Insurance Law

Consumer Advocates on Florida 2007 v. 2009

By The authors are Martin F. Grace and J. Tyler Leverty, professors of insurance and risk management a

Does anyone see a relationship?

2007

Q: [Lakeland (Fla) Ledger Jan 14, 2007] Industry lobbyists say if Florida gets too tough with insurance companies, it will drive the insurers from the state. Can Florida afford to do that given that private insurance is already less available and more costly in many areas?

A: [Robert Hunter, Consumer Federation of America] This is the same threat we heard when California was considering its tough law, Proposition 103. It did not happen, so competition remains strong in California, even with powerful consumer protections in place.

This threat has been heard in many states over the years and, for a state as large and important as Florida, is quite hollow. The legislature cannot continue to give away the store to the insurers in a vain attempt to please them into treating consumers well.

The insurers promised, after Hurricane Andrew, to bring stability in prices and availability if states (including Florida and Texas, where I was commissioner) gave them the three things they demanded: much higher rates based on models, sharp cuts in coverage, such as deductibles, and pools (like Citizens) where they could dump high risks and keep profitable risks for themselves.

We gave them those things and they reneged on their promises, obviously. The legislature should not be fooled again by remembering the old and true adage, "Fool me once, shame on you. Fool me twice, shame on me."

If insurers had the audacity to leave, the state has several options to make sure affordable insurance is in place, including requiring the super-profitable auto insurers to offer home insurance, removing wind from the homeowners insurance policy and putting it into a state pool, competitively bid ding large blocks of houses to insurers from around the world and other options.

2009

From Jacksonville (Fla) Times Union (Aug 10, 2009)

Politicians and regulators pushed back, authoring a complex set of government interventions that critics now say bought lower insurance rates at a steep cost - endangering the state's financial future.

If a major hurricane hit a large metropolitan area today, the state could be forced to boost taxes on insurance policies and take out billions in debt to cover shortfalls in taxpayer-backed insurance plans. Some doomsday scenarios include bankruptcy.

"They get a big hit, like Andrew or bigger, they're going to have to go to the bond markets at a time that it's not good to go to a bond market," said Walter Dartland, executive director of the Consumer Federation of the Southeast, a consumer watchdog group.

Funding that debt will be difficult, Dartland said. "They'll have to go across the board and raise taxes almost on everything."

Eventually, many believe, the danger will lift, with lawmakers passing a sweeping overhaul of state-backed insurance plans that should help keep the state solvent - if luck is on Florida's side while the changes take effect.

It could take six years to entirely wipe away billions of dollars of state obligations to back up insurance companies in the event of a catastrophe. And with premium increases in the state-backed property insurance program for consumers capped by law, it's unclear how long the state will have to increase rates before premiums can cover the program's responsibilities.

Full post as published by RiskProf on August 10, 2009 (boomark / email).