EDITORIAL: Florida politburo adds to taxpayers’ risk, cost of homeowners insurance

Apr 25, 2008

‘F’-rated homeowners insurance program continues slide as lawmakers freeze rates again

By TCPalm Staff
Treasure Coast Palm–April 24, 2008

If Floridians haven’t been crippled enough by the effects of the subprime mortgage fiasco, overbuilding and the rest of the nation’s economic doldrums, just wait and see what will happen if a hurricane or two hits this year.

Florida senators earlier this month voted to continue a freeze on premiums paid by Citizens Property Insurance customers for the rest of 2008. In 2009, unless another freeze is enacted, the rates could increase a measly 5 percent.

Is this any way to run a sustainable taxpayer-backed insurance enterprise?

Citizens, which was supposed to be an insurer homeowners used only if they couldn’t get property insurance elsewhere, is owned by Florida’s taxpayers and ratepayers. It insures about 5,000 single-family homes on the Treasure Coast, mostly those near the water. About two-thirds of its customers live in Palm Beach, Dade, Broward and Monroe counties.

The rest of us have been paying assessments to the insurer for years to subsidize Citizens’ low rates. While real insurance companies set rates based on risk, and actuarial tables, Florida legislators set rates based on politics (lower rates equals more votes) and while crossing their fingers that the Big One does not hit the state.

A major hurricane would expose the state to billions of dollars in claims.

One estimate is that if the state has a repeat of the 2004-5 hurricane pattems, all state policy holders could face a $20,000 assessment.

Current Florida law authorizes the state to sell $28.42 billion in bonds — backed by assessments to all Floridians — to pay for hurricane damages.

The $28.42 billion is more than any U.S. state or city has ever issued, according to the Heartland Institute, a nonprofit group that recently issued its 2008 Property & Casualty Insurance Report. What’s more, a “severe but foreseeable storm season” could result in $35 billion in claims, according to state Reps. Donald Brown, R-DeFuniak Springs, and Dennis Ross, R-Lakeland, chairs of the House committees on insurance and courts.

Such a system is unsustainable.

It’s no wonder Florida was one of four states to receive a grade of F from Heartland for its property insurance system. It’s not surprising given socialist legislators’ penchant to build up a government-run insurer now ranked in the top 30 nationwide in exposure to perils.

“Consider (Citizens) rates,” Lynn McChristian, a spokesman for the New York-based Insurance Information Institute, told Scripps Treasure Coast Newspapers recently. “Properties insured by Citizens are presumably in areas of the highest risk, so it would make sense for their rates to be among the highest. Instead, those with insurance coverage from other companies are subsidizing Citizens.”

So the next time you look at your insurance bill — unless you’re one of the privileged Citizens customers — blame your state lawmaker.