State Farm lobbyists are going to have their work cut out for them after Paige St. John‘s story, HOW STATE FARM CASHED IN ON A CRISIS, documented how State Farm used financial slight of hand and friendly politicians in the Florida legislature to help create an insurance crisis leading to greater profits through a re-insurance subsidiary.

The article bluntly states its findings:

A Herald-Tribune investigation finds Florida’s largest insurer has…found an easier way to profit from homeowners desperate for coverage. And the desperation State Farm helped create allows it to command some of the highest rates in the world.

 The conduit for this back-door insurance is DaVinci Reinsurance Ltd., an offshore company with no physical office or employees of its own that sells policies to insurers to cover their storm losses.

 The virtual corporation was launched in 2001 by State Farm and a Bermuda reinsurer with which it has close ties.

 State Farm provided $200 million in seed capital. Its partner, RenaissanceRe Holdings Ltd., took on management and the recruitment of other investors.

 While it has little physical presence, DaVinci is now one of the state’s most important hurricane reinsurers. Contracts show DaVinci provided coverage last year to more than 50 Florida insurance carriers representing the owners of 3.7 million homes.

 Through DaVinci, State Farm quietly continues to collect money from thousands of former customers who were told their homes were too risky to insure.

I remember Florida legislators grilling Florida’s Insurance Consumer Advocate, Sean Shaw, last year about "free markets." I bet they were provided scripts by State Farm and other insurance industry lobbyists to ask those questions. And all the while, the market was being secretly manipulated by the insurance companies that wanted no regulations so rates could go sky high. It is disgraceful to indicate that Florida has a "free market," when it comes to insurance rates because it is manipulated in so many ways by the insurance company participants.

I know a number of Florida leaders who stood up to the insurance industry propaganda last year. One was Florida Senator Mike Fasano, who is always skeptical about the rates charged by insurance companies. Here is what he reportedly had to say:

State Farm has done a good job, an excellent job, in pulling the wool over the eyes of many of my colleagues in the House and Senate," said state Sen. Mike Fasano, a Pasco County Republican and a critic of State Farm.

Senator Fasano may be "on the outs" with Florida’s Republican leadership because he loyally stuck to his commitment to Florida’s Governor Charlie Crist, who switched political allegiance from Republican to "independent" in his failed race to become a United States Senator. It will be interesting to see whether Florida’s other legislative leaders are going to be bought off by the insurance industry and its agenda or have the courage of Fasano and do something for Florida’s insurance consumers.

I met with a number of Florida’s Senate and House leaders on insurance issues last year. I plan on doing the same in Florida and Texas in 2011. The insurance industry and its lobby keeps much of its true agenda secret. Those speaking for them use propaganda, such as everybody’s belief in "free markets" or "freedom to contract" as methods to appeal to basic notions of American values and fairness. Unfortunately, each of these notions are manipulated secretly or after the fact so that insurance laws and regulations are rigged for the insurer and against the consumers of the product. Insurance companies have an army of propagandists, often lawyers and public relations or academic types, that write editorials or get articles published by ignorant journalists.

The investigative work done by true journalists, such as Paige St. John, does not come cheap. In an era when media has little money to uncover the truth, it is refreshing to find journalists who will spend time and reveal the truth regarding such an important product dominated by such powerful interests.

I hope our leaders will learn for this journalism. I hope they remember that they were elected to serve their constituents and not those powerful insurance companies with large soft money campaign contributions. And while I hope, I am not naive.