Gov. Charlie Crist should mark the start of another hurricane season today by vetoing a property insurance bill that would make it too easy for insurers to increase premiums. That is the right decision, but it also underscores that Florida has yet to figure out how to make coverage more available and affordable. Forecasters expect a busy hurricane season, yet the best Floridians can do is make their own preparations and hope the state's recent luck does not run out.
The property insurance bill (SB 2044) has some worthwhile provisions, including raising the amount of capital that insurers are required to have to stay in business. But there is no reason to broaden the ability of insurers to get expedited review for rate increases of up to 10 percent to cover reinsurance and inflation costs. The way the bill manipulates mitigation discounts — the premium reductions homeowners receive for buying storm shutters or otherwise hardening their houses against storms — also unfairly penalizes those who made the investments at the encouragement of the state.
It also turns out that — surprise, surprise — the insurance industry played a large role in writing the bill. The Sarasota Herald-Tribune reported Monday that newly released state e-mails show the Office of Insurance Regulation practically begged industry lobbyists to write parts of the legislation. No wonder Insurance Commissioner Kevin McCarty now wants Crist to sign the bill into law.
This is not the only example of questionable judgment by McCarty's office. The effort to cultivate new Florida-based insurers has not been as successful as the insurance regulator has indicated at various times to the governor and Cabinet. The Times' Kris Hundley reported Sunday how regulators awarded a license to Magnolia Insurance of Coconut Grove even though its founder had no insurance experience and a poor credit record. Magnolia's former chief financial officer now acknowledges the company had a flawed business plan and was so far in debt from the start it quickly became clear it was doomed to failure. The result is that thousands of customers now have little choice but to seek coverage from the state-run Citizens Property Insurance Corp.
Citizens, the state's largest insurer with about 1 million policyholders, and the state's Hurricane Catastrophe Fund, which sells reinsurance to insurers, are in better financial shape than they have been entering some previous hurricane seasons. But they are far from being able to handle the worst hurricanes, and after a large storm Floridians would be paying huge assessments and begging for help from the federal government. There has to be a better way. Neither the competitive, lightly regulated marketplace sought by industry supporters nor artificially low rates mandated by politicians are viable solutions. Stronger building codes, tougher development rules along the coast and a commitment by homeowners to invest in storm shutters, stronger garage doors and other improvements will help over time. But both Congress and the state Legislature have to be more aggressive in finding ways to create a stable insurance market.
In Washington, Florida's congressional delegation should continue to push for a regional or national catastrophe fund that would spread the risk for major storms and other disasters. In Tallahassee, state officials should examine the feasibility of having the state collect all hurricane premiums and paying those claims in return for the private insurers servicing all policies and covering other damages. Civic-minded St. Petersburg residents have spent months researching that idea and have taken it as far as they can. It may not work, but the current system is not sustainable, either.