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Despite legislation, property insurance costs rise

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By Lee Helscel

Since the hurricanes of 2004, property insurance in Florida has been in a flux, with significant price increases, major insurance companies dropping policies, and the state-backed Citizens Insurance Company becoming the largest property insurer in the state.

During a special session last year, legislators thought they had taken steps to secure rate relief when they passed a bill that increased the state’s Hurricane Catastrophe Fund, thus providing major private insurance companies cheaper reinsurance through the state fund.

Unfortunately, most premiums have not decreased and major companies are still dropping customers. Only about 1 in 5 Florida residents has seen premiums decrease, and most of these decreases are from relatively new startup companies.

Assuredly, the property insurance issue in Florida is complex, with coverage provided by a mix of smaller private companies, Florida-only subsidiaries of major private companies, and the state-backed insurance company. Throw in a state-backed reinsurance pool, and it gets even more complex.

But the private companies are subject to regulation regarding their rates. And this is where the current rub comes in. While legislators are taking sworn testimony from insurance companies about how they set their rates, some companies have been less than forthcoming. Allstate, for example, has simply thumbed its corporate nose at regulators. This kind of gamesmanship has to stop.

The Office of Insurance Regulation is in court with Allstate, legislators are looking at how to close the loopholes in state insurance laws, and Gov. Charlie Crist has reacted to the situation by enlisting three private-sector attorneys to evaluate a class-action suit against insurance companies.

There is no doubt the property insurance in Florida is a mess. The challenge to lawmakers and regulators is how to create and maintain an environment that encourages private insurance companies to provide coverage in Florida without damaging the interests of Florida citizens. So far, these efforts have not met with success.

While private insurance companies have a legitimate obligation to look out for the interests of their investors and shareholders, state government also has a legitimate obligation to assure that the interests of citizens are protected.

Our legislators and regulators need to keep the heat on insurance companies to be forthcoming with information about how they set their rates and where they are securing reinsurance, so that state regulators have the information necessary to approve rates that are fair to both companies and to citizens of the state.