Beware quick insurance fix
A Times EditorialPublished January 10, 2007
House Speaker Marco Rubio and Senate President Ken Pruitt broke a cardinal rule by formally calling a seven-day special legislative session to start Tuesday on the property insurance crisis. The legislative leaders and Gov. Charlie Crist have not agreed on a comprehensive plan to address the complicated mess, and special sessions that begin without such agreements often are a prescription for failure. Unless something changes quickly, what should be an opportunity to fundamentally overhaul a broken system could become an irresponsible stampede to lower rates now and cross our fingers later when hurricane season comes.
For example, there is a general consensus that an average 56 percent rate increase that would take effect in March for windstorm policyholders stuck in Citizens Property Insurance Corp. should be repealed. That increase was based on faulty logic included in last year's attempt at fixing the problem, which would require the state's insurer of last resort to set its rates as though it buys reinsurance - which it doesn't. But a Senate proposal would go further and also repeal an average 25 percent rate increase for Citizens policyholders that took effect Jan. 1. Repealing that rate increase would be short-sighted and irresponsible. It would provide a short-term political benefit to legislators who campaigned on reducing rates, but it would make Citizens rates less financially sound and increase the risk of more assessments following a hurricane.
Senate Banking and Insurance Committee Chairman Bill Posey, R-Rockledge, said in an interview Tuesday that the repeal of the 25 percent rate increase may come out of the Senate bill, which would be prudent.
House and Senate leaders also should reconsider deleting limits on maximum allowable hurricane deductibles. It's understandable that some homeowners would like more flexibility as they search for ways to lower their premiums. The fortunate homeowners who don't have mortgages may have the strongest argument. But too many homeowners will be tempted to choose high deductibles they won't be able to pay after a major storm, making it impossible to rebuild without significant government assistance.
There are plenty of other provisions to like in the Senate proposal, which is the first one on the table. They include making it easier for insurers to tap into the Hurricane Catastrophe Fund for reinsurance and requiring any savings to be reflected in rates; allowing Citizens to sell full coverage in coastal areas where it sells windstorm-only coverage now; and repealing the requirement that Citizens' rates be at least as high as those charged by the largest insurers. There is no point in forcing Citizens to be noncompetitive when it is virtually the only game in town.
The governor and state lawmakers have imposed a tight time frame upon themselves to address a difficult issue with no clear solution. They campaigned on the property insurance crisis, and Crist and many legislators pledged to lower rates. But in their haste to make good on their promises, they need to be careful and keep in mind the long term. If the cumulative effect is to freeze or lower rates by substantially increasing the financial risk to homeowners and the state after a hurricane, that is a gamble not worth taking.