A Risk-Filled Future?
The property and casualty insurance market in Florida lies at a crossroads. There is considerable debate being waged over which insurance system will best serve Florida’s unique insurance needs: one that is market-based, through private insurance companies like State Farm, or one that is state-controlled, through an expanded Citizens Property Insurance Corporation.
The recent rejection by Florida regulators of State Farm’s property and casualty rate increase request is a strong example of Florida’s misguided management of private insurers (“State Grills Insurers,” August 12). Blaming insurers for high rates and not allowing them to adjust their rates for risk and profitability is a political maneuver that ignores the realities of the insurance industry. Insurers need to be able to react to risk and charge premiums that allow them to remain solvent. Government manipulation of premium rates places insurers at a greater risk of failure.
Florida’s rate regulation system stifles the ability of insurers to react to market forces, creating an environment unfriendly to business, driving providers out of the state. State Farm is the largest private provider of wind insurance left in the state, so driving away State Farm can lead only to a greater burden on Citizens and the state reinsurance catastrophe fund.
Governor Crist’s efforts place a greater burden of risk on taxpayers, who will be stuck with the bill in the event of an insurance collapse after a major storm. A rate increase for homeowners in specific risk-prone regions is preferable to increases in assessments and taxes for everyone as a result of a reactive bailout after a major storm.
Matthew Glans (firstname.lastname@example.org) is a legislative specialist for The Heartland Institute.