By vetoing SB 2044, Gov. Charlie Crist not only secured his place as one of the least consistent politicians in Floridas history, he also established himself as one of the most selfish.
With a single pen stroke, he succeeded in placing Floridas home-insurance market -- the one he created and populated with small domestic carriers -- on the verge of collapse. Ironically, he did this on June 1, the opening day of what is predicted to be the most active hurricane season since the 2004/2005 storms made a shambles of our state, a period that puts nearly 6 million homeowners at risk.
SB 2044 was heaped with consumer protections. It blocked re-enactment of the use and file law, which allows insurance companies to raise rates without OIR (Office of Insurance Regulation) approval. It increased surplus and capital requirements for shaky insurers. It created a Web site to help consumers find the lowest price and the best deal. It maintained OIR oversight of rates while enacting provisions that would forestall pending insolvencies and lower underlying costs.
Thats why Insurance Commissioner Kevin McCarty, consumer advocate Walter Dartland, the Florida Chamber of Commerce, Tax Watch, Associated Industries of Florida, a majority of lawmakers, and numerous newspaper editorials urged Crist to sign SB 2044 and keep politics out of the debate.
SB 2044 placed restrictions on the ability of carriers to channel needed surplus to investors instead of retaining it for payment of future claims. When told of this provision, Crist said during a Cabinet meeting, Thats a bill Id like to sign. Instead, when pressed by trial lawyers and public adjusters to veto something that might impact their profits, he caved and did their bidding. And, the results wont be pretty, even without a hurricane.
Five years without a hurricane would normally allow companies to build up a surplus, which provides a cushion to pay future claims and drives prices down by reducing the need to depend on unregulated reinsurers. Instead, under the system that Charlie Crists veto preserves, the average loss per policy, without hurricanes, has risen 65 percent. With his just make it to November approach, Crist squandered a five-year opportunity for consumers to avoid future rate increases, and he still hasnt kept rates down!
Last year, under Crists scheme, more than 100 rate increases were necessary, many over 20 percent. The states largest private insurer had to be granted a 14 percent rate increase on every one of its policies. When coupled with discounts the company removed, the average State Farm customers premium rose 42 percent. Again, with no storms!
Even with all the rate increases, Crists plan hurt hundreds of thousands of consumers with an alarmingly high number of company insolvencies. While assessments and premiums rocketed up, five carriers had to be shut down.
And its getting worse. In the first quarter of 2010, only nine of Floridas top 47 domestic writers showed an underwriting profit. The rest lost another $250 million in potential surplus to pay claims. This is partially why the states insurer-of-last-resort, Citizens, is now receiving 45,000 new applications every 30 days.
Just after we all go to the polls, its possible Citizens may be the largest residential insurer in America, with 1,750,000 homes insured and more than half a trillion dollars in exposure, subsidized by taxpayers and voters.
Without the reforms of SB 2044, we can all expect more of the same -- rate increases, assessments, and insolvencies. Sadly, Charlie Crist put the interests of trial lawyers and public adjusters over the people of Florida he pretends to serve.
Jeffrey Grady is President and CEO of the Florida Association of Insurance Agents and can be reached at 850-893-4155 ext. 379. The Florida Association of Insurance Agents is located at 3159 Shamrock South, P.O. Box 12129, Tallahassee, FL 32317.
