INDIANAPOLIS (July 5, 2007) – The following statement is in response to a South Florida Sun-Sentinel newspaper story that appeared in the July 3, 2007 editions, in which Florida Gov. Charlie Crist says he’s disappointed with property insurance companies. In the story, the governor criticized companies for seeking recent rate hikes and spoke of broken promises from the industry, which, he said, had disappointed him by not lowering rates following actions by the Legislature that he claims were done at the behest of the insurance industry. The comments below may be attributed to Liz Reynolds, southeast state affairs manager for the National Association of Mutual Insurance Companies.
The comments attributed to Gov. Crist are inflammatory, inaccurate, and misleading. His statements serve only to confuse constituents concerned about the likelihood of another severe storm season.
It is understandable that Floridians want an end to rising insurance rates. All of us who live and work in Florida feel the pain of higher rates, including our member companies' employees, agents, and their families. We recognize that insurance companies must take prudent steps, such as increasing rates and reducing exposure, to ensure coverage will be there when our policyholders need it, just as it has been following previous hurricanes, tornadoes, wildfires, and other natural catastrophes.
Unfortunately, the path taken by the Legislature and governor will lead in the wrong direction – straight to the wallets of Florida taxpayers.
The governor says he is “…concerned about broken promises from the [insurance] industry.” The fact is, the insurance industry made no such promises of double-digit rate decreases. The industry has consistently maintained that the way to bring stability to the Florida homeowners’ insurance market is to allow private insurers to set actuarially sound rates and work in partnership with all stakeholders to mitigate human suffering, property loss, and, ultimately, insurance costs.
The governor’s comments that he “… hopes those rate increases are rejected,” and intimations that he may take administrative actions to “hold the industry’s feet to the fire,” suggest he either fails to understand or is ignoring the need for risk-based pricing to maintain a healthy, viable, private insurance market in Florida.
Despite the governor’s wishes that by expanding the state-run Citizens Insurance a competitive market will ensue and insurance rates will magically go down, that is not how the insurance system works. A true competitor is not propped up by the government. Further, mixing government with the private sector in this scenario does not work. The private market can insure Florida’s homeowners without “competition” from the government. Rather than lowering rates, this type of competition will only serve to force many private insurers out of the marketplace and leave Florida’s taxpayers holding the bag when the next storm hits.
If the governor believes that state intervention is necessary to reduce rates for certain policyholders, then mechanisms that send relief directly to those clearly in need would be far more effective. For example, South Carolina recently passed a coastal insurance package that includes tax deductions for catastrophe savings accounts, tax credits for lower-income property owners who pay more than 5 percent of their income toward insurance premiums, and tax-free savings accounts for homeowners who choose to carry very large deductibles or create accounts to "self insure."
The governor’s remarks obscure the true problem for Florida homeowners – increased risk of loss and the cost of that risk due to several years of severe hurricanes and other catastrophes colliding with increased land development, building, and population.
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