William L. Proctor: Just being lucky isn’t a solid insurance plan
July 22, 2009
William L. Proctor
Re: "Insurance veto was to ease consumer pain," (My View, July 7).
With respect to the veto of House Bill 1171, I concur with Commissioner Kevin McCarty in that the resulting "commentary has included incomplete or incorrect information." I think we would differ as to the sources of such misleading information.
I find little more in the commissioner’s column than the reiteration of the same specious arguments he set forth in his May 14 letter to Gov. Charlie Crist, in which he expressed his opposition to HB 1171, which the governor subsequently vetoed.
The commissioner appears to favor the continuing withdrawal of national property insurance companies that do not acquiesce to the suppressed rates prescribed by the Office of Insurance Regulation.
I view this forced exodus of national companies with increasing alarm, as I contend that Citizens Property Insurance Corp., the so-called "emerging market" and a remnant of national companies do not provide an adequate insurance program for Florida homeowners.
A report by the Department of Financial Services dated March 13 and titled "Economic Impact of a 1-in-100 Year Hurricane" includes the following statement:
"For the purposes of this report, the total deficit of Citizens and the FHCF (Florida Hurricane Catastrophe Fund) is estimated to be $22.59 billion. These deficits will be paid with emergency assessments levied on Florida’s property and casualty insurance companies and passed on to insurance consumers (excluding workers’ compensation, accident and health, federal flood, federal crop, and medical malpractice insurance policies) in order to pay debt service on tax-exempt revenue bonds issued to pay claims."
It is likely that the assets of both Citizens and the FHCF have increased because of premiums collected and interest earned since March. It is for Commissioner McCarty to document that a sufficient amount can be bonded to ensure that all claims will be paid fully and promptly.
If such is not the case, then all policy holders may confront massive assessments on their policies (home, auto, business) regardless of where they live or which companies’ policies they hold. Is this the "consumer pain" the commissioner wishes to ease?
Gov. Crist is quoted as having said, "I understand if we have a 100-year storm it will cost a lot of money, but the position this administration has taken is that people should not be required to pay for a 100-year storm when we don’t have one, only when it does happen, and then we will respond appropriately."
Apparently, the administration regards the prospect of thousands of dollars of assessments levied on all Florida’s policy holders as that appropriate response.
Private insurance companies, unlike the state programs, cannot levy assessments.
Private insurance companies must charge rates sufficient to fund a reserve adequate to pay claims and to purchase the necessary amount of reliable reinsurance.
Their rates, however, apply only to their policy holders. Whereas, the state’s assessments apply to all policy holders.
The issues are clearly defined. If there is even the remote possibility that, in the wake of a major storm, Citizens and the FHCF could not pay all claims, I contend that it is unwise policy to continue to expel private claims-paying capital. Also, as presently constituted, isn’t the state’s long-range property insurance program no more than reliance upon widespread assessments and the denial to homeowners of the right to choose their insurance providers?
These are the issues, and to my knowledge, the commissioner has yet to address either in a forthright manner.
ABOUT THE AUTHOR
William L. Proctor is a Republican state representative from District 20 and is chancellor of Flagler College in St. Augustine. In the House, he was a sponsor of HB 1171. Contact him at email@example.com or at his district office at firstname.lastname@example.org.