Orlando Sentinel
by Mike Thomas
April 20, 2011
You are underwriting insurance for 500 beachfront mansions worth a combined $2.6 billion. If a big hurricane hits Florida and blows them down, you will be taxed to put them back together. This is because the owners buy insurance from state-owned Citizens Property Insurance.
Citizens Property is proof that Republicans aren’t opposed to all entitlement programs. This one entails redistributing wealth from the center of the state to the coast.
Past attempts to correct this inequity have failed. But here we go again, this time with Gov. Rick Scott and state Sen. Alan Hays leading the charge.
Wish them luck.
Citizens is growing out of control.
The carrier is covering property worth $462 billion. We are on the hook for it because as Florida citizens, we own Citizens.
If it were a private carrier, it would have gone bankrupt long ago. Because it is not, it survives by our constant bailouts.
Gov. Charlie Crist made this bad situation much worse with his populist crusade to suppress insurance rates. He and Republican legislators froze rates charged by Citizens for three years.
Thereafter, they limited premium increases to 10 percent a year.
The result is that Citizens is woefully underfunded. To raise enough money to be fully solvent, Citizens would have to increase rates a whopping 56 percent. This means its customers are paying 44 cents on the dollar for their policies.
Consider this: Between 2004 and 2010, sinkhole claims have cost Citizens $867 million. Yet it has only collected $272 million in sinkhole premiums.
This is how the government conducts business.
Crist also politicized the Florida Office of Insurance Regulation, using it to suppress rates charged by private carriers. This created a market of highly leveraged companies, most of them losing money, with little cash on hand to pay claims. Many will blow away in the next big storm. Taxpayers will have to cover their losses as well.
This has caused a pent-up demand to raise rates, which hit with a vengeance last year.
There were 80 rate hikes. One in three companies obtained double-digit increases.
As a State Farm customer, I really got hammered.
Crist’s ballyhooed insurance reforms did nothing more than hold down rates long enough for him to run for the next political office. Now that he’s gone, the bill is coming due in huge lump sums. The very same insurance regulators who once rejected rates on Crist’s orders now are approving them in record numbers.
