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Letter to the editor

Either pay 'em more, or do it ourselves

By HOWARD TROXLER
Published January 24, 2008

Let's review the action.

(1) The insurance industry abandons Florida homeowners on a large scale.

(2) The public sector expands to take over the risk.

(3) Our governor and Legislature stick the public with even more risk in early 2007.

(4) But instead of the hoped-for cuts, many companies file for rate increases.

All righty, then!

This brings us to the current huffing and puffing. The state wants answers from Allstate. Allstate tells the state to get stuffed. The state breaks a pool cue over Allstate's head. And so forth.

That brings us up to date.

To be sure, our "friends" in the insurance industry would tell this sordid tale differently. They would start it this way:

The state of Florida, because of too much regulation, makes it impossible for insurance companies to charge enough to justify the risk of a hurricane.

Did you see the ad that Allstate took out in the paper a couple of weeks ago? The company offered its own three-step fix for Florida:

-Make sure the state catastrophic fund has enough money.

-Allow insurance companies to charge "appropriate rates."

-Allow insurance companies to earn "a fair return on their investment."

There you have it. Just let Allstate and other companies charge more and make more profits. That'll fix everything.

Except, you know, it won't.

Here's what would happen. Floridians would get jacked with higher rates, yes. The insurance industry would make more profits, yes, until the next big storm.

Then it would just cancel everybody's policy again.

"The system is broken," Allstate proclaimed in its ad, and who can argue?

What should we do?

There are three basic approaches:

First, we can try what the insurance companies want. We let them charge what they want and make more money and see if that actually works. Let the free market reign!

Second, we can keep the current (bad) setup. We regulate, we threaten, we grumble, and meanwhile we let them dump the risk they don't want onto the public sector.

Third, which is lookin' better and better some days, we could move all of the windstorm risk to the public sector - the state of Florida, in essence, could insure itself.

Let the private companies cover fire and auto and slip-and-fall, just like always. But for storms, everybody in Florida chips in. Call it the cost of living in Florida.

I know, I know - let's all yell "socialism!" together.

Except -

We've got socialism now, except it's a really lousy version of it. It's socialism for insurance companies. They get to keep the low-risk customers and make money. They stick the public with the most danger.

Here is the trouble with hurricanes: You either get one, or you don't. If you get one, it costs $1-bazillion. If you don't, the insurance company has the dough. The free market has failed utterly to resolve this conundrum.

* * *

If you're clickin' around, would you click by TroxBlog? We had a great live chat this week - check out the transcript. There's a gratuitous photo of Alanis Morissette. Heck, there's even my favorite insulting e-mail from a reader for the week (so far).

Look for TroxBlog under the "Blogs" menu at www.tampabay.com.

[Last modified January 23, 2008, 23:58:17]