Florida Bill Would Free Up State’s Ailing Insurance Market

Published April 18, 2010

Despite there having been no major storms in Florida in the last year, three property insurers in the state have gone into receivership, and many others are in financial trouble, according to Florida’s Office of Insurance Regulation.

“The insurance commissioner testified not too long ago that 102 of 221 insurance companies have lost money during the last quarter. How do you lose money when you haven’t had any storms?” said Florida Representative William L. Proctor (R-St. Augustine).

Proctor, a recent guest on the weekly podcast for the Heartland Institute’s Center on Risk, Regulation, and Markets, introduced one of two major bills now under consideration in the Florida legislature intended to remove some damaging government strictures on Florida’s insurance market.

The Senate bill introduced by Banking and Insurance Committee Chairman Garrett Richter (R-Naples) reforms regulation of the ways insurers provide mitigation credits and replacement values. The bill passed the Senate Banking and Insurance Committee on March 10.

Crist Vetoed Previous Version
Proctor’s bill, the 2010 Consumer Choice Act, is almost identical to one that Gov. Charlie Crist (R) vetoed in 2009. It differs in extending the deregulation of rate-setting to all insurers, not just the largest ones in the state.

The bill Crist vetoed would have allowed large insurers to set rates without state approval. Crist said he vetoed the bill because he believed it would harm consumers and small, domestic insurers, who would not be able to charge deregulated rates.

Proctor’s new bill has its opponents. One could be Crist, who Proctor said has suggested he might veto the bill if lawmakers pass it. One sure opponent is Sean Shaw, Florida’s Consumer Advocate. Shaw has said he worries the bill would spell higher premiums for consumers, which would put more insurance buyers into Citizens Property Insurance Corp., Florida’s underfunded state-backed insurer.

Still, Proctor said he hopes this will be the year for reforms of Florida’s insurance market regulations.

Crist’s Concerns Addressed
“I thought that probably the best thing to do was to try to correct whatever was of concern to the governor in the bill and then come back this year. And I think that we have corrected those things,” Proctor said. “If you want to have reliable insurance in Florida, you’re going to have to have rates that are equal to the risk. And you’re going to have to permit companies to build up a surplus that will be sufficient to cover their exposure.

“Anything you do other than that, you’re just in a sense gambling with Mother Nature. We’ve been very fortunate in the last four years. But if you look at the history of Florida and its hurricane record, we will have that bad storm. And the question is, will we be able to pay the claims? Right now there’s evidence that we could come up very short.”

Arin Greenwood ([email protected]) writes from Alexandria, Virginia.