Florida Style Insurance Reform
Aug 18th, 2007 by admin
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The politicians in Florida are congratulating themselves for enacting a homeowner’s insurance reform plan today. They’ve been at it for a week! Listen to the Senate President; “what you (lawmakers) have done is enhance a pillar of our economy because this (crisis) had the ability to bring Florida’s economy to its knees.” Read on and form your own opinion.
There are two worlds in the Florida Homeowners’ insurance business. A state entity called the Citizens Property Insurance Corp. and private companies like State Farm, etc. The former was founded because many of the latter stopped doing business in the state or became very selective in what they would cover. Thus, those unable to get private coverage can get coverage from Citizens. Interestingly, all of the private policies are hit with a surcharge that goes to fund Citizens. Needless to say, Citizens is loaded with coastal properties that are inherently at high risk. The crisis came about because Citizens raised its rates about seventy percent for 2007, and many private insurers sought increase as high as 300%. The latter number is from the author’s personal experience.
The new reform package will freeze the rates for Citizens policyholders at 2006 levels, a move that rolls back rate increases averaging more than 70 percent. It will also allow Citizens to charge more competitive rates and offer additional types of coverage. These features could reduce rates another ten percent.
It would also expand Florida’s Hurricane Catastrophe Fund by up to $16 billion for at least the next three years which could lower homeowners’ rates an estimated 10 to 30 percent, with coastal residents receiving the biggest savings.
Now for the plums that the plan offers to holders of private policies.:
1) Allows homeowners to raise their deductibles above 10 percent.
2) Allows homeowners to forego wind coverage. i.e. hurricane coverage.
3) Allows homeowners not to insure the contents of their homes.
4) Allows homeowners to pay their premiums in quarterly or semi-annual installments.
Can you believe it? The “reforms” for the private policyholder basically amount to doing without insurance at a cost that would probably be even more than they paid in 2006! It’s incredible to read that our leaders actually believe (see quote at start of article) they they’ve accomplished insurance reform. Stay tuned…
