Florida
lawmakers know what they should do to repair the state's troubled property
insurance industry. And the insurance company executives know it, too --
which is why they might be getting nervous as a planned January special
session approaches.
After all, governor--elect Charlie Crist
ran on a platform that included get-tough measures that could restore a
measure of fairness to an industry that has thus far been catered to. Bill
McCollum, the incoming attorney general, and Alex Sink, the incoming chief
financial officer, also expressed displeasure with many of the breaks
extended to insurance companies over time.
A three-day meeting of House members that
ended Wednesday produced much discussion -- incoming Speaker Mario Rubio
deserves credit for opening up the issue to any solutions. And, for once,
legislative leaders aired the notion that they might have been a bit too
kind to companies in the past, lavishing them with incentives not to leave
the state.
But will that resolve carry forward into
the January session? For the sake of those who live and operate businesses
in the state, the answer should be yes. If lawmakers are serious about
insurance reform, however, they'll look past immediate issues -- such as
the need to squash an average 56 percent rate increase considered Thursday
by the board of Citizens Property Insurance, the state's insurer of last
resort that provides storm-damage coverage to 1.3 million Floridians,
including thousands of Volusia and Flagler county residents. Citizens'
board delayed its vote, giving lawmakers time.
The Citizens fix -- changing the formula
that requires such massive rate increases -- should be easy. But the
Legislature can't really solve the broader insurance problems without
making some tough decisions.
Lawmakers should start by helping Crist
keep his campaign promises. Crist targeted two major loopholes benefiting
insurance companies: the ability of national companies to set up
Florida-only subsidiaries that bear all the risk for hurricane-related
damage, but transfer profits out-of-state; and the insurers who cherry
pick Florida's lucrative auto and life insurance markets but don't write
property insurance, even though they cover properties in other states.
Before the Legislature grants any more
favors to companies -- like a proposal that would allow companies to dip
into the taxpayer-backed catastrophic fund to a greater extent than they
previously have -- they should look at these two provisions and how
they've driven up rates in the state. Legally speaking, cherry picking is
a more difficult problem to solve, but the attempt is worth it if it
lowers rates.
Lawmakers should be skeptical, however,
of one Crist-favored proposal that would allow higher deductibles in
exchange for purportedly lower premiums. There's little evidence that a
tradeoff would benefit property owners, and deductibles are already higher
than many people realize -- up to 5 percent of the value of their house.
Higher deductibles might make policies virtually worthless -- especially
for homeowners who are hit twice during the same year.
Insurance companies argue that they're
facing massive risk in Florida, and they're right. The hectic storm season
of 2004, which steered clear of the state's biggest metro area yet still
caused $17.5 billion in damage, proves as much. However, state lawmakers
should recognize that skyrocketing insurance rates pose just as big a
threat to Florida's overall economy -- and that the state's track record
of placating insurance companies with taxpayer-funded giveaways has done
little to keep rates down. |