Rates doing big damage

Article Courtesy of The Sun Sentinel

By Dan Gelber

Representative Dan Gelber is Democratic leader of the Florida House
Published  January 8, 2007


Later this month, the Legislature will meet for a long-overdue special session intended to address Florida's hurricane insurance crisis. Part of the job will be to undo portions of a horrible Republican-backed bill passed last spring that allows insurers to charge obscene rate increases. The bad news is that the same group that wrote the last bill will be writing the next one. If they decide they want to actually help this time, here are some dos and don'ts:

Do lower rates. We will have failed Floridians if we don't. The goal of the Legislature should be to bring insurance rates down immediately for homeowners and businesses, not just slow rate increases. At a minimum we need to cut rates by at least one third from their current levels.

Don't wait for the market to fix itself. This is how the insurance companies are used to being treated by their Republican friends, who believe that allowing companies to collect uncontrolled profits will eventually promote competition in the marketplace. It hasn't. Democrats believe that we cannot cross our fingers and hope that Florida's dysfunctional insurance market corrects itself within a decade.

Don't wait for a "federal" solution. We cannot wait and hope for the federal government to establish some kind of national fund for natural disaster damage relief. Rather, the state has to use all means necessary to lower rates now.

Don't simply ask homeowners to opt to pay higher deductibles. Giving homeowners the choice to raise deductibles is not a solution, just a choice of last resort. It may work for some, but it is really an unfair and risky decision that Floridians should not have to make. Imagine what will happen when we do get a hurricane and thousands of our neighbors can't afford to rebuild.

Do marshal the state's current involvement in the insurance market into a single effort. The state's Citizens Property Insurance Corp. is the largest windstorm insurer in the state and, by law, its 1.3. million high-risk policyholders must be charged the highest premiums. Similarly, the state catastrophe fund is a state insurance fund that is available to help people rebuild after a hurricane causes damage exceeding $5 billion.

Both of these funds, and others, rely on the state assuming hurricane risks, but not in a way that makes the best sense. We should spread the risk of Citizens rather than concentrate it only among high-risk policyholders. Similarly, the CAT fund may not be delivering its relief at the right place where it will optimally lower rates.

Do put the governor in charge. The Legislature must give the governor all the tools necessary to work with insurance companies in a rational and meaningful way with the goal of lowering insurance premiums. Too often, legislative responses to this crisis have been inadequate because my colleagues have only followed a path drawn by the insurance industry. And when we have passed bills, as we did earlier this year, we can do nothing other than cross our fingers and pray. The governor needs the authority and flexibility to act in the 10 months when the Legislature is not in session.

Finally, do make sure everyone -- including the Legislature -- remains accountable. After the Legislature meets in January, it should meet monthly through a joint committee of the House and Senate.

Further, the powers that we give the governor should include some triggers that require legislative approval or notification to assure we don't abdicate our oversight responsibility. For instance, the Legislature should still have to approve decisions that change the levels of debt and risk the state assumes.

Amazingly, windstorm insurance rates are doing more damage to homeownership than hurricanes themselves. This is the Big One and it threatens Floridians without ripping off a single shingle. Until we treat this as a crisis of that order, we will continue down the same road that got us here.