Don Brown

The Florida Times-Union
By David Hart
January 6, 2012

Looking back on 2011, Florida thankfully avoided a hurricane landfall for an unprecedented sixth consecutive year.

While this string of good luck won’t last indefinitely, the New Year brings about an opportunity to reform Citizens Property Insurance Corporation and the Florida Hurricane Catastrophe Fund before the next storm causes a collapse of these government-run entities.

Reform is critical. One primary reason is because the government-run Citizens Insurance has grown from the insurer of last resort to the insurer of first resort.

Second, reforming both Citizens and the Cat Fund will help to eliminate the “hurricane tax” assessment levied on Florida businesses, homeowners, renters, charities, churches and drivers to cover costs associated with major hurricane losses.

Florida’s business community is still paying for the back-to-back storms of 2004 and 2005.

And the future is not bright for all taxpayers should a major storm or series of storms hit Florida in 2012.

If a major storm hits, future “hurricane taxes” could amount to over 50 percent of insurance premiums each year for up to 30 years and will be financially devastating for the business community.

Also, Citizens Insurance and the Cat Fund will not have the capacity to pay claims for future storms and will rely entirely on taxpayer-backed debt — further threatening the Florida economy.

Solutions needed
Cat Fund Chief Operating Officer Jack Nicholson and many of Florida’s elected leaders agree that it’s important to reduce the size of Citizens and scale back the Cat Fund.

From increasing the Citizens Insurance rate glide path to reducing the capacity of the Cat Fund, Florida must create an environment where insurance premiums reflect exposure to risk.

Nicholson has diligently worked to listen to the views of stakeholders and recently presented a seven-year plan to reduce the overall size of the Cat Fund to members of the Florida Cabinet.

Rep. Bill Hager, R-Boca Raton, has also filed a bill, HB 833, which is a balanced approach and strong first step in reforming the exposure Florida will have if a major storm hits.

Increasing premiums
A modest increase in current rates is far less risky than the devastating economic impact from a massive “hurricane tax” or potential insurer insolvencies that Florida will face in the wake of the next major storm.

If Citizens Insurance and the Cat Fund were able to borrow enough to pay their claims, Florida’s entire state debt is at risk to double, and decades of hurricane insurance subsidy assessments will likely be paid by businesses, homeowners, renters, charities, churches and drivers. The situation is even worse if Citizens Insurance and the Cat Fund cannot borrow funds.

Florida can no longer hide its head. We must accept that Florida faces danger from unfunded insurance subsidies that will result in massive exposure to “hurricane tax” assessments.

This threat is far greater than paying a fair price for insurance. Private insurance markets should not be forced to compete with government-run insurance companies.

Instead, they should be positioned to provide competitive rates and thrive in a vibrant market. Also, the private reinsurance industry and capital markets are ready to provide the needed capital to stabilize Florida’s reinsurance market.

The Florida Chamber of Commerce urges policymakers to consider the important Citizens Insurance and Cat Fund legislation put forth by Hager to fix Florida’s broken insurance system.

Seismic reform needs to take place immediately before Florida’s streak of good luck runs out.

David Hart is the executive vice president of the Florida Chamber of Commerce. He can be reached at this email address: dhart@flchamber.com.

http://jacksonville.com/opinion/letters-readers/2012-01-06/story/seismic-reform-needed-cat-fund

TheLedger.com
By Bill Newton
January 6, 2012

Florida’s insurance consumers face new risks from our homeowner-insurance system — some are well known, and some most people haven’t heard about. Our insurance companies, including Citizens, are supposed to remain solvent even when a big storm hits. For storms of a certain size, or multiple storms, the state Catastrophe Fund also kicks in, and uses funds it has built up in years with no storms. If there isn’t enough to fund their obligations, the state would try to borrow enough to cover claims on both Citizens and the Cat Fund, backed by their ability to make assessments on most insurance policies statewide. Because of the new economic world, that may no longer be possible, possibly leaving many homeowners stranded.

We have to fix this problem. House Bill 833, sponsored by state Rep. Bill Hager, R-Boca Raton, and Senate Bill 1372, sponsored by state Sen. J.D. Alexander, R-Lake Wales, will diminish these risks, while keeping the cost to ratepayers reasonable. Based on a proposal from Cat Fund Chief Operating Officer Jack Nicholson, the Florida Consumer Action Network believes these consumer-friendly bills are a necessary step and we support the bills as long as the cost to homeowners remains low.

