Last winter was the meanest season the Florida property insurance industry has ever faced. Gov. Charlie Crist asked three prominent lawyers to look into a class-action suit against the industry; a select committee of the Florida Senate spent two days slow-roasting executives from Nationwide, Allstate, Florida Farm Bureau and Hartford; and Insurance Commissioner Kevin McCarty began trying to shut Allstate down.
The allegations against the industry include collusion, price gouging, conspiracy and breaking state law.
But the Florida Legislature could turn all that anger and mistrust into some meaningful reforms, right? Turns out, property owners statewide are worse off than last year by many measures.
As we trade the 2008 legislative session for the pending start of the 2008 hurricane season, let's take stock:
The average cost of homeowner's insurance in Florida is now more than $2,000 a year, about twice what it was three years ago.
State-backed Citizens Property Insurance, the insurer of last resort, remains the state's largest property insurer with about 1.2-million policyholders, about the same as it had in 2006. It also finds itself in a weakened financial state.
Allstate, State Farm, USAA, Nationwide and others have either stopped writing new policies in the state or have cut back what they will write. And most of the smaller, newer companies that took their place limit the number of older, coastal homes they insure. About two-thirds of the homes in Florida fall into that category.
For another year, a record $28-billion will be sitting in Florida's hurricane catastrophe fund, which offers cheap backup coverage to insurers. If insurance companies need to tap into a major chunk of that fund, or if Citizens runs a deficit, all Florida policyholders are in deep trouble.
The Legislature did manage some minor changes. Penalties have been raised to $40,000 for insurers that violate fair trade practices. Insurers have to set rates based on state-approved hurricane models. Consumers can now sue an insurer that doesn't pay the "undisputed part" of a claim within 90 days.
There was also a nice gift for the industry. Companies like State Farm can continue to offer their auto customers special "multiline" discounts even if their customers' homes are insured by Citizens.
But serious reforms? After their winter vent-a-thon, lawmakers lost their nerve.
As the 2008 session began, nearly every legislator complained about the state's dangerously high exposure to hurricane risk. And yet Chief Financial Officer Alex Sink's effort to reduce the CAT Fund by $3-billion went nowhere.
The state also decided to dip into Citizens' reserves and take $250-million to use as long-term, low-interest loans for private companies. Citizens board chairman Bruce Douglas brings up the "Who are these guys?'' point. Will they live up to their agreement to take on some riskier policies? How well capitalized are they? Will they be in Florida for the long haul?
We don't know. They haven't been tested.
And since Citizens is such a convenient target, the state also froze the company's rates until 2010. This could be compared to the gas tax holiday sleight of hand.
Douglas and others argue that Citizens doesn't collect enough money as it is and must raise premiums, preferably over a three-year period, to ease the pain.
But homeowners (voters) love to hear words "rates" and "frozen" in the same sentence. The trouble is that when the freeze is eventually lifted, Citizens will have even more ground to make up. What happens to rates then?
So not only does Citizens have less in reserve to pay claims, it has less of a chance to build what reserves it does have.
Adding to the angst within Citizens: A provision allowing Citizens to expand the coverage it sells was cut out of legislation. This would have allowed Citizens to build reserves by covering all the components of its 400,000 wind-only policies the lucrative fire, theft and basic liability that private companies cover.
Taken together, handcuffing Citizens and doing nothing with the CAT Fund will increase, not lessen, the state's risk exposure.
On the other side of the fence is the U.S. property insurance industry, which complained of overregulation as it reported a record profit of $67.6-billion in 2006 and a near-record $65-billion profit last year.
How did they do it? Many analysts say it was by changing the rules. The companies either refused to write large blocks of risk like windstorm in Florida or they shifted the burden to the policyholder in the form of increased deductibles and policy limits.
"We learned (insurance companies) used loopholes to skirt the law," state Sen. Jeff Atwater, R-North Palm Beach, a co-chair of the select committee, said in a recent TV ad. "That's unacceptable. We were promised lower premiums. What they're doing is wrong, and these big insurance companies will be held accountable."
The question is when.