Free-market remedy for insurance mess
May 11, 2009
Florida is rapidly approaching the moment when it will either grow a market of financially sound companies to sell property insurance, or it will fall to the state to provide coverage for all.
The state already is the biggest player in the homeowner's insurance business, selling policies to more than 1 million property owners who can't get it anywhere else. Citizen's Property Insurance Corp. was created to be the insurer of last resort, but it has become the carrier of first resort.
It also can't afford to pay its policyholders for damages should a major hurricane strike. That is the responsibility of citizens across Florida through assessments on most lines of insurance. It's not a sane way of doing business.
Fortunately, lawmakers finally seem to understand that hoping for good weather is no way to protect Florida residents. This session they passed a bill that, among other things, will increase Citizens rates by 10 percent annually until the company is "actuarially sound." whatever that is. Gov. Charlie Crist has indicated he will sign that bill into law.
He appears less inclined, however, to approve another bill that would give consumers a chance to choose an insurance company that is financially sound and pay the carrier's price. It would be a step toward reviving the insurance market, and Crist should sign it.
In Tallahassee it has come to be known as the State Farm bill, after the state's largest private homeowner's carrier, which has announced it is getting out of the property insurance business in Florida.
The state Department of Insurance refused to approve State Farm of Florida's request to impose a 47 percent increase in rates. The company claims it can't afford to stay, and its policyholders are faced with finding new coverage.
But the bill pushed by Sen. Mike Bennett of Bradenton and Rep. Bill Proctor of St. Augustine could make it worth it for State Farm to remain and encourage other companies to write new policies in Florida.
It would allow companies that meet strict financial requirements to charge a rate "in excess of the otherwise applicable filed rate." In other words, policyholders can choose to pay more if they want the security of knowing their claims will be met.
The idea is to give consumers some control over their hurricane coverage while encouraging well-capitalized private carriers to do business here.
Nineteen companies would qualify, Bennett said, and rates will be posted online so people can make comparisons. In theory, if the state can grow the market, rates will come down to some degree, although how much is unclear.
Although the insurance department would not have to approve the rates, it would have the authority to reject a rate it found inadequate or based on dishonest figures.
Although insurance Commissioner Kevin McCartney has come out in opposition to the bill, Bennett says the department brought him the bill and helped set its parameters.
If homeowners want to be insured through a large insurance company they know has money in the bank and the ability to efficiently pay claims, they should have the choice.
The bill would give private enterprise a chance to remedy Florida's insurance crisis. Consumers want and need more options. The state needs more private insurance companies and the private capital they bring. This is a good deal for consumers and the marketplace. Crist should sign it
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