More homeowners’ insurance headaches
Mr. Crist needs to squash the latest effort to deregulate the homeowners’ market.
Here’s why Gov. Crist might soon need to grab a great big Sharpie and veto legislation that lets property insurers impose great big rate hikes on policy holders without regulatory review.
The reason comes straight from one of the insurance industry’s top lobbyists, Mark Delegal, who represents State Farm. Mr. Delegal told a Senate committee Wednesday that, if left alone by regulators, the industry will be “the best protector of consumers.”
That it will provide a “competitive marketplace where consumers get to decide what’s the best price for them.”
And that the government and public need to trust the industry because, after all, it would lose business “if we jump our rates up 50 percent.”
But 47 percent, Mr. Delegal, that’s palatable? That’s the rate increase State Farm tried to impose on homeowners last year.
Until, that is, regulators found the increase actuarially unjustified. And rejected it.
Mr. Delegal’s disingenuous comments are just the latest reason Mr. Crist mustn’t defang his insurance-industry watchdogs. They need plenty of bite to protect the public from more of the same. Why can’t the industry be trusted?
After State Farm didn’t honor state rules requiring the company to tell customers about discounts for hardening their homes against storms, regulators last year made it pay policyholders more than $100 million in credits and refunds.
A year earlier, the courts backed regulators who’d kept Allstate from writing new policies because the company didn’t fully divulge how it sets rates. Only after Allstate submitted documents regulators subpoenaed did the company get to solicit new business.
The industry said it could more easily do business and raise rates less frequently if only it could more affordably get the backup insurance it needs to pay claims after catastrophic storms. The state sold it the cheaper “reinsurance,” but companies kept submitting whopping rate increases.
The industry said it would gladly offer customers state-mandated discounts if they harden their homes against storms. No wonder, right? Sturdier homes that withstand high winds mean homeowners will submit fewer claims that insurers need to pay. But companies invariably complained about the discounts. Said they couldn’t afford them. And cried that policyholders unfairly got companies to grant millions of dollars in discounts for home improvements that didn’t actually happen.
Insurance representatives subsequently admitted that the industry has done a terrible job policing itself for fraud, however.
Now come reports of industry practices that further undermine its claims that it can’t do business in Florida unless regulators leave the room. The Sarasota Herald-Tribune reports overhead for Florida insurers appears 50 percent higher than the national average and cost homeowners $900 million in 2009.
And that, while complaining about losses, Florida insurers from 2006 through 2008 paid $38 million in bonuses and $32 million in other perks to 180 execs.
The House and Senate are speeding legislation through their committees allowing insurers, in just a few years, to impose 15-percent rate hikes, one year after another.
Mr. Crist vetoed similar legislation last year. Floridians need a repeat performance from their governor when, as expected, this latest gift to the insurance industry reaches his desk.