What are the two conflicting views about property insurance as it should be regulated in Florida.
I haven't made up my decision on which one I would actually prefer. I would have to dig more into the subject, read some more, and do not let political views interfere with it.
Perhaps, in a few days, I will come back with my opinion, but it won't surely be a very expert one, but one based on my experience.
Here is the article:
Scott, Crist split on approach to property insurance
TALLAHASSEE, Fla. – Oct. 9, 2014 –
The cost of property insurance is a major issue to many Florida homeowners and
Realtors. A hurricane hasn't hit the state in nearly nine years, but that
hasn't dampened property insurance rates.
The two candidates for governor
facing a November election, Republican Rick Scott and Democrat Charlie Crist,
approach the property insurance problem differently.
The state has historically
tried to keep property insurance rates low while simultaneously bringing more
private insurers into the Florida market to reduce overall risk. Historically,
a move to achieve one goal has had a negative impact on the other goal.
According to University of South
Florida political-science professor Susan MacManus, voters' opinions about the
property insurance challenge could be a deciding factor in the election, in
part because observers expect a lower voter turnout in a non-presidential
election. A recently released Sunshine State Survey, conducted by the
University of South Florida and the A.C. Nielsen Company, found that property
insurance is one of the top six "stressors" for homeowners in
Florida, along with food and maintenance costs, health care, utility bills and
the potential of no longer being employed. MacManus said the survey found that
concerns about property insurance have risen since a prior survey in 2012.
Property insurance under Gov. Scott
During his four years serving as
Florida's governor, Scott has maintained a free market approach to the
industry. That approach includes efforts to attract more private insurers to
Florida, push thousands of policyholders out of state-owned Citizens Property
Insurance Corp. and reduce the items it covers.
The average annual premium for
homeowners' policies has grown from $1,544 to $1,933 under Scott. Meanwhile,
Citizens coverage has been reduced for many customers to just main buildings,
leaving unprotected awnings, gazebos, Tiki huts, and most carports and
screened-in pool enclosures, which are more vulnerable to damage in a
hurricane.
"Homeowners are very attuned to
that, and homeowners tend to vote," MacManus says.
The shift of policies from
state-owned Citizens has accelerated in the past two years through large
"take-outs," in which thousands of Citizens policies are offered to
private carriers. Also, a new electronic clearinghouse forces first-time
policies and renewals to go with a private firm if the rates are somewhat
comparable. Through Aug. 30, 124,995 policies have exchanged hands through the
"takeout" process this year. In 2013, 386,787 policies were shifted
from Citizens to private insurers.
Property insurance under Crist
If elected, former governor Crist
has said he will act to reverse the rate increases that have occurred under
Scott's free-market watch.
While governor, Crist, then a
Republican, backed a temporary freeze on Citizens rates and later a 10 percent
cap on annual rate increases. Both were intended to help homeowners after a
spate of hurricanes in 2004 and 2005 and during the recession. But they also
helped lead to a shift of the state-backed insurer from being a refuge for
those who couldn't find coverage into being the state's largest
property-insurance company.
"The choice could not be more
clear," Crist told reporters while announcing his insurance plan last
month. "A governor who took on the insurance industry and lowered rates so
families had more in their checking accounts and at the end of the month? Or a
governor who let insurance companies raise rates – over 25 percent so the
companies and his campaign have more in the bank?"
Insurance risk
Scott spokesman Matt Moon says
Crist's effort to hold down rates on Citizens also increased the liability risk
for all homeowners. "Florida taxpayers were left on the hook for billions
and homeowners were left with fewer options to protect their property,"
Moon said in a prepared statement. "Under Gov. Scott, Florida has done the
exact opposite, reforming and shrinking Citizens Insurance while giving
consumers more choice and competition to protect their home."
The insurance industry generally
backs Scott, and their backing has translated into more dollars for Scott's
reelection campaign. Since the start of 2013, Scott has received roughly $2
million in contributions from the property- and auto-insurance industry through
his campaign. Over the same timeframe, Crist and a closely aligned political
committee, Charlie Crist for Florida, have received about $75,000 from those
with ties to the insurance industry.
Lynne McChristian with the Insurance
Information Institute labeled the Scott model as "pay now," and
Crist's model as "pay later."
"The pay-later model is the
riskiest," McChristian says. "We can't change Florida's hurricane
history, and no one believes this nine-year reprieve means a permanent end to
major storms. … Forcing private insurers to roll rates back to where they may
be actuarially unsound is definitely unfriendly to consumers. It gives
consumers fewer choices because it can cause insurers to restrict how much risk
they can take on."
A middle approach
Jay Neal, president and CEO of the
Florida Association for Insurance Reform, said a non-political middle ground is
needed between Crist simply rolling back rates and Scott wanting to further
deregulate the industry.
"I think we'd be better off,
overall, if the extremes were not the policy – if we found a way to lower
rates, but do it in a way that is actually paid for, actually
responsible," Neal said.
Neal contends rates could be lowered
about 7 percent by reforming the reinsurance industry, which is heavily based
offshore.
Meanwhile, Neal added that in a
state where "there isn't a long-term approach," there is a need to
keep regulations in place on the industry to ward off lobbyist attempts to give
insurers unfair advantages over policyholders.
"There is a price that the
industry pays for having anti-trust protection, and one (of those) is to have a
state regulator ensure they're treating policyholders fairly," Neal says.
"If we can help build sort of a middle approach, we'll have some
stability. If you're out of balance, sooner or later someone is going to tug it
back in the other direction, and that's where we have the pendulum effect. It
never really stops, it just goes up the other end of the spectrum."
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