Thursday, April 23, 2009

Florida House strikes again

Florida House approves open pricing for home insurers

Read in - April 22, 2009

TALLAHASSEE — The House this morning passed a bill that would allow insurance companies to charge whatever premiums it wants on homeowners insurance policies, a move proponents said would attract companies to the state and let the marketplace decide appropriate rates.

The policies allowed by the proposal would not be subject to extra fees all insurance consumers are now liable for to pay back state-run Citizens Property Insurance deficits.

The bill, sponsored by Rep. Bill Proctor, was overwhelmingly passed 105-13. The Senate must still pass the bill. Gov. Charlie Crist, who has fought State Farm and other big insurance companies, has indicated in published reports that he doesn't like the bill.

Lawmakers said the bill is a response to the "unintended consequences" of Crist's insurance legislation during his first month in office in January 2007. Companies meeting certain financial soundness tests -- a combination of reserves and premium-to-loss-liability ratios -- would be eligible to sell the policies.

State Farm Florida, the state's largest private property insurer, last year was denied a requested 47 percent increase for its homeowners rates and as a result is pulling out of the state -- regulatory actions taken with authority granted in the 2007 legislation. The company said without the increase it was sure to lose money, even without a catastrophic hurricane.

The company -- and State Farm is not the only company that could take advantage of the bill's provisions -- is not saying whether it would sell the unregulated policies but its lobbyist has previously said the company does favor a change in regulations.

Rep. Marti Coley, a Marianna Republican, was among those who said people are clamoring for the change. "I hear from so many constituents who start out their letters: Please let me choose.

There was opposition expressed, even with the overwhelming vote.

"I do have a concern and that is, there is nothing in the bill that will prevent a company from charging rates much higher than what are actuarially necessary. It could lead to price gouging," said Rep. Franklin Sand, Democratic leader in the House from Weston. Proponents said the marketplace would work to find appropriate rates -- if companies set premiums too high, consumers won't buy the policies.

"For those of you who have concerns … this is not unregulated policies," said Proctor, a St. Augustine Republican. "I can count several major regulations that (state insurance regulators) will still apply on these policies. No one is compelled to buy a policy."


My reaction:

This looks like an unbridled attack on all government regulations that aim to protect the consumer. Homeowners in Florida have seen a tremendous increase in their property taxes, their cities charges for basic services, and insurance premiums.

Even with government strong attempts at reining in homeowners' insurance premiums, Florida property owners pay higher insurance costs compared to other states.

An important factor in Florida real estate problems is the cost of ownership.

I am a permanent advocate of bringing back to reasonable limits the ever increasing greed of cities and counties governments who don't seem to understand that time has come to downgrade all these luxurious offices, services, bureaucracies; the ridiculous proliferation of police department, zoning offices, compliance offices, fire departments, etc. etc.

South Florida consists of a ridiculous amount of cities stretching up from the Keys . I have never counted them, but believe me: they are too many. And lately they have come up with new tricks to squeeze every penny off the homeowner. Since property values are down and the inflated tax bills have come down to more reasonable levels, cities and counties can't quite adjust. Even though uncountable new condos and homes have been built in the last decade and that their tax base has grown above all their expectations, they just cannot understand that we have to go back to thrift and cost controls. That charging us for previously free services, or increasing their fees to "adjust" their budget, is not the solution.

I know that, many years ago, the Jacksonville area consisted of a large amount of cities. They consolidated and we have now one entity: Jacksonville.

Can we achieve this in South Florida? Why not? This country is known for not being afraid of innovations and bold approach to solving problems. This is not as provocative a thought as it could be qualified. It just makes sense.

Regarding the insurance issue. Yes it can be resolved in a more consumer-friendly manner.

Large insurance companies cannot be left to cherry-pick the territories and services that they want to provide. Regulating insurance companies in a reasonable fashion is not as unreasonable as some of our Florida legislators want us to believe.

Does the word AIG ring a bell? Well, it was the largest US insurance company, and they left them alone and perhaps you would like me to remind you that $150 billion (or was it $180 ?) of taxpayers' money had to be spent to bail them out. They are one of the worst culprits of the terrible real estate crisis in US history. They are a good example of unregulated insurance companies. You will say that it's not a valid comparison.

I will respond that, when large corporations are allowed to only "consider their shareholders' interests", what really happens is that they rather consider "board of directors' interests". Should we allow our governments to give up their right to supervise such an important industry? I don't think so. If some of our elected officials feel that it's not up to them to protect the citizens who elected them, let's remember who they are when we pay our higher insurance bills, and also at elections time.

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