The Cat Fund recently announced it faces a shortfall of $3.2 billion — or more. If the Cat Fund is unable to borrow sufficient funds to pay its obligations in full after the next big hurricane, the consequences for families and businesses statewide would be devastating. Even if the Cat Fund succeeds in borrowing enough to pay claims on a smaller storm, Floridians statewide will be required to pay assessments on their homeowner, renter and automobile policies for years to come, as we are now paying for the storms of 2005. There’s a better way to handle it.

Spreading Florida’s hurricane risk beyond our state’s borders through private reinsurance is a step we must take. Florida cannot take on all the risk itself, and needs to “spread the risk” and take advantage of international financial resources. Florida should not put its residents in financial peril because a program that is in trouble because of the economy. Instead, we should rely on an industry that is willing and able to financially handle storm risk. The Cat Fund’s protection is dangerously limited, so putting Florida on more sustainable, financial footing should be the top priority of all our elected officials.

We have insurance so we don’t have to take our chances with hurricanes and other risks. While Mother Nature has been kind to us the past few years, the dangers of relying on borrowing funds to rebuild our state in the wake of the next big hurricane are all too real. The proposal from Rep. Hager and COO Nicholson represents an incremental, measured path to smart reform.

Business organizations, nonprofits and charities have been outspoken with regard to reforming the Florida Hurricane Catastrophe Fund and supporting the efforts of Dr. Nicholson, Rep. Hager and Sen. Alexander. It’s time for Florida consumers to embrace this need for change as well. FCAN does not normally support rate increases, but we feel this is responsible, as long as the cost to consumers is 10 percent or lower, which we feel is affordable. On behalf of FCAN, I hope the Florida Legislature enacts HB 833 and SB 1372 this session. The task at hand is imperative to the well-being and financial security of our state, including Florida consumers.

[ Bill Newton is executive director of the Florida Consumer Action Network, Tampa. ]

http://www.theledger.com/article/20120106/COLUMNISTS03/120109636?p=1&tc=pg

News-Press.com
Bradley Kading
January 3, 2012

As the media reports on insurance-related matters throughout Florida, especially with regard to the state-run Citizens Property Insurance Corporation and Florida Hurricane Catastrophe Fund, the term reinsurance is one that is frequently used but sometimes misconstrued.

As some of Florida’s elected leaders aim to reform both Citizens and the Cat Fund, it’s important for Floridians to understand how private reinsurers are willing and able to handle the hurricane-prone state’s catastrophic risk.

An optional choice for insurance companies, the reinsurance industry provides a growing, reliable source of capital to support national hurricane and earthquake risk. Working with the private insurance market, which aims to spread risk so that no single entity is saddled with a financial burden beyond its ability to pay, reinsurance enhances this principle because of our industry’s ability to spread risk throughout the world.

Throughout 2011, the world experienced its fair share of natural disasters, including earthquakes, hurricanes, tornadoes and floods. However, despite a record $100 billion plus in insured global property catastrophe losses for the year, the commitment of reinsurance markets to the United States remains stronger than ever, with ample capacity to meet the demands of national insurers.

Due to our ability to spread risk globally, neither this year’s losses nor the worst ever U.S. hurricane losses from 2005, which featured Hurricanes Katrina, Rita and Wilma, have dented the private reinsurance supply that supports U.S. property insurance markets. The reinsurance industry exists to properly manage such risk, ensuring there are adequate funds for recovery and rebuilding following a disaster.

There are various examples of our industry’s ability to fully meet our obligations including the tens of billions of dollars in losses paid out to Japan, New Zealand, Thailand, Australia and Europe this past year to the more than $22 billion Bermuda reinsurers paid to U.S. clients for the 2004 and 2005 hurricanes, including Katrina. Private reinsurance plays a vital role in the “clean-up” phase following a catastrophic disaster and helps to both boost and speed up economic recovery. Unlike the structure of the Cat Fund, the private reinsurance market is able to provide funds for recovery, sparing taxpayers of Florida from the “hurricane tax” debt assessments needed by Citizens and the Cat Fund.

