Editorial: Property insurance reform package could harm consumers
Feb 5, 2011
The following article was published in the Orlando Sentinel on February 5, 2011:
Property Insurance Reform Could Harm Consumers
To sell the public on its property-insurance reform package, which amounts to a great big gift to the companies that write your policies, legislators are — big surprise — telling homeowners how it’s a present for them.
Homeowners will benefit, legislators say, because the reforms will spawn more (and stronger) companies they can choose from to insure their properties.
But get beyond the sales pitch and there’s reason for homeowners to be anxious.
We grant that some companies writing policies in Florida have suffered, even though hurricanes have spared the state for five years running. Some startups have gone belly up, suffering the high costs they and other companies pay for backup insurance, which helps them pay claims in the wake of major storms.
Fraud has affected their bottom lines. They’ve offered discounts to policy-holders who misrepresented the work done to harden their homes.
And the companies are increasingly complaining about bogus sinkhole claims into which millions of dollars in company payouts are disappearing.
They’re due some relief. For example, an effort among legislators to reduce claim-filling deadlines to three years instead of five seems sensible.
A call to make Florida’s building code require thicker foundations and added reinforcements should be considered.
But hand the companies everything they want, which many in the Legislature appear eager to do, and it’s Florida’s homeowners who again will suffer.
Lawmakers are looking to hold back paying claims until policyholders prove repairs are under way — an unreasonable hardship for homeowners who may need to first provide contractors deposits.
They’re looking to let insurance companies cancel certain policies within 45 days – companies that at times have acted ruthlessly by casting off hundreds of thousands of loyal policyholders they no longer feel serve their needs.
Homeowners have more to fear than the legislation as it’s currently drafted, however. It doesn’t have the most odious provision featured in last year’s legislative reform package, which then-Gov. Charlie Crist vetoed: one allowing insurers to raise rates 10percent annually without proving to officials that the requests are justified. Its omission is a concession to the real-estate industry, whose agents say a return to the days of permissive rate increases would further hamper home sales.
But several lawmakers want the 10-percent rate-hike allowance returned to the bill, sponsored by Sen. Garrett Richter of Naples.
Better that lawmakers not go there. Better that insurance companies act more responsibly. If they did a better job checking whether policyholders truly are entitled to discounts because of improvements they made to their homes — something insurers admit they’ve mismanaged — they could save billions of dollars. If they operated better — their overhead’s reportedly 50 percent higher than the national average — they wouldn’t need to ask lawmakers for more ways to empty their customers’ wallets.
Which is not to say they’d back down: Regardless, they’re likely going to be asking regulators for whopping rate increases in the coming months, thanks to a new analysis that suggests inland areas are at far greater risk of suffering damaging winds than previously thought.
If a state review board agrees, some metro Orlando residents could face rates coastal residents now pay.