Editorial: Crist’s veto of property insurance bill perpetuates shell game
Wednesday, July 1, 2009
For years now, Florida’s elected officials have been playing a shell game with property owners on the issue of homeowners insurance.
By aggressively regulating the rates insurers can charge consumers, the state has succeeded in limiting increases in insurance premiums.
However, this strategy has come with a price:
Citizens Property Insurance Corp., created by the Florida Legislature to give homeowners an option in a volatile insurance market, is actuarially unsound. Why? Because lawmakers, who froze Citizens’ rates in 2007 — continuing through the end of 2009 — allowed Citizens to charge premiums that failed to reflect the actual risk.
To return Citizens to more stable financial footing, the 2009 Legislature approved a bill, signed by Gov. Charlie Crist, that allows the state-run insurer to raise premiums by as much as 10 percent a year beginning in 2010 until Citizens builds its reserves. State officials say the rate increases are needed to pay projected claims and other expenses.
Private insurance companies, prohibited by state regulations from charging actuarially sound rates, have been leaving Florida, giving consumers fewer options. State Farm Florida, which insures 993,000 home and condo owners in the Sunshine State, announced plans in January to drop coverage for these policyholders because the state has refused to allow the insurer to charge rates that reflect the risk of providing coverage to property owners in Florida.
As with any shell game, the true risk doesn’t become apparent until the players “cash out.”
This would occur if and when the state gets ravaged by a major hurricane.
Florida is “one large storm away from some very difficult circumstances,” said Jeff Grady, president of the Florida Association of Insurance Agents.
To their credit, the members of the 2009 Legislature recognized this problem. In addition to boosting Citizens’ premiums, lawmakers also approved HB 1171, which would have deregulated a sizable portion of the property insurance market by allowing large insurance companies to charge realistic rates that cover their potential storm losses.
Crist, who is running for U.S. Senate and pandering to voters, vetoed the legislation. For that, he was aptly dubbed “Hurricane Charlie” by the Wall Street Journal editorial page this week.
Driving insurers out the state is not the way to make property insurance more affordable for consumers. This will be accomplished by encouraging competition.
By rejecting HB 1171, Crist is perpetuating the shell game that is bringing Florida closer to the brink of financial catastrophe.