Consumer Insurance Coalition
















Use March legislative session to tie up

loose ends from 2007


Article Courtesy of The Sun Sentinel

OPINION By Heather Carruthers
Published February 5, 2008


The recent op-ed piece from Eli Lehrer of the James Madison Institute regarding the Legislature's property insurance reform may lead some to believe it's time to abandon the gains of last year's special session. But before legislators surrender, many consumer groups would like to suggest that, rather than going too far, those reforms did not go far enough.

The James Madison Institute is a Tallahassee "think tank" that provides position papers on behalf of business and the insurance industry. Conversely, the diverse groups signing this letter represent thousands of consumers.

We believe the free market should provide the best solution to market problems. However, our problem in the Florida property insurance market is that the free market has failed us.

After Andrew, many property insurers fled Florida. The Joint Underwriting Authority was created to fill the gap and ultimately became Citizens Property Insurance. Contrary to the Madison Institute's assertion, until last year Citizens' windstorm rates were mandated to be non-competitive at least 20 percent above market. National firms established Florida spin-off or "PUP" companies to contain losses and maximize profits for the parent company. Insurers practiced "use and file," raising rates and billing consumers before rates were approved. Still, private insurers did not return to Florida.

The reforms of last year brought modest relief to some ratepayers. Some companies lowered premiums due to the increased availability of reinsurance from the Florida catastrophe fund. The promise of profits brought other small insurers into the state cautiously. The state should continue to beef up the cat fund, and could establish a consistent funding source directly related to windstorms: Earmark the majority of post-storm sales tax windfall revenues for this purpose.

Those firms that did not lower rates have hidden their counter-intuitive rate increases behind "black box" models that dilute the benefit of a more robust cat fund and reinsurance availability, that rely on five-year storm projections when we have over 50 years of solid hurricane history, that do not accurately reflect the strength of construction by region, and that are profoundly opaque to regulators charged with approving or disapproving those rates. The recent stand-off between Insurance Commissioner Kevin McCarty and Allstate attests to insurers' unwillingness to operate transparently.

Two relatively calm years of collecting high premiums without paying significant claims, an expanded cat fund for better reinsurance accessibility and lower costs for private reinsurance due to those calm seasons have not been enough to entice large private insurers back to the Florida market. The state owes it to consumers to operate Citizens like a business. Diversifying coverage would allow Citizens to spread its risk and improve its bottom line. Building reserves and buying reinsurance with the revenues gained from two quiet years would diminish the potential for future assessments. In an ideal world, the free market would step in to provide property insurance that would not bankrupt consumers. Insurers would expand their book of business to spread their risk. But this is not an ideal world. The private market has been given ample latitude and opportunity to fulfill Florida's property insurance needs, and still, without Citizens, more than a million Florida property owners would be uninsured. Therefore, when Florida lawmakers begin mulling insurance legislation for the session that begins on March 4, they ought to consider proposals to bolster Citizens, strengthen the cat fund, open the black boxes, make prior rate approval permanent, eliminate arbitration panels forever, and finish the work begun last year.

Heather Carrruthers is with the Consumers' Coalition on Insurance.


"Having Affordable Coverage"

Ginny Stevans (727-967-8220)

[email protected]

Florida Consumer Action Network, Inc. (FCAN )

Bill Newton (813-785-0413)

[email protected]

Fair Insurance Rates in Monroe (FIRM)

Teri Johnston (305-797-0955)

[email protected] 

Association of Community Organizations for Reform Now (ACORN)

Laura Goodhue (561) 512-7579

[email protected]

Cyber Citizens For Justice, Inc.  (CCFJ)


Jan Bergemann (386) 740-1503

[email protected] 

Property Owners Association of The Villages (POA)

Joe Gorman (352) 259-0999

[email protected]

Floridians In Action (FIA)


Waldo Faura III (305) 412-3494


Brad Ashwell (850) 294-1008

[email protected] 

F.A.I.R. for Collier

Fighting Against Insurance Rates

Bobbie Dusek (239) 659-6132
[email protected]




Jacqui Sisto (850) 224-9403

[email protected]