TheLedger.com
Editorial
April 13, 2011
Citizens Property Insurance has so many critics that the government-sponsored insurer is the butt of jokes in the Florida Legislature.
During a recent hearing, for example, state Senate Budget Committee Chairman J.D. Alexander, R-Lake Wales, got laughs from fellow committee members when he proposed an amendment to change Citizens’ name to the “Taxpayer Funded Property Insurance Corp.”
Legislators can be excused for getting a little slaphappy during their annual session, but what was so funny about Alexander’s amendment?
What’s more, why are so many legislators — including proponents of bills that would further limit Citizens’ reach and substantially raise private-sector premiums — treating property insurance so cavalierly?
Yes, Citizens — a nonprofit, tax-exempt government corporation — has been plagued by problems since its in inception and, despite the acquisition of $2.4 billion from the sale of bonds last week, some estimates suggest the insurer will require a $14 billion bailout if a catastrophic storm strikes a heavily populated portion of Florida.
And, yes, in a perfect world, property owners would have access to affordable insurance provided by a solvent, stable and well-capitalized private-sector market.
But Citizens and its predecessors were created in response to the failure of 11 private insurance companies, in the aftermath of Hurricane Andrew (1992) and the subsequent exodus of insurers. The state had to use public funds to pay claims filed with the failed insurers.
Private insurers continue to leave the state, and policy cancellations are routine. The market was in crisis again after the 2004 and 2005 hurricane seasons.
It’s understandable that private-sector insurers and their lobbyists resent the size of Citizens’ client base — the government corporation has 1.3 million policyholders, about one-third of the market — and the state’s efforts to keep its premiums under control.
It’s obvious, too, that Florida’s vulnerability to hurricanes and dense coastal development create enormous exposure for insurers. Higher premiums can be justified, so long as they are used to keep private companies solvent and enable them to pay claims.
Bills advancing in the Legislature would place constraints on Citizens, but lift caps on private-policy premiums and significantly reduce the exposure of insurers.
Proponents contend that the legislation will stimulate the private market and lead to more competition and, thus, better insurance.
Let’s hope they’re right. History casts doubt on their optimism. Despite the potential to charge higher rates in the future, many of the most robust insurers have continued to cancel policies and reduce their exposure in Florida.
The legislation provides too few assurances that rate hikes will translate into competitive pricing, greater availability of coverage and an increase in the number of companies willing to write policies and able to pay claims.
http://www.theledger.com/article/20110413/EDIT01/104135000/1358/news06?p=2&tc=pg
