Despite bipartisan support for reform over the last three years, Florida’s legislature has not effectively addressed the state’s dysfunctional property insurance system. Add to that emerging concerns regarding the long-term sustainability of Florida’s vehicle insurance system, and the state now faces dual crises in its insurance markets.
“If the Florida legislature does not reform vehicle insurance, it will run the risk of seeing vehicle insurers leave the state. If it does not reform property insurance, it will run the risk of an all-out fiscal catastrophe,” says Eli Lehrer, vice president of The Heartland Institute.
In a newly released white paper, “Workable Solutions for Florida’s Challenging Insurance Problems,” James Madison Institute Adjunct Scholars Lehrer and R. J. Lehmann outline the cases for reform and propose a series of recommendations that can be immediately addressed.
Lehrer said, “While legislators cannot solve in one session all the insurance-related problems that face Florida, they do have an enormous opportunity to make a very real dent in some of them. This paper focuses on reforms that could reasonably be implemented in the 2012 Legislative Session and thus could begin to make a meaningful difference in Floridians’ lives very shortly thereafter.”
Property Insurance Reforms
Florida’s geographic vulnerability to hurricanes and tropical storms cannot be changed. Earlier legislative efforts to address rapidly rising property insurance rates resulted in the creation of a state-sponsored property insurer, Citizens Property Insurance Corp., and reinsurer, the Florida Hurricane Catastrophe Fund (Cat Fund). Both have ballooned beyond their ability to handle the risks they face.
The authors’ recommendations:
- Retain the Cat Fund as a buffer for Katrina-sized events, but shrink it to remove the dangers it poses to the state. Although the Cat Fund offers value as a buffer, it is currently Florida’s largest reinsurer while lacking sufficient resources to meet the potentially massive payout in the event of a major storm. To reduce this risk, legislators should eliminate the Temporary Increase in Coverage Li