This upcoming state legislative session Florida’s elected leaders will consider proposals to address the issues associated with both Citizens and the Cat Fund. While some private reinsurance has been purchased by the state in the past, the wisest public policy would include maximizing the private sector risk bearing in order to better protect all Floridians from the very real threat of a financial catastrophe.

When lawmakers make the decision to completely transfer the state’s risk, international reinsurance markets will be prepared to meet Florida’s needs and perform as the strong, reliable industry capable of handling the job we were created to do.

– Bradley Kading is president of the Association of Bermuda Insurers and Reinsurers.

http://www.news-press.com/article/20120104/OPINION/301040006/Guest-opinion-Reinsurance-industry-crucial-Florida-s-tropical-storm-hurricane-coverage

The Miami Herald
By Manley Fuller, president, Florida Wildlife Federation
December 27, 2012

We concur with the Dec. 1 editorial Hot and hotter and believe that the United States should lead the way on international climate policy. The piece convincingly argues that Florida’s leaders should implement changes to address the state’s current and increasing vulnerability to storms, flooding and rise in sea level. The changes should include smarter land-use and traditional environmental policies as well as reform of Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund.

As a low-lying landscape vulnerable to sea level rise and storm damages, we should protect our natural features that have a range of benefits, from providing vital habitat for fish and wildlife to buffering us from the inevitable storms we experience.

Yet we require private citizens to assume the financial costs of storms’ risks, rather than shifting the burden to all Floridians. We support laws and policies that remove public subsidies for development of our most storm- and flood-prone coastal properties, namely by making new construction ineligible for Citizens coverage or making improvements to existing structures seaward of Florida’s coastal construction control line or within the Coastal Barrier Resources System.

We urge the Legislature and Citizens Board to consider our recommendations and support legislation that strengthens structures across the state, making them more storm resistant. By returning Citizens to the insurer of last resort and right-sizing the Cat Fund, we can better protect our state’s natural environment, reduce the public’s exposure to massive “hurricane tax” assessments and put Florida back on a glide path to stability.

http://www.miamiherald.com/2011/12/27/2563322/spread-the-risk-in-storm-prone.html

SunSentinel.com
By Julie Patel
December 27, 2011

Citizens Property Insurance should raise rates by more than the 10 percent allowed under state law and it should reduce coverage, according to a recent report from Florida State University’s storm risk management center.

The report comes weeks before the start of the 2012 annual legislative session. Lawmakers have proposed bills to reduce the financial risk to Floridians of state-backed Citizens and are considering other proposals.

With 79 private home insurers, Florida has more companies selling residential property insurance than any of the other eight coastal states the report evaluated. It’s followed by Texas, which has 69. A few national insurers that sell most homeowners policies nationwide have scaled back from the state, leaving smaller Florida-based insurers to fill the gap, according to the report.

“Despite the high number of insurers and the relatively high total premium amounts sold in Florida, the State’s private homeowners insurance market has the [lowest claims-paying reserves] of any catastrophe-prone state other than Texas,” the report says.

The report notes the average premium for $1,000 in coverage has decreased since December 2005, despite increasing in the first half of 2007, largely because people bought more coverage while state leaders approved measures to keep rates from increasing. Many policyholders have also increased their deductibles in order to minimize rate hikes.

The report recommends the state:

Increase premiums for Citizens’ policyholders by more than the 10 percent a year allowed. If this doesn’t happen, the report says it would take five more years to make some policyholders’ rates as high as they’re supposed to be.

Have insurers, including Citizens, provide less coverage. “Limited coverage would make insurance more affordable,” the report noted. Citizens, the largest home insurer in the state, started cutting some of its coverage and plans to implement new coverage reductions in 2012.

Reduce how much cheap backup coverage the state sells. The Florida Hurricane Catastrophe Fund was expanded in 2007 to allow insurers to pass savings from it to consumers. In recent years, legislators started shrinking how much coverage is offered and raising its rates.

The report backs proposals to do more of that in order to avoid “difficult, or even unaffordable, future assessments.” Nearly all Floridians are subject to paying fees to offset deficits in the catastrophe fund.

Shift the state’s focus from making rates affordable to making them fair. If regulators and lawmakers want to make rates affordable, they should subsidize premiums just for low-income Floridians instead of most policyholders.

