Solve the insurance crisis or we’ll all go broke and move away.
That’s what homeowners told the 100ideas.org “idea-raiser” forum chaired by Republican state Rep. Julio Robaina and fellow Miami Republican Reps. Marco Rubio and Juan Zapata.
Two dozen state and county officials, lawmakers and insurance industry representatives shared the podium all day last Saturday before 200 homeowners at Coral Gables High School to tackle the issue of ever-increasing wind insurance premiums, ranging from $5,000 to $15,000, which are forcing homeowners to choose between going bankrupt and moving away.
Gloria Palacios, a retired city of Miami worker, is living on her savings in a rock-solid 1951 house that has never been damaged by hurricanes.
“I hear that wonderful things may be happening in the future,” Palacios told the panel. “Well, my future is in two weeks—I have two weeks to pay almost $7,000 for the insurance on my house. Five years ago I was paying $700.” She says her insurance carrier left town, forcing her to go with Citizens Insurance and raising her premium to $1,200. Then she says Citizens dropped her and her new insurance company, Gulfstream, raised her rates to $2,000; then, last year, to $3,200. “And now they told me two weeks ago that I have to pay $6,598. Where can I get that money…?”
Now Palacios is spending her savings to cover her premium. “That’s the money you have for when you are older so you won’t be a burden. So next year if they increase to $12,000, what am I going to do? And the year after, $24,000?” She can’t understand the rate increases because her house “is very sturdy and has gone through many hurricanes with no problem at all.”
Homeowners lined up all afternoon to tell the panel of lawmakers and insurance experts of their desperate financial straits, paying insurance rates that have been allowed to double, triple, quadruple and quintuple in the past few years. They also asked what the state planned to do about it.
Zapata told the audience that fault lies within his own party. “I think the Republican Party has failed you and not because we haven’t tried. But we haven’t tried hard enough, and I think it’s obvious by the results,” Zapata said. “You know I think for far too long we knew we created a system that only benefited the insurance companies. And we have been afraid that every time we try to do something up in Tallahassee, the insurance companies go, ‘Oh you guys can’t do that, you’ll have no insurance. What are you going to tell your folks back home when you have to tell them they can’t buy any insurance ‘cause all of the insurance companies took off?’”
“I think what we’ve done is operated out of fear. And in that fear we have really limited the ideas,” Zapata said.
House Minority Leader Dan Gelber said his own wind insurance is going up this year from $9,000 to $16,000. Gelber was the lone Democrat in the Florida Legislature to show up at the Republican forum and present his solution to the windstorm crisis: outlawing insurance companies from “cherry picking” their policies — a proposal he tried to get on the legislative floor last session, but which never saw the light of day.
“…We should force companies to write wind [insurance policies] if they are writing auto,” Gelber said. “A lot of people talk about that … but trust me, trust me, the idea has been in Tallahassee for years, and it has never got a hearing.… We’re here in Coral Gables High School talking about it like it’s going to get a hearing. It won’t. It won’t because very simply stated, every year the insurance industry rates all of the legislators; their number one legislator is the head of the Insurance Committee. And he’s not ever going to put that on for a hearing. Whether it’s a good idea or bad, the only people who are going to talk about it are in this room.”
On that score, Zapata concurs. “Look, I agree with Representative Gelber. There have really been lots of ideas that have not been vetted out at least in the legislative process.”
Zapata asked homeowners for support. “You guys could help us because there are a lot of political forces up in Tallahassee that don’t want change. Understand that right now there are a lot of people who are very happy with the system. There are a lot of folks that are making a lot of money. All you have to do is look at the stock market. … All of their stocks are going great. They’re making lots of money.
“We have allowed the insurance industry in this state to have the upper hand,” Zapata continued. “But we’ve done it ... more out of fear. But I think we’ve gotten to the point where we’ve got to overcome that fear.”
How did insurance companies become so influential? Actually, it’s “who,” Zapata said. “His name is Don Brown.… That’s the guy who’s chairman of the Insurance Committee. Don Brown. He’s the man. I’ll tell you this much on the record. I hope he hears this: He is in the pocket of the insurance companies.”
Brown, a Republican, represents DeFuniak Springs in the northwest Florida Panhandle. He is also an insurance agent.
“People are losing their homes now, and if the state doesn’t decide that it’s going to get serious about lowering premiums — so that it’s not just availability, but affordability — it really doesn’t matter,” Gelber said.
State representatives and county officials on the podium all complained that while all of Florida is at risk during hurricane season, homeowners in Miami-Dade County are getting hammered disproportionately, paying three to six times as much for insurance as the rest of the state, while having most homes built up to the latest building codes. Meanwhile, the Florida Panhandle, under the leadership of Insurance Committee Chairman Brown, is exempt from the requirements of a building code enacted throughout the state — it’s even legal to construct homes out of presswood, which is extremely vulnerable to hurricanes.
Throughout the day, lawmakers presented possible solutions — a variety of financial mechanisms to create funding to lower insurance premiums, even issuing hurricane bonds like war bonds. Most agreed on several key proposals:
*Make homes more hurricane-proof, thereby lowering insurance premiums by reducing the risk of damage. Create ongoing financial incentives for homeowners to strengthen their homes as much as possible. The state has created a $250 million grant program, offering $5,000 apiece to homeowners for hurricane improvements that lawmakers want to permanently put into the budget.
*Enforce the state building code throughout the state, including the Florida Panhandle.
*Restructure or do away with state-run Citizens Insurance, the largest insurance company in Florida with 1.2 million customers and growing daily. Gelber calls it “a leper colony. It’s a risk pool of the worst risks in the state. Everybody in Citizens has two characteristics — they’re a bad risk, and by law they have to pay the highest premiums in the state of Florida.” Zapata agrees that “Citizens was created to benefit insurance companies.”
*Seek federal help in the form of catastrophic hurricane insurance, modeled on California’s catastrophic earthquake insurance. “We’re going to continue to pursue the federal catastrophic wind insurance,” Robaina vowed. “I’m telling you that we are going to be looking closely at that issue in Tallahassee.”
Gelber thinks nothing would be sweeter than federal aid, but that Florida, especially South Florida, needs major help right now.
“We can hope something happens in the federal government, but we don’t control that.
We control the legislature,” Gelber said. “So maybe if everybody commits we’re going to have a hearing on this, that would be great. But you know what? Tell me the man who’s been appointed head of the Insurance Committee — when he says he’ll hear the bill I’ll believe him, because we don’t control that.
Gelber continued, “I’m sorry to say it … but you’re not going to get a hearing on a lot of these ideas because they’ve been there and they just haven’t been talked about, and that’s the truth.”
“I think you make a valid point,” Robaina agreed. “And I’ve got to tell you that in the past, not all of the issues have been addressed. But I think you’re seeing for the very first time a major commitment, when you see all of the players sitting here with this hearing going on, that the pressure will be put on to make sure these ideas are heard.”
Miami Beach Condominium and Homeowners Alliance President Joe Fontana hopes Gov. Jeb Bush will call a special session “to take care of a problem that’s killing the people.” He said he knows of one condo association that has a $1.2 million deductible and is paying $400,000 in premiums. “Have some compassion for the people. Think of how you’re hurting the voters.”