The politics of insurance is tough for consumer champions. The insurance lobby has many faces and methods of forcing its position. In Florida, the dirty campaign against those governmental officials who stand up to State Farm and the big insurance industry has begun in earnest. Florida has one of the most respected insurance commissioners in the country, Kevin McCarty. Mike Bennett, a relatively unknown state Senator, is attacking McCarty simply because McCarty voiced the opinion that Bennett’s insurance “choice” bill would hurt Floridians.

Bennett sponsored the bill that became HB 1171, which will raise insurance rates. Bennett and State Farm lobbied for this bill, claiming it would give consumers "choice." McCarty wrote a letter to Governor Christ indicating that Bennett’s bill would help the insurance industry, not Florida insurance consumers, and that Crist should veto it. Bennett was publicly embarrassed, and published a letter trying to explain why McCarty should get terminated. Now, Florida Senate leader Mike Fasano and Governor Charlie Crist, past champions of policyholders crying for reduced rates, have come out supporting McCarty against Bennett’s very personal attack.

The Miami Herald reported Governor Crist’s view:

"Gov. Charlie Crist had nothing but praise for Insurance Commissioner Kevin McCarty, despite Sen. Mike Bennett’s call for him to resign.

"I don’t agree with that,” Crist said."I think the commissioner has done a great job, and I have enormous respect for him…I haven’t reached a final conclusion on (the insurance rate legislation)."

Senator Mike Fasano’s view was reported by in a story titled, Fasano clashes with Bennett, backs McCarty:

"Republican Sen. Mike Fasano of New Port Richey has rushed to the defense of state Insurance Commissioner, whose resignation was demanded by Sen. Mike Bennett of Bradenton in a letter to Gov. Charlie Crist.

"He is one of the most highly qualified and experienced individuals to hold this important post," Fasano said in a statement issued Friday from a legislative aide’s BlackBerry. "Florida needs his steady hand to steer through the unique insurance challenges that continue to be part of Florida’s landscape."

Fasano’s statement did not mention Bennett by name, but he got his point across by ending this: "In a town in which insurance companies wield so much power, he (McCarty) has been a voice of reason and stability. During the many years I have worked with him he has never hidden his deep desire to make sure that consumer-friendly legislation and policy were his top priorities."

Kevin McCarty wrote a letter explaining why Bennett’s legislation was not in the best interest of Florida consumers. This letter embarrassed Bennett because it is true–the bill unnecessarily raises insurance rates of Bennett’s constituents, but Bennett was not counting on McCarty to say that. McCarty’s letter probably worries every legislator who voted for it:

Impact on Consumers
As a result of the unprecedented storm seasons of 2004 and 2005, Floridians were hit with dramatic increases in their homeowners insurance rates. Realizing that families across our state were struggling to afford these premium increases, you led the effort to pass HB lA in January 2007, which yielded rate decreases on the average of 15.9% statewide. Since that time, rates have remained relatively stable for most of our residents.

HB 1171 will reverse the trend begun by HB 1A by exempting certain insurers from a
determination that their rates are "excessive or unfairly discriminatory." These
companies will be permitted to charge a rate that is substantially higher than the
actuarially sound rate approved by the Office. The result will likely be significant and
unpredictable rate increases that, during these difficult economic times, people can
simply not afford.

Impact on the Insurance Marketplace
Florida has added 40 new property insurance writers with more than $4 billion in capital since 2006. The Legislature invested $250 million to attract new capital for companies committed to the Florida marketplace. Largely because of this new capital, more than 400,000 policies were taken out of the state-run Citizens Property Insurance Corporation in 2008, reducing its exposure by more than twenty percent.

HB 1171 will disrupt the effort to build an increasingly competitive insurance
marketplace and treat certain insurers differently than emerging Florida domestic
companies. This has the potential to harm consumers and investors who have worked in good faith to create a competitive marketplace that has benefited all Floridians.

