In an interview with Victoria Langley, Alex Sink, Florida’s Chief Financial Officer, weighed in on what she believes went wrong with Florida’s insurance reform plans. Part of the reform involved lawmakers putting an additional $12 billion dollars of taxpayers’ money into the states Catastrophe fund. This was supposed to allow insurance companies to reduce rates; however, we’re not seeing any real significant rate decreases. As a matter of fact, many companies have filed for rate increases.
Sink did not believe it was in the state’s best interest to go back to the drawing board and start from scratch, but she did indicate that maybe we need to take back that $12 billion if it’s not paying off. She further suggests a need to remove insurance oversight from the State legislature, which may not be equipped to deal with highly complex financial decisions, and place it into the Florida Financial Service Commission. Both views may have some legitimate basis.
First, the rates are not going down. If Florida policyholders are not getting any benefit, why should the $12 billion remain in the catastrophe fund? Second, the legislature now has the State of Florida in the insurance business as a result of trying to appease the electorate outcry about high insurance bills. The result is that the State now controls the largest property and casualty company in Florida. Insurance laws are constantly changed as the legislature tries to improve and protect this insurance entity. The perilous result is that if a big hurricane hits, the rates of all Floridians will go through the roof as Citizens pays off the debts through assessments. This is all because a legislative body should not be in the position of running a capitalist insurance enterprise.
Although a much anticipated OIR public hearing on State Farm‘s July 19 announcment of their plans to not renew some 50,000 residential policies in Florida, scheduled for tomorrow, Tuesday, August 14th, has been postponed. The hearing, whenever it takes place, may shed some light on why the enacted changes did not yield lower rates. A critical analysis of the internal motivations and political strategies employed by State Farm and similarly situated insurance carriers is required to provide transparency to the process and see whether this is an industry that has any semblance to one that should be trusted.