The Florida Times Union
Editorial
June 1, 2011
Property insurance reform was a major issue during Florida’s 2011 legislative session.
No surprise there.
It has been an issue, to one degree or another, at least since 1992 – when Hurricane Andrew ripped through South Florida, leaving about $16 billion in insured damage.
Each solution, unfortunately, seems to have created its own new set of problems.
Insurance companies wanted higher rates to recoup their losses. When consumer-oriented regulators wouldn’t allow as much as they said they needed, some stopped selling policies.
Many property owners, unable to buy policies on the open market, turned to state-run Citizens Property Insurance Corp. Citizens, designed to be the insurer of last resort, has become the largest property insurer in Florida.
Also, the state – trying to entice insurers not to abandon Florida – has been selling a lot of low-cost reinsurance policies to private insurance companies. That puts the state’s budget at even greater risk.
Senate Bill 408, passed during the session and recently signed by Gov. Rick Scott, won’t solve all of the problems. But it is a step forward.
According to a Florida Senate staff analysis, it increases minimum surplus requirements. That will help ensure that companies can pay claims when hurricanes strike.
Also, it requires private insurance companies to buy more reinsurance on the open market.
And it’s designed to fight sinkhole claim fraud.
This new law has its critics – principally because it means rates, already going up, will increase even more.
But, unless the private sector is liable for more of the storm damage losses, the next hurricane will put tremendous upward pressure on taxes.
Besides, it doesn’t make sense for all Floridians to subsidize insurance premiums on coastal residences.
Let’s give this new system a chance to work – and tweak it, if need be, in a couple of years.
The hurricane problem cannot ever be solved, but the risk can be managed. And the best way would be to encourage competition in the private sector.
