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Is Florida ready for a real free market in homeowners insurance?

Got a deal for you.

Let's say there was a new kind of insurance you could buy for your house in Florida.

Let's say it would be the exact opposite of the consumer experience we've had in recent years.

Instead of having to beg and hunt in hopes of finding an insurance company … .

Instead of getting canceled by your insurance company out of the blue, and being kicked into the state's Citizens Property Insurance Co. … .

Heck, they'd be lining up to get your business. Right off the bat, there might be 40-plus reputable insurance companies that would qualify to insure your house.

There's just one little catch:

Their rates would not be regulated by the state. They could charge you whatever they want — arm and a leg, firstborn kid, whatever.

That's the trade-off. We'd get new choices. In return, the insurance companies would set their own rates, pretty much the same way that Publix prices its own groceries.

This is not a hypothetical proposal. The Florida Legislature, which is in a full-scale deregulatin' mood this year, is well on the way to creating this new insurance.

It might turn out to be one of the most significant ideas of this year's session. If you're tracking it, the measures are Senate Bill 2036 and House Bill 1171, both of which are moving merrily along.

There are still minimum safeguards. To sell these new policies, a company would have to have a sizable surplus — no fly-by-nights need apply. The Legislature estimates that only 44 companies would qualify. They'd still be subject to regulations on fraud, deception and so forth.

To buy one of these policies, customers would have to sign a statement in big type saying that they know exactly what they were doing. The statement would say, in part:

THE RATE FOR THIS POLICY IS NOT REGULATED BY THE FLORIDA OFFICE OF INSURANCE REGULATION AND MAY BE HIGHER THAN THE RATE APPROVED BY THAT OFFICE.

I kind of like this. I like it because it calls the insurance industry's bluff and says, "Okay, now you can charge what you want — come insure us like you said you would."

I've been saying for years that there are only two ways for Florida to improve its insurance mess — either deregulate rates, or have the state take over the entire hurricane insurance risk.

This is a strong step in the free-market direction. For that reason, some folks won't like it. But the beauty of this bill is that nobody has to change. Folks can stick with Citizens or their old, regulated private company.

There is one troubling side issue in the House version of the bill that should be fixed.

The House bill not only creates unregulated policies, but also exempts them from any future assessments that the rest of Florida's policy-holders would pay in the event of a big hurricane.

In other words, the House bill would create two classes of Floridians: a privileged class that could afford to "buy its way out" of paying for Florida's future hurricanes, and those still in the old system who would get stuck.

Me, I would strike that part of the House bill, pass the "clean" Senate version, sweet-talk the governor into not vetoing it (which might be a challenge), make it the law of Florida, and see if it does any good. Heck, it can't hurt.

Is Florida ready for a real free market in homeowners insurance? 04/15/09 [Last modified: Wednesday, April 15, 2009 11:04pm]
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