EDITORIAL: Vetoing reality
Gov. Charlie Crist thinks Florida’s property insurance market is doing just swell as is. And why wouldn’t he? He helped make it what it is today, so it’s in his interest to promote that fiction.
The reality, though, should make everyone less sanguine.
Crist last week vetoed yet another insurance reform bill, SB 2044. It would have reduced the amount of insurance fraud and strengthened the property insurance market by giving insurers a little more financial flexibility and requiring them to be on firmer financial ground.
The measure passed the Legislature with overwhelming support and earned the endorsement of Insurance Commissioner Kevin McCarty (who last year supported Crist’s veto of the Consumer Choice Act) and the state’s insurance consumer advocate. But the governor killed it on the grounds that it would likely increase premiums.
Thus did Crist remain true to his populist goal: maintaining the idea that Floridians do not have to pay the real costs of building in coastal areas that are at high risk of hurricanes.
Keeping insurance rates artificially low is great politics, the Sunshine State’s equivalent to a chicken in every pot. But it’s bad business and even worse economics.
Florida — and Crist — have been fortunate the last four years that the state has not been in a major storm’s path. Yet despite the absence of new claims, Florida has been unable to amass enough money in its state-run Citizens Property Insurance Corp. and Hurricane Catastrophe Fund to match the amount of risk it has accumulated in insured properties. Crist has helped build a house of cards that is just one major windstorm away from collapsing.
The precariousness of the situation is illustrated by the fact that several new property insurers entered the market in the last three (hurricane-free) years, only to go bankrupt because they were undercapitalized. According to McCarty, 102 out of 210 property insurers in Florida lost money last year. This is due in part to insurers still having to pay out claims for 2005’s Hurricane Wilma, many of them involving shady public adjusters.
SB 2044 addressed both issues. It would have raised the capitalization levels for new companies, ensuring that they had the resources to compete (and reassuring consumers that their claims might actually be paid in the event of a storm strike). Plus, it would have required claims to be made within three years and capped commissions for public adjusters.
But the governor axed it.
Crist is being disingenuous when he says his veto is protecting consumers from rate hikes. If a major hurricane hits Florida, the state will charge fees on every insurance policy — home, auto, boat or business — to offset the deficits in Citizens and the CAT Fund. According to Florida TaxWatch, one bad storm could trigger hurricane taxes of almost $700 per year for each of Florida’s 5.7 million policyholders.
So long as the skies remain sunny, the emperor appears to be well-clothed. And with Crist vacating the governor’s mansion this year whether he wins a U.S. Senate seat or not, he won’t have to deal with the fallout from his shortsighted policies. He can try to buy votes now with tomorrow’s hurricane money.
The next governor cannot afford to continue such reckless gambling with Florida’s financial future.