Consumer choice insurance best plan
Posted: April 18, 2010 – 12:11am
State Rep. Bill Proctor’s House Bill 447 — aimed at consumer choice in property insurance and deregulation of rates — heads to the state House floor Tuesday. Backers are optimistic it will pass both the House and the Senate, where a companion bill (SB 876) is moving through committees. Once that is accomplished, they believe they will have a bill that Gov. Charlie Crist will sign.
The latter may be optimistic as Crist has already said he will veto this legislation as he did a similar Proctor attempt last year.
Crist and Proctor disagree over whether the bill really is consumer choice and if allowing unregulated rates have consumer protection built in. The key here is the consumer has a choice and is not being forced to take the unregulated rate. But the bill also includes a cap of 10 percent on a statewide rate increase and 20 percent on an individual policy increase.
Furthermore, the bill requires the Office of Insurance Regulation to start up a shop-and-compare Web site for consumers.
Other critics have said a recession is no time to be allowing companies to raise their rates.
But Proctor said the choice is imperative because the state’s private insurance market is eroding. He tells whoever will listen, “We are just one hurricane away from a (financial) disaster.” Even before that comment sinks in, he explains that if a major storm hits a large metropolitan area, damage could exceed $80 billion.
He goes on to say that the state’s two major insurance entities — Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe (Cat) Fund — do not have the resources to pay all the losses from a year’s first devastating storm, let alone a second one.
Citizens, the primary insurer of many properties, would have about $12.9 billion to draw on, leaving a deficit of $8 billion toward its obligation of $21 billion. Likewise, the CAT fund would only be able to provide up to $17 billion toward claims, leaving a deficit of $6 billion.
Proctor says the state needs to attract more claims-paying capital through companies having a substantial surplus on hand. We agree. Proctor’s bill requires a minimum amount of surplus on hand of $15 million for each new company coming in the state after July 1. That should provide greater stability for the market.
Proctor isn’t the only one saying the state’s insurance market is in trouble. In March, the Sarasota Herald-Tribune published a special report. It said, “Over the past year, without having to weather a single hurricane, Florida led the nation with a half-dozen property insurance failures. For the first time, state regulators openly warn that more failures will come, even if a storm does not.”
Florida Tax Watch, a nonprofit, nonpartisan taxpayer research institute and government watchdog, said, “Florida faces a property insurance crisis,” it said. It also said that Citizens and the CAT fund cannot cover their potential liabilities. “Florida may be one hurricane away from depending on federal relief or facing a financial crisis.” It reinforces what Proctor has been saying — there’s much for Crist to mull over.
We supported the choice plan last year and we’re doing it again this year. Insurance companies should be able to offer consumers a choice in rates. If consumers choose to pay unregulated rates and accept the risk, then let them do so.