Stop inflating discounts to policyholders that hurricane-proof their homes but keep encouraging them to do so. “Several studies have shown the cost effectiveness of mitigation in reducing hurricane” claims costs, according to the report. “Other studies have shown that homeowners may opt not to engage in windstorm and storm surge mitigation due to a perceived lack of affordability and/or uncertainty about the cost-benefit outcomes.”

For instance, some homeowners have complained the past two years that insurers are taking away legitimate discounts when trying to find ones that aren’t deserved.

Require home sellers to disclose the cost of hurricane insurance. This is already required for property taxes and for flood insurance. The disclosure may result in some people changing their minds about wanting to live in risky, coastal areas. Former Gov. Charlie Crist supported a state law that would have required home sellers to disclose how hurricane-resistant their properties are starting this year but the state Legislature overrode his veto of a bill repealing the requirement.

Provide tax breaks and other incentives to insurers that want to sell property insurance in Florida. “A premium tax credit will help offset the cost of holding catastrophe reserves to pay for losses due to severe storms in Florida’s future,” according to the report.

http://weblogs.sun-sentinel.com/business/realestate/housekeys/blog/2011/12/fsu_report_citizens_insurance.html

The Florida Times Union
Editorial
December 27, 2011

Floridians recognize that the state’s property insurance system is broken and are willing to take reasonable action to fix it.

A landslide majority of Floridians, 70 percent, fear being assessed hundreds of dollars in fees because the state’s Catastrophe Fund is unable to cover insurance claims, according to a scientific poll conducted for the American Consumer Institute Center for Citizen Research.

It is a nonprofit based in Tallahassee.

Floridians understand we have been lucky with no major storms in the last six years.

What if another Hurricane Andrew hit a populated area as in 1992?

What if the state were hit by three storms in a row, as happened in 2004?

A total of 55 percent of Floridians were willing to pay $15 a month more in premiums to make the CAT fund sound.

The survey was conducted after the CAT Fund’s chief financial officer reported that the fund is “dangerously exposed” and billions short of meeting its obligations following a storm.

The presumption had been that the state could just go to the international debt market to fill in any gaps, but recent years have shown that the world financial market is just as shaky as Florida’s property insurance foundation.

Unless Florida fixes its very real exposure to hurricane loss, its financial future is in jeopardy.

Uncertainty is a killer to business.

This is a cloud hanging over the state.

http://jacksonville.com/opinion/editorials/2011-12-27/story/floridians-get-cat-fund-troubles

The Tallahassee Democrat
By Brent Kallestad
December 20, 2011

Gov. Rick Scott wants lawmakers to fix a pair of auto and property insurance issues that are costing Floridians hundreds of millions of dollars but have eluded resolution for more than a decade.

The issue facing the largest number of Floridians is the rising cost of personal injury protection or PIP coverage that licensed drivers must buy. In some neighborhoods in the Tampa Bay area and South Florida the coverage can add several hundred dollars annually to auto insurance premiums, a cost that’s almost entirely the result of rampant fraud.

Scott, a conservative Republican, also expects lawmakers during their annual session that begins Jan. 10 to somehow reverse the runaway growth of the state-backed Citizens Property Insurance Corp., which was created a decade ago as the insurer of last resort for home and business owners. However, Citizens has mushroomed into the biggest property insurer in Florida with 1.5 million policyholders and doesn’t collect enough in premiums to guarantee that is could pay off if a catastrophic storm hit the state.

While Scott’s predecessors, as well as legislators, have tried to resolve these issues in recent years, the problems remain.

“We were just in an echo chamber here making ourselves feel good by passing bills,” said Sen. Don Gaetz, a Niceville Republican slated to become that body’s next president.

And the prospect of making gains on either insurance measure, much less both, is uncertain again as lawmakers concentrate on approving new political boundaries during the session before cranking up their re-election campaigns.

“I hope we can make progress on both, but it’s too soon to tell,” House Speaker Dean Cannon said in a pre-session interview. He points out that fixing the Citizens problem would likely result in higher premiums, at least in the short term, something legislators don’t want to do as the state suffers from a down economy and 10 percent unemployment rate.

