Our choices stink, but they solve the problem
By HOWARD TROXLER
Published August 3, 2006
Florida's leadership, from the governor and Legislature down, remains weirdly sluggish about this insurance thing.
Hey, we're studying it. Meanwhile, another storm swirls to the south of Florida.
There are only two ways to go.
Either we get the private insurance companies to come back...
Or else the public sector (meaning, the government) takes over more of the show.
That's it. Two stinky choices. Either we kind of kiss the patooties of State Farm and Allstate, or else we go more socialist.
A lot of people say, "Let's just ORDER those so-and-sos to sell insurance! Let's tell them they can't sell car or life or anything else in Florida if they don't sell property!"
Easy to say. But it won't work, for a lot of reasons. The companies are separate entities. There's plenty of legal mumbo jumbo. Even if that law held up in court, some companies that had to choose would just pull out of Florida altogether. Maybe we could whip up an auto-insurance crisis too.
Nope. Either we get the companies to come back, or we take it over ourselves.
How do we get them back?
Some folks say we should let them charge as much as they want, no limit. Others say we need to fix the problem of "reinsurance," which means, insurance for insurance companies, but they don't say how.
Maybe you saw in the paper the other day a Q&A with a guy named Robert Hartwig, the president-elect of an outfit called the Insurance Information Institute.
"Let premiums float and become actuarily sound," Hartwig replied, when asked the answer to Florida's problem. "They aren't even close today."
They aren't even close today, the gentleman said of insurance rates in Florida.
And you know what? I am afraid he is right. No matter how high current rates are in Florida, they aren't high enough to justify the risk to the private companies.
But I bet you that most Floridians would march on Tallahassee and burn the Capitol if the next governor and Legislature actually proposed free-floating insurance rates.
This leaves a public sector solution, which Gov. Jeb Bush and many Florida leaders decry as the path of "Big Government."
Well, there's no need to worry about whether we'll have Big Government. We already have Big Government. It is called the Citizens Property Insurance Co., and it now covers 25 percent of the market in Florida, with 1.2-million policies, and $400-billion worth of risk.
But it is the worst kind of Big Government. The state is covering the highest-risk policies, only the ones the private companies choose not to cover.
Two of this year's candidates for governor, Tom Gallagher on the Republican side and Rod Smith on the Democratic, stopped by the office Wednesday to make their pitches. Gallagher, a former state insurance commissioner, made the observation that we Floridians are more or less having to "insure ourselves."
But if that's the case, if we are on the hook for insuring ourselves anyway, then why not really do it? Why not spread the risk, instead of concentrating only the highest-risk Floridians under the public sector, while letting the private companies enjoy the benefit (and profits) of the lowest-risk customers?
Smith, for his part, proposes that the state of Florida cover the first part of all hurricane damages - say, the first $50,000 to $100,000 - when a storm is big enough to trigger the state's participation.
That echoes an idea floated in last spring's session of the Legislature by Democrats who wanted the state to cover damages above $100,000 or so, with private companies covering everything beneath that.
Horrifying? Distasteful? Well, are these ideas more distasteful that the insurance guy's claim that premiums "aren't even close" to high enough? Are they more distasteful than our current system, in which the state of Florida meekly follows behind the private companies with a Pooper Scooper, picking up those of us the private companies don't want?
Florida is at the point where the governor and Legislature need to be doing something more than just explaining why other people's ideas are lousy.
It is amazing, incredible, astonishing that the 2006 Legislature did not see further. We should hope and pray that it remains merely an irresponsible lapse, reparable in a timely fashion, and not The Worst Mistake The Legislature Ever Made.