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Pay now for homeowner's insurance, or pay later, but we're paying

Hey, do you want to pay more for insurance on your house?

I'm taking a wild guess that your answer is "no."

So you might not like a bill in our Legislature that would let insurance companies charge more.

It's a "deregulation" bill to allow a new kind of insurance rates in Florida. The state could not rule that these rates were too high — only too low.

Over the next three years, in annual steps, companies could raise their rates by up to 32.8 percent.

I know, I know. What the heck are they thinking? Aren't Floridians suffering enough already? Haven't we already been socked with rate increases in recent years?

This is why the governor vetoed this idea when it passed last year. It's why some legislators are fighting it again this year. The state's Office of Insurance Regulation is against it, too.

But before we boo it to death, consider what we have now.

What we have now is a plan for a future statewide Ponzi scheme that is going to sock every one of us anyway.

The bitter truth as you and I sit here this morning (you, anyway; I'm probably still in bed) is that we're already on the hook. The state is counting on taking a lot more of our money — sooner or later.

This is our plan now:

Wait until we get hit by a big storm. Borrow the money under the worst possible circumstances. And then sock every Florida insurance policy with extra charges, potentially thousands of dollars each over time, to pay it all back.

How we will howl and wail! But it will be too late. Every Floridian will be saddled directly with the cost of unpreparedness.

Some borrowing, as part of a coherent strategy, is reasonable. Debt is one of the tools in our toolbox, so to speak. But as Plan A, Plan B and all the way to Plan Z? No.

Wait, it's even worse.

As the State Farms and Allstates have pulled back in Florida, we have encouraged new, "startup" insurance companies to pick up the slack — some of them financially suspect.

A recent investigation by the Sarasota Herald-Tribune found that more than 1 in 3 Floridians with private insurance are currently covered by a company showing some sign of trouble.

Even state regulators admit — rather glibly, it seems to me — that "there will be failures" of these companies when a big storm hits.

So, let's sum matters up. A major storm will wipe out what cash we have in Florida's catastrophic fund (which backs up both private companies, and the state-run Citizens Property Insurance Corp.) and force the state into enormous borrowing that all Floridians must pay back, while likely causing grievous collapse in the weak private market to boot.

That is our current plan.

If you like this plan, or think we should keep rolling the dice and hope we don't get hit, or figure that what the heck, the feds will bail us out — well, congratulations, you are qualified to be governor or to sit in the Legislature.

So, what should we do?

I keep saying it over and over. We can go in one of two directions. The first one is a public solution: Have the state take over the entire business of insuring against windstorms, put every Floridian into the pot, and have the gumption to charge rates high enough to cover the risk.

The opposite direction is toward creating a stronger private insurance market, which is what Senate Bill 876 and House Bill 447 claim to do. The idea is allow sound companies to charge higher premiums so they will be willing to grow, strengthen the private sector, and reduce the public-sector risk.

Why would customers buy such policies? Because of loyalty and confidence, the theory goes. Otherwise they are free to go to another company, or back to Citizens (although Citizens, quite rightly, is finally being allowed to raise its rates, too).

We have the worst of all possible worlds in Florida — a weak private sector, a public sector bearing enormous risk, and a plan to borrow money and sock it to everybody on the back end. Maybe we ought to try something different.

If the Legislature kills this idea or the governor vetoes it again, the excuse will be, "Floridians cannot afford to pay more." But they should at least be honest and say: "It is our official policy that Floridians will have to pay more through the nose later, instead of doing anything about it today."

Pay now for homeowner's insurance, or pay later, but we're paying 04/03/10 [Last modified: Sunday, April 4, 2010 12:27pm]
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