Property insurance deregulation too costly
By Sean M. Shaw, Brad Ashwell and Bill Newton
Special to the Star-Banner
Published: Sunday, January 31, 2010 at 6:30 a.m.
Last Modified: Saturday, January 30, 2010 at 11:23 p.m.
This has been a tough year for property insurance consumers in the state of Florida. 2009 brought Floridians problems from harmful Chinese drywall to the threatened exit of State Farm. Now, two of Florida’s legislators, Sen. Mike Bennett and Rep. Bill Proctor, have proposed a bill to deregulate residential property insurance rates.
Senate Bill 876 and House Bill 447 claim to give consumers “greater choice” by allowing property insurance companies to charge unregulated rates to their residential customers. The proposed legislation also stipulates that no private insurer can be charged an assessment until all Citizens’ policyholders have been charged a 15 percent assessment.
While these provisions are similar to the “consumer choice” bill introduced in the 2009 legislative session, unlike the previous bill, this legislation would allow all authorized property insurers in the state to charge any rate, not just a select few.
Bennett has stated that he filed this bill in response to the perception that Citizens’ legislatively set rates are driving private property insurers from Florida. Unfortunately, this bill does nothing to address Citizens’ rates, either through deregulation of Citizens or through any other mechanism. Allowing property insurers to charge unregulated rates would only serve to increase the divide between Citizens’ rates and what other companies can charge. If Bennett and Proctor are truly concerned about Citizens’ rates, it would make more sense for their legislation to directly address their concerns.
Proponents of deregulation claim that it will bring new insurers to the market. However, no insurer has said publicly that they would enter Florida if the property insurance market were deregulated.
Deregulation also strips out a huge layer of consumer protection for all Floridians. Because the average consumer does not have the resources or information to determine when a rate is excessive, the opportunity for the company to abuse consumers exists. However, the state of Florida has the time, knowledge, and resources to judge the fairness of rates contained in insurance policies. The state can provide a warranty of fairness to the insurance consumers of Florida.
The sponsors of this legislation mistakenly call this bill the “Consumer Choice” insurance bill. However, the only choice that consumers are given is between higher premiums (based on recent rate filing requests of anywhere for 25 percent to 50 percent) or a move to Citizens’ property insurance.
However, this bill does not accomplish any improvement – instead it would significantly hurt Florida’s consumers. Deregulation of our property insurance industry rates would allow insurance companies to abuse consumers through excessive rate increases and would hurt Florida financially by overburdening Citizens. We also do not see any hard evidence this bill can achieve its stated goal of attracting new companies to the state.
We call on members of the Florida Legislature to vote against the proposed deregulation bill. If this legislation should pass, we urge Gov. Crist to again veto this type of proposal. We encourage the Legislature to choose what’s in the best interest of the citizens of Florida.
The Insurance Consumer Advocate is appointed by Florida Chief Financial Officer Alex Sink and is committed to finding solutions to insurance issues facing Floridians, calling attention to questionable insurance practices, promoting a viable insurance market responsive to the needs of Florida’s diverse population and assuring that rates are fair and justified.
Sean M. Shaw is Florida’s insurance consumer advocate. Brad Ashwell is democracy and consumer advocate for the Florida Public Interest Research Group. And, Newton is executive director of the Florida Consumer Action Network.