Both PIP and Citizens began with the best intentions — to make sure anyone injured in an auto accident would quickly get money to treat their injuries and to make sure that property owners in areas especially susceptible to hurricanes could get coverage. But both have turned into annual headaches for the Legislature, where competing interests have made resolution difficult.

Under PIP, which was adopted in 1972, a driver’s own insurance company pays up to $10,000 to cover medical bills and lost wages after an accident, no matter who is at fault. But it has been fraught with fraud, with schemers turning Florida into the No. 1 state for staged accidents.

The Insurance Information Institute predicts that fraud could approach $1 billion in the state this year — costs that are passed on to customers. Lawmakers have even heard testimony that organized crime is involved in some areas of the state in the high-stakes swindles. Florida is one of only a dozen states that require PIP insurance.

“These excessive costs are levied on those who can afford them the least,” said state Rep. Jim Boyd, a Bradenton Republican and insurance agent who sits on the House Banking and Insurance subcommittee. “It’s costing our taxpayers and our citizens and our friends and neighbors a lot of money every year.”

U.S. Sen. Bill Nelson tried to clamp down on PIP fraud as long ago as 15 years ago during the time he served as Florida treasurer and insurance commissioner.

“It’s been so hard to fix the problem in Florida because of the influence of special interests,” Nelson told The Associated Press. “You’ve always had trial lawyers versus the insurance companies, plus health-care providers trying to get at least some of their costs covered in car injuries.”

State Sen. Ellyn Bogdanoff, R-Fort Lauderdale, apologized at a legislative committee meeting earlier this year for not solving the problem in 2007 when a bill she shepherded while in the House inadvertently led to increased fraudulent activity as questionable claims involving staged accidents increased 58 percent between 2008 and 2009. The Insurance Research Group also found that one-third of all no-fault claims closed in 2007 involved overbilling or excessive use of medical services.

“We messed up,” Bogdanoff said. “We need to fix it.”

She believes that keeping PIP in its existing form amounts to a legislative endorsement of fraud and some lawmakers would just like to kill it — Rep. Mike Horner, R-Kissimmee, filed a bill to repeal the law effective July 1, 2014. Many people already have health and disability insurance that would cover their losses, although the first $10,000 would not be covered in a basic health policy in Florida since PIP would pay it.

Sen. Joe Negron, R-Stuart, agrees with his colleague on many concerns about PIP, but believes changes are needed to ensure that insurance companies pay legitimate claims in a timely manner.

“Let’s not go to the other extreme and act like every person involved in an auto accident is a potential crook,” Negron said.

Lawmakers thought they might have had a solution in 2006, but former Gov. Jeb Bush vetoed it. Bush believed any changes should include limits on the number of doctor visits permitted and on charges by doctors, hospitals and lawyers.

Lawmakers did allow for more than 11.3 million licensed drivers in Florida to have an option on buying PIP in the 2007 session, but after just three months it was required again.

The Citizens property insurance problem is just as complex. The state-backed insurer is supposed to be getting smaller, but instead has been adding customers at the rate of 30,000 a month.

Scott wants Citizens shrunk because of fears the insurer would suffer massive losses if a big hurricane hits. Unlike private companies, Citizens has the power to place a surcharge on nearly every insurance bill in the state if it can’t cover such losses. Although industry estimates vary somewhat, Citizens could pay roughly $20 billion, including $6.5 billion from the Florida Hurricane Catastrophe fund, before assessing policyholders. That would be a pittance if a Category 4 or 5 hurricane hit a major metropolitan area.

The company was created by the Legislature in 2002 to provide coverage for businesses and homeowners in high-risk areas and those who cannot afford coverage in the private market. It was largely an offshoot of an underwriting association formed by the state in the aftermath of Hurricane Andrew, a Category 5 storm that devastated Homestead and other towns south of Miami in August 1992. It caused more than $20 billion in damage in the state.

The state hasn’t been hit with a hurricane since getting hit with eight in 2004 and 2005 — a six-year run that’s unprecedented since records began more than a century ago — but the Legislature hasn’t been able to use the lull to fix the system.

