It's time we got straight answers on insurance

By A TIMES EDITORIAL
Published October 19, 2007

Florida lawmakers may be fooling themselves to think that putting the state on the financial hook for big hurricanes will translate into lower insurance rates for homeowners. But give insurance commissioner Kevin McCarty credit for demanding some answers.

The subpoenas that McCarty has issued to Allstate Floridian, which is seeking a 42 percent rate increase, are aimed at peeling back the layers of this insurance enigma. Insurance companies complained they were being hit by extraordinary increases in backup insurance for major storm events, so the state created a cheaper alternative from its own catastrophe fund. But the result has been that most of the companies are trying to increase, not reduce, their rates.

This turn of events has sent the ever-gracious Gov. Charlie Crist into orbit. "I'm a free-market guy and I believe in people making a profit, but I do not believe in profiteering on the backs of our people," he said. "This action by the commissioner to get these subpoenas out is important, so we can get honest answers."

Similar threats caused State Farm Insurance to settle in its rate case by offering cuts of 9 percent, but McCarty should not be looking merely for leverage on rates. Lawmakers need some answers. If putting billions of public dollars at risk for storm coverage really has no effect on private insurance rates, then the state needs to spend its money elsewhere.

Insurance executives argue that the catastrophic fund is only one piece of the puzzle and that rating services demand additional layers of protection because of the recent hurricane history. That may be so, but the state can no longer take their word for it. When the state started putting its own money on the line, it changed the financial equation. As a business partner, in essence, Florida must see the ledger books and the actuarial tables and the company memos.

Robert Hartwig, president of the Insurance Information Institute, called the subpoenas "a form of intimidation" and told one newspaper "there's absolutely no justification that would support the Office of Insurance Regulation's bizarre theory that insurers are colluding indirectly or directly through their trade association or modeling companies or rating organizations."

History, though, is sufficiently replete with cases of insurance collusion that no one can credibly label such suspicions as "bizarre." As for the complaint that McCarty's subpoenas represent "a form of intimidation," belittled consumers can only smile. If this is intimidation, it's long overdue.

[Last modified October 19, 2007, 00:53:47]