Crist’s veto of deregulation irks industry
OCALA BUSINESS JOURNAL
By JEFF BROOKS
Special to Ocala Business Journal
Published: Thursday, July 30, 2009 at 4:34 p.m.
Last Modified: Thursday, July 30, 2009 at 4:34 p.m.
OCALA — When Gov. Charlie Crist vetoed House Bill 1171, which deregulated a portion of the insurance industry, State Rep. Lake Ray called for a special legislative session to address what he called a "crisis" in the state’s property insurance market.
Those who have been involved in the sometimes acrimonious property insurance debate for several years now say welcome to the fray, Ray.
Now, as State Farm exits Florida’s property insurance market, joining several other major insurance companies in the last few years, many say the state is just one good storm away from bankruptcy. They blame Crist’s failed policies and the underfunded Citizens Insurance, which has become the state’s leading property insurer.
House Bill 1171, which Ray calls the Freedom of Insurance Act, basically said every citizen should have the right to pick and choose the type of insurance they want. If an insurance carrier wants to charge more, then the buyer should be the one to select the coverage they want, not the state.
"Our members are very upset about the veto," said Barney Bishop, president and CEO of Associated Industries of Florida, a Tallahassee-based lobbying and political action organization with 10,000 members. "If we have a storm that hits the right place, it would bankrupt Citizens. If a storm hits and Citizens can’t pay the damages, there will be special taxes on their policies and the business community will pay the rest of it. We’re playing with the financial stability of Florida. We could be the first state ever in the history of the United States to go bankrupt."
Craig Curry, president of the Ocala division of Brown & Brown Insurance of Florida, Inc., said the property insurance market just keeps getting worse.
"In terms of Crist, it’s just more of the same," Curry said. "I think we’re at a point now where pretty much all A-rated larger carriers have exited the state in personal property. It’s very disruptive to the customer, but also the office and staff to have to continually be finding new markets for people."
The governor’s office declined to respond to Ocala Business Journal’s repeated requests for comment.
Though a common argument heard from the state is over 40 new insurance companies have replaced the ones that left, Curry said that’s a misleading statement.
"The issue I still have and I wish they would be honest with the public is the rhetoric you get out of the insurance commissioner’s office," Curry said. "We’ve had all these companies leave, but we’ve had 40 new companies to take their place. If you look at the financial stability of those companies it’s very shaky."
Curry said the total amount of insured value in the state pool is $1 trillion. Even with reinsurance and the premiums being collected, Citizens is several billion short of being able to meet its obligations.
"Charlie Crist and the insurance companies went to Washington, D.C. and were trying to get a national program put together for catastrophic events like wind," Curry said. "Washington sent them back and said you got yourself into this mess, so get yourself out of it. Charlie Crist has gotten a pass every year he’s been in office. The chickens haven’t come home to roost yet. It’s not a question of if, it’s when."
Ray said many insurance companies left the state because of restrictive regulations and policies at the state level.
"Now what’s happening is if you drive State Farm out of the state, all these people, 10,000 a day, have to move their policies," Ray said. "Now, you’re not letting these carriers charge a rate that’s reasonable. Citizens raised rates 49 percent. State Farm wanted a 47 percent increase and was told no. Are we going to have socialized insurance here in the state? Why would we possibly drive a private enterprise out of the state and not let them charge rates that at least keep them solvent?"
Curry said all insurers should have to play by the same rules.
"The state program does not have to meet the same tests that the government requires insurance companies to meet," Curry said. "In order to be A-rated requires a certain level of financial stability. Citizens does not have to make a profit, doesn’t pay taxes, doesn’t have to have reinsurance. The state is running a defunct organization and the taxpayers are banking it."
Bishop said several things could be done to improve the property insurance market, including limiting the exposure of Citizens by decreasing its liability, increase programs to make homes hurricane-ready and charge people the rates they should be paying.
Pat Mangan, president of George Mangan Insurance Inc., said it’s become much more difficult to obtain property coverage these days because of overregulation by the folks in Tallahassee, but the biggest concern in the possibility of more assessments.
"I don’t see assessments going away anytime soon as long as Citizens is in the position they’re in," Mangan said. "Assessments are going to happen on a regular basis from this point forward it looks like."
Mangan believes House Bill 1171 might have helped keep companies from leaving Florida.
"As an agent, I’m having a little bit more difficult time placing coverage for our commercial accounts on the property side," Mangan said. "The companies that have for many years been writing coverage in Florida are concerned about the situation here and are taking a wait-and-see attitude right now."
To find property coverage for his clients, Mangan has to use the excess surplus lines market, which are insurance companies willing to take on more risks. They also, in most cases, charge a higher premium, limit the coverage and offer a higher deductible.
At this point, many believe there won’t be any changes to the property insurance market until Crist leaves the governor’s mansion.
"Nothing is going to happen until the legislature and the governor agree on what to do," Mangan said. "It looks like the legislature make some real good steps in the right direction this past term and hopefully they’ll re-address is next year when they go back in session. Maybe at that point we’ll have a new governor that’s willing to work with them a little bit more."
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