“They’ve begun to right the ship, but we may be running out of time,” said Sam Miller, vice president of the Florida Insurance Council. “We’ve still got crises with Citizens growing by a thousand policies a day and the CAT fund still can’t totally pay off all of its claims. We’ve got to hurry and take the steps that would make a critical difference.”

http://www.tallahassee.com/article/20111220/NEWS/111220003/Gov-Scott-pushing-lawmakers-insurance-issues

The Tampa Tribune
Editorial
December 19, 2011

Florida rolls the dice with citizens’ dollars every hurricane season. A sensible proposal by Boca Raton Republican Rep. Bill Hager would halt the reckless gambling.

It won’t be popular because it will end up raising insurance rates, but it will also make the treacherously overexposed Florida Hurricane Catastrophe Fund, the reinsurer of last resort, more responsible.

Taxpayers back up the fund, which keeps rates artificially low. But it also forces all citizens to subsidize homeowners who build in dangerous coastal areas. These homeowners are spared the full costs of their risky decisions.

Hager’s bill is built on the recommendations of Jack Nickolson, the chief operating officer of the fund. It would gradually reduce the Cat Fund’s size, from $17 billion in 2012-2013 to $12 billion in 2015-2016.

The Cat Fund now has only about $7 billion on hand, though it might raise another $7 billion or more from the bond market after a storm.

But a major hurricane — or series of hurricanes — would cost far more. The four hurricanes of 2004 — Charley, Ivan, Frances and Jeanne — cost more than $45 billion.

In the event it can’t fund its obligations, the Cat Fund can levy a tax on insurers that will be passed on to consumers. The state also would look for federal funds.

Hager’s bill would shift more of the risk to insurers and reduce the cap for the emergency special insurance tax that can be levied after an emergency.

Such moves, by reducing the public exposure, would increase homeowners’ bills, but modestly in most cases.

And a recent poll by the American Consumer Institute found 70 percent of the Floridians surveyed said they feared the expensive assessments that would occur should the Cat Fund not be able to meet its obligations. Some 55 percent of the 805 individuals interviewed said they would be willing to pay $15 more per month for coverage to make the fund sound.

Such polls, of course, may not accurately reflect how citizens will react when their insurance goes up. But should a major hurricane strike, citizens would be on the hook for much more.

Florida leaders for too long have tried to mask the true costs of the insurance marketplace.

Dominic Calabro of the nonpartisan Florida TaxWatch applauds Hager’s approach and his understanding that Florida must “alter the current state-run interrelated systems in order to reduce the probability, frequency and amount of potential ‘hurricane taxes’ on Florida taxpayers. Reform is necessary to ensure the Cat Fund can meet its obligations without crippling taxes.”

Lawmakers should have the courage to pass the measure.

http://www2.tbo.com/news/opinion/2011/dec/19/meopino1-patching-floridas-catastrophe-fund-ar-335855/

Panama City News-Herald
Editorial
December 16, 2011

When the Florida Legislature convenes its 2012 session in three weeks, lawmakers will have a full plate of issues, dominated by partisan political fights over redistricting and closing a $2 billion (or more) hole in the state budget.

However, those battles can’t be allowed to suck all the air out of other important business legislators must attend to. For instance, Florida again faces mounting financial challenges to its insurance system. The longer the state goes without enacting fundamental reforms, the more its residents are exposed to potentially disastrous economic consequences.

First and foremost is the need to change the state-run Citizens Property Insurance Corp., which issues policies, and the Hurricane Catastrophe Fund, which provides reinsurance to Citizens and private insurers.

Florida has benefited from an incredible stretch of good luck: No hurricane has made landfall in the state since 2005. That has helped Citizens and the CAT Fund rebuild their reserves that were depleted during the very active, highly destructive, seasons of 2004-05.

Nevertheless, both hold far more in liabilities than they do liquid assets, and it would be reckless for public officials to rely on the run of fortunate weather continuing long enough to close the gap. If a major hurricane, or multiple storms in one season, hit, the state would lack sufficient funds to pay claims.

That initially would force Florida to seek additional financing on the bond market — which after the crash of 2008 hasn’t exactly been in a generous lending mood.

If Citizens is unable to pay its claims because it can’t get sufficient reinsurance from the CAT Fund, it will be forced to levy surcharges on Citizens policyholders. If that doesn’t generate enough money, Citizens can levy assessments on all property and casualty policyholders in the state. These are de facto tax increases that would crush Florida’s economy. Just the possibility of such assessments has discouraged some private insurers from entering the Florida market.

