Florida Insurance Legislation is Over for 2009--Maybe
Numerous newspaper articles have discussed this session’s bills which impact the insurance industry. The anti-consumer bill, which provides for deregulation of insurance rates, passed. I expect Governor Crist will veto that bill as was previously reported.
I have yet to hear or see any economically valid reason to allow admitted insurance companies to set rates in an unregulated manner. Federal legislation passed in the 1940's exempted the insurance industry from federal anti-trust regulations so insurers could share and access loss information. In return, to prevent the insurance industry from conspiring to set rates and determine market areas of competition, the insurance industry agreed to state regulated rates. Thus, Departments of Insurance in every state regulate the insurance rates therein. In most states, the insurance industry gets an "industry insider" appointed to a regulatory position and allegedly pro-consumer regulation is often a facade. This is not the case with Florida’s Kevin McCarty.
Rate regulation by the Florida Office of Insurance Regulation worked in Florida until the major oligopoly of Allstate, State Farm, and Nationwide decided to reduce their "exposure" to hurricane and sinkhole risks, and started selling significantly less insurance in Florida. This trend started after Hurricane Andrew, in 1992, and accelerated in this decade. Now, the total supply of insurance offered in Florida is consumed, and even exhausted, by the demand for insurance. Accordingly, Florida allowed Citizens, previously an insurer of last resort, to pick up this demand and provide a market for residential and business insurance.
The argument that Florida should allow insurers to charge whatever they want because they will sell more insurance is ignorant. Studies have shown more insurance will not be the result. There is a limited amount of insurance coverage at any price in Florida. It is not a free market. Most people simply have not studied the literature and reports on this issue and assume that if insurers can make more money on higher premiums, more insurers will sell insurance in Florida. These studied findings were made to the Citizens Mission Review Task Force which I was part of. No legislators were there to listen and learn.
Many proponents of rate deregulation (including our legislators) make uninformed decisions on the issue, and then offer ignorant opinions and answers to a difficult issue. Other leaders supporting this issue are probably just pandering to State Farm and the insurance industry.
Governor Crist should veto the bill that deregulates the insurance industry. It makes no economic sense. It is what the insurance industry bargained for in the 1940's. Did Florida’s legislators even know why Florida can and should regulate rates before they chose to give up that right?.
Why shouldn't we hold State Farm and other insurers to a deal they bargained for?
You claim to advocate for policyholders. What about a long time USAA member who got auto insurance from USAA in 1970 when no one else would provide such insurance to a member of the military. I have been a member of USAA ever since and get a nice rebate every year based on my longevity and amount insured. Recently I lost my USAA insurance on my second home because Governor Crist would not grant them an increase and they decided they could not afford the exposure in Florida. Thankfully they did not drop my primary residence. I had to go with Citizens which cost me more than it would have cost if USAA had gotten its increase. Now I have been tossed off to an unknown group called Sunshine State which is trying to drop me because my second home (a small vacation home on a lake) is not occupied full time. Your regulation advocacy sucks!
So, they won't insure our homes but still want to insure our cars?
I say no! I would never purchase an auto insurance policy from a company that refuses to insure my home!
The insurance companies get away with a lot of stuff. Yet so does the government. I'd rather have an insurance company to deal with than state law regulators.