It should come as no surprise that Gov. Charlie Crist on Wednesday vetoed a bill that would have enabled State Farm and other large insurers to charge whatever they wanted for property insurance. The governor has been consistent — if not always responsible — in his efforts to hold down premiums, grow smaller insurers to expand the market and turn the state-run Citizens Property Insurance into a viable alternative. In this case, his populist rhetoric is aligned with reasonable policy.
Allowing large insurers to determine their own rates while rates for other insurers are regulated would have undermined the state's efforts to ease the property insurance crisis. It would not have increased competition; it would have harmed the domestic market Florida is trying to grow. It would not have provided consumer choice as supporters claimed. It would have allowed big, well-capitalized insurers to gouge their customers and force them to pay up or drop their coverage. Over time, HB 1171 would have allowed those name-brand insurers to consolidate their business in the safest areas and set prices high enough to force homeowners with higher storm risks to go elsewhere.
Supporters of the bill lodged the predictable complaints Wednesday about the governor's veto. Sen. Mike Bennett, R-Bradenton, contended that deregulating prices for large insurers would have given consumers more choices. But property insurance is not a free market, because mortgage companies require homeowners to have coverage. Allowing big insurers to jack up premiums would let them manipulate an otherwise regulated market and force their policyholders into a corner.
In the big picture, providing State Farm with an opportunity to drop plans to leave the state and dramatically raise premiums was not going to solve the property insurance crisis. The ultimate solutions include gradually raising premiums for Citizens and other insurers so Floridians can adjust, hardening homes to better withstand storms, bringing more insurers into the market to spread the risk, creating a regional or national catastrophe fund to lower insurers' reinsurance costs — and avoiding hurricanes for at least another few seasons.
When lawmakers defend legislation as providing consumer choice, it often is really about providing greater opportunities for business to charge higher prices to captive consumers. That is the case with this property insurance bill, and Crist was right to veto it.