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Florida's insurance solution: free puppies for everyone!

By HOWARD TROXLER
Published May 9, 2006

So, they didn't fix that insurance thing. Florida is still in a lot of trouble.

To sum up matters:

There still aren't enough private companies selling property insurance in Florida. They are too scared of hurricanes.

The state created its own "last resort" insurer, called Citizens Property Insurance Co., to cover what the private market won't.

But that outfit is still in the hole and must keep raising its rates. So everybody's mad.

Our state Legislature just finished its annual session. Did the Legislature take a deep, intelligent measure of the problem and enact visionary changes?

It did not.

The Legislature chucked a few hundred more million dollars toward Citizens, and even that was only a partial bailout.

The Legislature also stuck higher premiums on those Floridians who are insuring something besides their own home, and those with homes worth more than $1-million.

These were not bad ideas by themselves. They certainly were better than the plan Gov. Jeb Bush preferred, which was just to mail every household in the state a check for $140, supposedly to help with insurance bills.

I have a friend who, when confronted with an unpleasant topic, puts her hands over her ears and cries out: "Puppies! Cute, adorable little puppies!"

Mailing everybody a check for $140 was the governor's way of saying, "Look! Puppies!"

So the Legislature did better than that. But it still didn't go very far.

There are only two ways to make Florida's insurance problem better.

The first is to get private companies to come back to Florida. The second is to involve the government even more deeply.

The most common question people ask on this topic is, "Why can't we just pass a law? Let's tell those so-and-sos that they can't sell any other insurance in Florida unless they sell homeowners' insurance too."

Won't work. First, such a law is just as likely to drive more companies out. Great. Maybe we can create an auto insurance crisis too.

Second, some companies specialize in particular kinds of insurance. It would be like passing a law saying that proctologists also had to be able to pull teeth.

The second most common question is, "If insurance companies are in such bad shape, how come those $##$%%'s are making billions of dollars a year?"

Yes, some are making trainloads of money. That still doesn't mean they are willing to underwrite a worst-case storm in Florida that, by some estimates, would cost them $125-billion, even wipe some of them out.

So there is no simple answer. There is only a menu of partial answers. We have to mix and match from that menu:

The state (meaning the taxpayers) could assume more risk, by building an even bigger catastrophic fund - or else taking over the private windstorm market altogether.

The feds (meaning the taxpayers) could assume more risk. There ought to be a national disaster fund to back up the private market.

Congress could do other things, including changing the tax code, to encourage the private sector to accept more of the risk, a national instead of state-by-state approach.

Florida could do plenty of other non-sexy but effective things. Keep making building codes stronger. Reward the fixing-up of old construction and punish the failure to do it. And here's a laughable idea, given the track record of local elected officials in Florida, but: We could build less stuff in at-risk areas.

Even if we do all that, we will never go back to the days of artificially low premiums. We can make the market more stable, and maybe slow down the pace of rate increases. But when it comes to low premiums, the jig is up.

The reality is that we live in a state that Nature, on a bad day, could scour from the map. There are many advantages to living in Florida. This is the principal disadvantage. (That, and too many bad bar renditions of Margaritaville.)

We need Florida's congressional delegation and the Florida Legislature to look us and each other in the eye, so we can admit all these things to each other and finally get to work. Now would be a good time.

[Last modified May 9, 2006, 00:40:05]