claims.
That’s why the Legislature this year passed a law allowing Citizens to increase rates by an average of 10 percent annually until they are sound.
Imposing any new costs on homeowners in a deep recession is regrettable and why we initially opposed any rate increase.
But lawmakers rightly saw the need to get Citizens back on the path to actuarial health, and a 10 percent average increase is better than more extreme hikes urged by some in the House.
A second insurance bill lawmakers passed, though, is a reckless bet that deserves Gov. Charlie Crist’s veto.
The measure allows giants like State Farm to raise rates without approval from the OIR. Proponents — including all of Brevard’s Tallahassee delegation — say the bill lets consumers with deep pockets choose to pay more for a brand-name insurer if they’re wary of smaller insurers and will increase competition.
We say it’s a giveaway to deep-pocket insurers.
McCarty says the bill will spur big rate increases.
And consumers’ groups are calling it “an invitation for insurers to game the Florida regulatory system and abuse consumers,” in a letter to Crist.
What’s more, the deregulation experiment has already been tried — and failed — in Texas.
Insurers there chose only to sell policies “at very excessive rates” after deregulation, according to Robert Hunter, former Texas insurance commissioner, in the same letter
Spike this one quick, Charlie.
Meanwhile, the state’s $28 billion catastrophe fund remains overexposed, and might not be able to provide the backup needed for insurers should multiple storms strike the state.
We continue to believe a national cat fund or other safety net, such as one proposed in April by Sen. Bill Nelson, D-Orlando, for the Federal Reserve to guarantee cat fund bonds issued by Florida, Texas, Louisiana and California are timely solutions deserving study.
But don’t buy all the doom and gloom you hear from state lawmakers like Rep. Alan Hays, R-Umatilla, who claimed during session the Sunshine State is “one storm away from bankruptcy.”
McCarty told The Palm Beach Post he estimates the cat fund’s chances of running short in a season at less than 2 percent.
And lawmakers this year rightly moved to lessen the state’s cat fund liability, phasing out support by $2 billion for three years.
That will force insurers to buy more private backup coverage — and undoubtedly lead to more requests for rate increases.
All the more reason Crist should veto the industry-friendly deregulation measure.
Property insurance cost increases are probably unavoidable for Florida homeowners, all of whom live in hurricane alley.
But they should be reasonable and predictable and fully vetted by the OIR.
That’s the only hope to protect consumers from the rigged numbers, systematic overcharging and other rip-off tactics greedy insurers have gotten away with in the past.