Florida Senator Alan Hays: Let consumers decide property insurance
Apr 19, 2011
The following article was published on April 19, 2011 in the St. Petersburg Times:
Let Consumers Decide Property Insurance
When it comes to insuring your home, who’s in the best position to choose what’s right for your family — you or the government?
I believe most Floridians would say it’s you, which is why I’m proud to sponsor this year’s version of the “Consumer Choice” property insurance bill in the Florida Senate.
Simply, the bill would allow consumers to decide for themselves whether they want to buy a new kind of market-based homeowners policy in which insurers could raise or lower premiums by up to 15 percent annually on a statewide basis without having to go through full state regulatory review.
What’s the rationale behind this?
First and foremost, Floridians want and need more good choices for insuring their homes in the private market. Consumers are savvy enough to determine what they’re willing to pay to protect their most valuable asset.
Under this bill, there are no surprises. Homeowners would sign an acknowledgment that they’re buying a Consumer Choice policy because they want one and receive a comparison quote showing what a similar policy would cost in government-run Citizens Property Insurance Corp.
If the homeowner thinks the Consumer Choice policy is a good deal, they can buy one. If not, they can keep shopping.
By allowing private insurers some limited rating flexibility, we can help spark competition that will strengthen insurers and stabilize rates over time.
Consumer Choice policies will also help encourage financially strong, private insurers to return to Florida and start writing homeowners policies again.
Floridians need more homeowners-insurance choices that are based on private capital instead of government entities with limited capital to pay claims.
We must confront the fact that Citizens and the Florida Hurricane Catastrophe Fund are too large and carry billions of dollars in liabilities that they don’t have the cash or bonds to pay for if a major hurricane hits.
Since 2005, Floridians have paid $6 billion in “hidden hurricane taxes” to cover losses in these two bloated government entities. There are estimates that every Florida family could be hit with as much as $14,000 in these taxes if a bad hurricane scenario unfolds.
Two years ago, my colleagues Sen. Mike Bennett of Bradenton and Rep. Bill Proctor of St. Augustine introduced a similar consumer choice bill. It won support from more than 80 percent of the Legislature but was vetoed by then-Gov. Charlie Crist, whose populist posture was to bash insurers while the market steadily deteriorated. The bill was pulled again last year under threat of another veto.
Recently, state regulators have received several requests from private insurers to raise rates by 25 percent or more on a statewide average basis.
So in a sense, the Consumer Choice bill can act as a 15 percent cap on rate swings from one year to the next. Under the proposal, no individual homeowners’ policy could increase by more than twice that cap amount annually.
Additionally, Citizens is currently required to raise its rates 10 percent annually and may be forced to raise its rates by 25 percent each year until its premiums reflect actual risk.
If the state-run insurer can be granted this kind of authority to raise rates annually, why not try giving private insurers some flexibility on rating?
The Florida House has a similar bill going through the legislative process. That bill has had some hang-ups, but I hope my colleagues will see the pro-consumer components of the bill, including the opportunity to re-stimulate the private insurance market leading to more choices for consumers.
I encourage my colleagues to support these good reforms.
All in all, it’s time to put you — the consumer — in charge of deciding what you want to pay for your homeowners insurance. If you agree, please support the Consumer Choice bill, Senate Bill 1330.
State Sen. Alan Hays, R-Umatilla, represents District 20, which includes most of Lake County and parts of Marion, Sumter, Volusia and Seminole counties.