Last week, Citizens took administrative steps to shrink its exposure. These include reducing or eliminating coverage for secondary structures like carports and for property inside a residence, stop writing policies for and phasing out coverage of buildings during construction and limiting coverage of homes in coastal areas to those valued at less than $1 million.

That’s a start, but more needs to be done legislatively. Citizens’ rates have been keep artificially low to benefit consumers, but they don’t reflect the true amount of risk it insures. Thus, not enough money has been collected to pay actual claims. The Legislature needs to make rates better reflect reality.

As for the CAT Fund, a bill sponsored by Rep. Bill Hager, R-Boca Raton, would gradually reduce the fund’s coverage by $5 billion between 2012 and 2015; increase its cash build-up by five percentage points each year until 2018; and limit its ability to levy emergency assessments.

The other major insurance issue is less catastrophic, but still represents an unnecessary drag on the state economy and insurance market.

The state requires all drivers to carry $10,000 in personal injury protection coverage, or PIP. It compensates people injured in accidents regardless of fault, and without having to sue the other driver for negligence. Unfortunately, it has spawned a massive amount of fraud, from exaggerated injuries to staged accidents. Indeed, even though accident rates have declined, PIP claims have increased.

The state estimates that direct losses from PIP fraud have risen from $1.6 billion in 2005 to $2.3 billion last year. Those insurance losses are borne by all policyholders: PIP rates from 35.5 percent to 72 percent since 2009.

The Legislature could take one more swing at reforming PIP, just as it did four years ago. But it would be better to scrap PIP altogether and return to the kind of tort system that is employed by the majority of states.

Most of those insurance reforms will require heavy political lifting, and lawmakers might not have the stomach to engage in so many bruising fights. Delaying action, though, will prove more costly in the long run.

http://www.newsherald.com/articles/fights-99123-closing-reforms.html

The Tallahassee Democrat
By Bradley K. Hobbs
Letter to the Editor
December 16, 2011

Re: “The answer might be a Category 4 stimulus” (Paul Flemming, Dec. 5).

I read Paul Flemming’s column hoping to find some facetious element but failed to do so. Once we get beyond the fact that there is no one able to choose “nonlethal” hurricanes, we have to address the fundamental premise of his remaining argument, which is this: Destruction is productive. This persistent, popular and absolutely wrong belief has been noted by economists since the 18th century, and in particular by Frederic Bastiat.

Bastiat (a political economist and member of the French Assembly) identified what he termed “the broken window fallacy.”

Bastiat tells the story of a shoemaker whose window is smashed by a ruffian with a stone. As the townspeople gather, one notes to another that at least there is a silver lining in that the broken window will provide the town glazier with work.

While this is true — and it is what is seen — it is also crucial to recognize what is not seen. The monies that the shoemaker must now provide to the glazier are monies that he cannot use to expand his shop, or to buy additional tools, or to purchase food for his family or any other myriad of things that all of us could spend our money upon. Thus, if it were true that destruction provided what Flemming calls an “economic bump,” that bump is immediately offset by a depression in the road elsewhere.

And if it were true that hurricanes provide a positive “economic bump,” then why should we wait for a hurricane? I’m sure we can enlist a willing crew with hammers-in-hand (putting the unemployed to work at the same time?) to roam the countryside of Florida, breaking every window they can reach and thus providing copious amounts of work for window-replacement companies.

And, if it is true that destruction is good for the economy, then why stop at breaking windows? Regular random arson, specifically designed to employ all of the skilled trades in construction, would provide a significantly larger economic stimulus. It would be easy to warn members of the household or commercial building before the lighting of the fire, and this would remove the unpredictability of death and injury associated with hurricanes, solving Flemming’s nonlethal requirement. (Unless, of course, you happen to be a firefighter, but then again they would also be provided with more work and perhaps even additional jobs would be “created.”)

Arguments such as Flemming’s are commonplace. But it is a mistake to focus on what is seen and to ignore what is not seen. Destruction is never productive, and jobs “created” through destructive forces — whatever their source or origin — are a fool’s errand.

http://www.tallahassee.com/article/20111219/OPINION05/112190307/Bradley-K-Hobbs-Hurricanes-hardly-answer