On insurance, it’s time for Florida to try something new | Editorial [South Florida Sun-Sentinel]

Florida’s state-run property insurer of last resort faces a crisis.

What else is new?

Florida has no helpful ideas for this crisis.

What else is new?

In fact, Florida has no helpful ideas for the wider crisis of rising property insurance rates by all companies.

What else is new?

Barry Gilway is CEO of that last-resort insurer, Citizens Property Insurance Corp. This month, he told a Florida House panel that the state’s property insurance industry faces “a sea of red ink” because of all the coverage it has been writing. Citizens had 708,000 policies as of Sept. 30, about 200,000 more than last year. The supposedly last-resort carrier is Florida’s largest property insurance company.

Obviously, it wasn’t supposed to happen this way. But it’s happened before with Citizens, and it will happen again.

Florida’s property insurance market has not been normal since 1992, when Hurricane Andrew tore through southern Miami-Dade County. Companies such as Allstate and State Farm, which had competed for business by cutting premiums, shed hundreds of thousands of policies.

Since then, governors of both parties and state legislators have done favors for the insurance industry. Among them:

— Creating, along with Citizens, state-subsidized reinsurance, which carriers buy to protect themselves against big losses. Everyone in Florida who buys hurricane coverage pays into the fund;

— Exempting perils from required coverage. Companies now basically don’t have to cover damage from mold and sinkholes;

— Offering incentives to state-based startup insurers. When the national firms began bolting, legislators saw homegrown alternatives as the answer;

— Allowing companies to seek rate increases of up to 15 percent without a full rate hearing. Last year, there were 105 rate filings with the Office of Insurance Regulation. Fifty-five of them were for more than 10 percent.

Again this year, Tallahassee claimed to have found the solution: Make it easier for companies to deny claims when they suspect fraud. Make it easier to push homeowners out of Citizens and into more expensive private coverage.

If that sounds like a solution devised by the insurance industry, you’re right. The bill sponsor was Sen. Jim Boyd, R-Bradenton. He’s in the insurance business. He’s chairman of the Banking and Insurance Committee.

Gov. DeSantis said the law will “give consumers more opportunities to have policies that are affordable and that will protect them from whatever Mother Nature throws our way.” Boyd said it will take between 12 and 18 months for the changes to “filter through the system.”

Then rates will come down? Don’t bet on it. The insurance industry always has an excuse.

Despite that state reinsurance fund, companies claim that they still have to buy private reinsurance, rates for which are unregulated. Even when Florida has quiet hurricane seasons, the companies say disasters elsewhere are driving up their costs. The new thing is requiring homeowners to replace roofs that might be less than 20 years old but which insurers consider inadequate.

Only once has Tallahassee stood up to the insurance industry. That happened during a special session in January 2007. Then-Gov. Charlie Crist said he wanted rates to “drop like a rock.” Then-House Speaker Marco Rubio agreed.

Legislators made significant changes, over the industry’s objections. Analysts stated that the changes, if the Legislature kept them in place, would have brought rates down and kept companies solvent.

But that attitude change didn’t last. Rep. Evan Jenne, D-Dania Beach, sits on the committee that heard Gilway’s presentation. Jenne first went to Tallahassee in 2007. Those changes from 14 years ago, he said, “have been rooted out.”

The result, Jenne said, is a potential “economic crisis that not enough people are keeping an eye on.” That crisis could have “dire ramifications for the state, especially South Florida.”

Anyone with a mortgage must have property insurance. If coverage becomes unaffordable for all but the wealthy, Florida’s real estate market could suffer. Rising costs for hurricane insurance come as some homeowners find that they must buy flood insurance or pay more for their flood policies.

During that committee hearing, Jenne asked, “Should we be trying something new?” Well, yeah.

Florida could require insurers operating here to write all lines of coverage, not just lucrative auto policies. Florida could require that companies pass along savings from anti-fraud legislation to customers. The industry would fiercely oppose such consumer-minded bills.

And Florida could join with other disaster-prone states and urge Congress to create national catastrophic insurance. That’s Jenne’s preferred option to spread risk to a larger pool.

But Tallahassee, where lobbyists rule, remains stuck on insurance reform that doesn’t offend the insurance industry. What else is new?

The Sun Sentinel Editorial Board consists of Editorial Page Editor Steve Bousquet, Deputy Editorial Page Editor Dan Sweeney, and Editor-in-Chief Julie Anderson. Editorials are the opinion of the Board and written by one of its members or a designee. To contact us, email at letters@sun-sentinel.com.

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