strip-mall insurance companies to have enough money
to pay claims.
Mike Thomas
COMMENTARY
to Orlando Sentinel
June 3, 2010
Charlie Crist has put the finishing touches on his four-year campaign
to destroy the property-insurance market in Florida.
And just in time for what is expected to be a wham-bam hurricane season.
Crist vetoed a bill that would have required all these strip-mall insurance
companies setting up shop in Florida to have enough money to pay claims.
They are so thinly bankrolled that they have been losing money and
going belly-up even without hurricanes.
We live in the riskiest state in the nation with the most under-capitalized
insurance market in the nation.
If the winds huff and puff and blow your house down,
your insurer may or may not be able to make good on your policy.
This could leave you scrambling for a bailout from a bankrupt state,
which itself will be scrambling for a bailout from a bankrupt federal
government that will be scrambling for a bailout from the Chinese.
Crist, a candidate for U.S. Senate, is gambling this will not happen
before the November election so people won't understand the
consequences of his actions before voting.
The punch line is that Crist's office worked with legislators on the bill.
His insurance commissioner endorsed it,
as did the state's insurance consumer advocate.
But then Charlie went rogue, dumped the Republican
Party and began using his veto pen as a campaign prop.
This veto means that insurance companies here will have to continue
operating at a loss. The big companies, such as State Farm,
will continue bailing out to reduce their risk.
The state-run Citizens Property Insurance and the small start-up
companies will absorb more of the market.
As previously mentioned, many of these small companies have scant reserves.
What they do is take in premiums,
then buy backup reinsurance from bigger companies to cover their hurricane losses.
They are little more than middlemen angling for a cut of the action.
The insurance bill Crist vetoed would have
required that they triple their reserves.
They also would have had more freedom to raise rates to cover inflation
and the fluctuating cost of reinsurance. As it now stands, some of these
companies have had to cancel their reinsurance because they couldn't
afford the payments.
This is the thin ice on which our insurance market stands.
The bill would have cut down on insurance fraud, restricting hurricane
claims to three years after the storm.
As it now stands, "public adjusters," who act much like some personal
injury attorneys, solicit homeowners to reopen damage claims up to
five years after a storm hits.
The state's insurance funds recently had to pay out about $715 million
in claims from the 2005 storms.
There was a last-minute rush to cash in.
We are paying for it.
Not only is our insurance market on the verge of collapse,
but it also is costing us hundreds of millions in fraud.
Leaking roof?
Blame it on a hurricane five years ago.
Crist vetoed the bill because rates could go up 10 percent a year,
and reducing rates is a hallmark of his populist reign.
Some newspaper editorial boards actually supported a veto.
They have spent years reducing the complex world of insurance
and reinsurance into a simplistic moral battle in which evil insurers
are out to gouge innocent homeowners.
Paying 50 cents on the dollar for insurance has become
the new entitlement here in Florida.
And when the big storm hits, don't worry.
The money will miraculously appear.
The only thing keeping Crist's insurance scam afloat
is the recent lack of hurricanes.
If they resume as expected this year, and we get seriously hit,
the market will crumble, and we will get hit with tens of billions
in tax increases to pay the tab.
Crist does not care.
He cares about getting elected to the U.S. Senate,
where, unfortunately, he would be right at home.
_____________________________________________________
Mike Thomas can be reached at 407-420-5525
or mthomas@orlandosentinel.com.
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