Reject bill that lets insurers raise rates without oversight
Our views: Don’t deregulate (March 23)
March 23, 2010
A bad property insurance bill that passed the Florida Legislature in 2009 but was vetoed by Gov. Charlie Crist has raised its ugly head again:
A bid to let insurers raise rates without proving they’re justified to the state Office of Insurance Regulation.
The bill has been softened this year, capping annual increases at 5 percent the first year and 15 percent in the future. But it’s still an invitation to insurers to gouge homeowners at will.
The OIR is all that stood in the way of insurance giant State Farm last year when it claimed it could become insolvent without a huge 47 percent rate hike and threatened to dump 1.2 million policyholders, including 26,521 in Brevard, if it didn’t get it.
Florida Administrative Law Judge Daniel Manny shot down that baloney, saying State Farm’s rate increase request was rigged with sham transactions and economic distortions with its parent company.
Meanwhile, State Farm increased its president’s pay by $400,000 in 2008, according to the Sarasota Herald-Tribune.
State Farm eventually struck a deal to drop only 125,000 policies this year in exchange for a 14.9 percent rate increase, showing consumer protections against skyrocketing rates remain weak at best.
Need more proof insurers can’t be trusted to operate without rate regulation?
A yearlong investigation of the property insurance market by the Herald-Tribune found insurers can siphon off profits to sister companies that don’t have to open their books to the OIR and continue to hand out big bonuses and other forms of compensation to top executives.
The Herald-Tribune found Florida property insurers paid out “more than $38 million in executive bonuses and $32 million in other perks from 2006 to 2008.
At the same time, Florida homeowners were being socked with soaring rates.
Yet some state lawmakers want to pull the plug on any OIR oversight of property insurance rates.
The House Insurance, Business and Financial Affairs Policy Committee last week voted to strip OIR of power to deny rate hikes. State Rep. Ritch Workman, R-Melbourne, voted yes for the industry-friendly bill.
Instead of falling over backwards to do the bidding of the deep-pockets insurance lobby, lawmakers should order a probe of potentially fraudulent insurance practices and close regulatory loopholes that allow insurers to shift their profits out of the sunshine.
It’s true there are other issues with the Florida insurance market, including inadequate reserves among small companies picking up policies shed by giants like Allstate and State Farm and the possibility a huge storm would empty the state catastrophe fund.
Those problems should be addressed.
But gutting the OIR’s authority to ensure rate hikes are warranted and based on valid numbers would be a travesty.
If the reckless bill is approved, Crist should spike it again.