Our Opinion: Hurricane reason
September 6, 2009
More choice in insurance still needed
The hurricane season in our vulnerable Sunshine State is well under way and, as Rep. Bill Proctor, R-St. Augustine, said Thursday, we have enjoyed "four years of grace" without the 100-year storm in a major area that would sink Florida financially.
No plan — apart from happy-go-lucky Charlie Crist optimism — is in place to help citizens recover from an enormous disaster, the likes of which our state has felt before (Andrew, 1992) and, as a state with more miles of coastline than any other, is almost certain to feel again.
There is right now no way for the state’s underfunded Citizens Property Insurance Corp. — even coupled with private insurers — to cover losses of $50 billion to $100 billion if a major Florida city is hit. That’s because not enough big insurers want to do business here without having some confidence they can require actuarially sound rates.
Consumers, especially coastal homeowners, like the happy-go-lucky approach and don’t like the cruel reality that they’ve been getting by on the low end, given the natural high risk of peninsula geography.
The hapless Department of Insurance continues to promote feel-good figures that don’t actually tell the truth: It says, for instance, that some $4.2 billion in fresh capital now stands behind new property insurance companies willing to do business here. What Florida Insurance Commissioner Kevin McCarty only barely acknowledges, though, is that these largely unregulated "surplus lines" specialize in a high-risk commercial properties, waterfront condos and other hard-to-insure properties — not mom-and-pop homeowners in the three-bedroom bungalow.
The reality is that these new domestic insurers, which Mr. McCarty contends will secure the state if, as expected, State Farm Florida Insurance Co., the number one residential insurer in the state, is driven out, are far fewer in number than he says and have only about $208 million available to cover losses for regular, everyday property owners. And about a quarter of that is through a dubious state loan program, the Capital Build-Up Incentive Program, according to detailed research of the industry this summer by the Gulf Coast Business Review.
Mr. Proctor, who is chancellor of Flagler College when not working as a state legislator, said he expects to reintroduce the Consumer Choice Act insurance bill, which was vetoed by the governor this spring — an act that was not challenged with an override even though 86 percent of lawmakers supported it. HB1171 was, in short, an effort to stabilize our property insurance environment by opening up competition, allowing rates more true to actual risk.
Sen. Mike Bennett, R-Bradenton, is championing this reform in the state Senate, where president Jeff Atwater, R-North Palm Beach — a 2010 candidate for chief financial officer — ought to be feeling enormous pressure to do something true and honest about insurance. If he doesn’t confront the problem while leading the Senate, he’ll have it right square in his lap if he wins the CFO’s job next year. Uncomfortably, maybe catastrophically so if our four years of grace don’t extend to five or six.
If the large insurers like State Farm are driven out, if the state’s Citizens Corp. remains underfunded and if those new surplus-line companies with little appetite to insure everyday properties are all that citizens have to rely on, Florida is indeed living on borrowed time. And, regrettably, most politicians are playing the game: telling voters what they love to hear, but not what they need to know.