EDITORIAL: Reject industry attempt to tap state-run insurer
Apr 30, 2008
Palm Beach Post –-April 30, 2008
Palm Beach Post Editorial
It’s the last week of the legislative session, which is the time for notorious “strike-all” bills. They are new versions of big-issue legislation. They have a deservedly bad reputation because they run long, arrive at the last minute and contain all sorts of hiding places for bad stuff.
On Tuesday, a “strike-all” transportation bill of more than 100 pages went to the House from the Senate. To the Senate from the House went a 100-plus page “strike-all” insurance bill, which contains bad changes for Citizens Property Insurance Corp., the state-run insurer of last resort that is so important to South Florida.
The state wants to attract more private insurers and reduce the roughly 1.2 million policies in Citizens. To lure those companies, the Legislature wants to create a fund that would offer up to $25 million per company in incentives. To fill up that fund, the Legislature wants to take $250 million from Citizens.
Understand that many legislators and the private insurance industry have complained that Citizens wouldn’t have enough money to pay all claims after a bad storm year. If that happened, Citizens would have to assess policies statewide. Why, then, would the same Legislature leave Citizens with less money?
Compounding its error, the Legislature may prevent Citizens from writing “multi-perils” policies – for fire and theft along with wind – in designated high-risk areas, most of which in this region are east of Interstate 95 in Palm Beach and St. Lucie counties. Most private companies don’t write hurricane coverage in those areas, though they offer the lucrative fire/theft policies.
Citizens has 406,000 hurricane-only policies in high-risk areas. The company can write multi-perils coverage elsewhere, but has only about 40,000. Allowing Citizens to write more full coverage would make the company stronger and better able to pay hurricane claims. That would seem to be in keeping with what the Legislature wants, but the private industry opposes the change.
Both the Senate and House would shift money from Citizens, but the House would allow the state to take more. The House also would continue to restrict which policies Citizens can sell. The House also is tougher on Citizens policyholders. Citizens rates are frozen until next year. The Senate and House would allow wind-only policies to increase 10 percent a year until they are determined to be adequate to pay claims. The Senate, though, would allow just a 5 percent increase the first year on multi-perils policies.
The Senate president (St. Lucie) and House speaker (Miami-Dade) are from counties where Citizens provides the only hurricane coverage for some residents. Unless the private market shows new interest in covering those Floridians, there’s no reason to penalize Citizens.