Impact on State Farm’s Withdrawal Plan
State Farm would have Floridians believe that because of its failure to obtain a rate
increase it was forced to present a plan to exit the state. State Farm’s rate filing was
woefully unsupported. The Office’s disapproval of the rate filing was subsequently
upheld by an independent administrative law judge. It appears State Farm used this as an exit strategy rather than taking responsibility for abandoning its agents and policyholders.

Moreover, State Farm is overexposed in the homeowners market and will likely not offer coverage to many of its policyholders irrespective of its freedom to charge an excessive rate. In fact, State Farm and other companies may actually use excessive rates to effectively non-renew policyholders under the ruse of consumer choice.

It is important to remember that in 2002, the former Department of Insurance allowed State Farm to write condominium insurance at an unregulated rate. The results were not beneficial for Floridians. This company dramatically increased rates over several years and shortly thereafter non-renewed every policy in the state. There is no reason to believe that this proposal will result in anything different.

It is unfortunate that this bill is being presented to you as an effort to promote "consumer Choice.” I believe the bill sponsors attempted to pass legislation that would allow State Farm policyholders to continue to secure coverage from that company in the future. This legislation is more far-reaching than is necessary. Current laws already allow insurers to offer two options at higher than approved rates. Insurers may offer policies on a consent to rate basis or on a surplus and excess basis.

I believe this legislation has negative consequences both for the people of this state and for the insurance industry as a whole. As always, I am available to answer any


Kevin M. McCarty

In A Balanced Perspective Regarding the Politics of Insurance Legislation, I noted how well meaning politicians, like Senator Mike Bennett, may get bamboozled by insurance lobbyists. State Farm lobbyist, Mark Delagal is sharp and very persuasive, but his only concern is pleasing State Farm–not their policyholders or customers. Another insurance lobbyist told me this week that State Farm is pulling out all the stops and has hired heavy Republican lobbyists Mac Stapanovich and Jim Magill to sway Governor Crist into breaking his campaign promise to not raise rates.

In that post, I commented on a scenario of what Bennett’s constituents will say if this law is passed:

"Edna, I am really excited about this new law. The old fair rate approved by the Office of Insurance Regulation has been wiped off the books by our genius Florida legislators. Next year, we will get the same insurance, and it will cost as much as our carrier wants to charge us. This is because our insurance carrier no longer has to worry about applying for a fair rate."

I find it curious that State Farm, a mutual insurance company, can use money for lobbyists to help make laws that harm its own owners/customers. State Farm has ten lobbyists registered on its behalf. It has a public relations effort trying to place comments into newspapers and a full time "independent" agent force working on this effort. It has the rest of the big players in insurance now working on this as well. 

Florida insurance consumers must understand that the insurance industry has numerous full time employees and lobbyists working on their behalf attempting to persuade the government to make laws that "game" the outcome of rates, profits, and claims to favor the insurance company. For example, Sam Miller of the Florida Insurance Council is a masterful strategist and lobbyist for the insurance industry. He works with insurance company employees and lobbyists to get Florida elected officials to safeguard the interests of insurers by making laws that favor insurers versus those that help the policyholders. Next week at the Destin Hilton, his group will host legislators at its 2009 Summer Insurance Symposium and talk with them regarding insurance company legislative interests. As far as I know, the public is not invited, and certainly yours truly is not getting an invite. But, the following State legislators are invited:

Golf Tournament Honorary Host Senator Garrett Richter
Fishing Tournament Honorary Host Representative Pat Patterson
Rep. Janet Long
Rep. Marti Coley
Rep. Brad Drake
Rep. Clay Ford
Rep. Dave Murzin
Rep. Jimmy Patronis

None of this is illegal to my knowledge. Indeed, insurance is an important business in Florida. Unlike private services or manufactured goods, it is a uniquely important social product upon which we are mutually dependent. The issue is whether our elected officials are more like Kevin McCarty and looking out for the consumer first or whether our elected officials are discussing and looking for something else behind closed doors with insurance executives. I strongly suggest all Floridians find out and let your voice be heard as to what you find. We need to support those champions of policyholders.