Sink Speaks Out at FIC Convention
Jul 11, 2008
Florida Underwriter--July Issue
By Sam Miller, Executive Vice President, Florida Insurance Council
Speaking before the Florida Insurance Council’s recent annual meeting in Key West , CFO Alex Sink said Florida “went in the wrong direction this year when the Legislature decided to freeze Citizens Property Insurance Corporation’s rates for yet another year solely out of political purposes.”
She said the impact means subsidizing rates in this state by as much as 40 and 50 percent, in some cases. Sink called for serious conversations among legislative leaders and then asked Citizens about conducting a study to find out how unsound its rates were nine months ago.
In those talks, she urged policymakers to determine what makes a fair subsidy. “If we agree it’s too big of a subsidy, then let’s talk about a glide path to rate adequacy for the state-run insurer that has grown into the largest single property insurer in the State of Florida with some 1.3 million policies,” she said.
Glide Path to Smooth Landing
Sink added that the glide path would “put people on notice” that their premiums would go up five or 10 percent a year for several years until rates are deemed actuarially sound. It would provide homeowners with a means to gradually plan family budgets rather than hitting them all at once with a single sharp rate increase.
The glide path was an idea first raised during the 2008 regular legislative session as a way to move Citizens towards rate adequacy. However, lawmakers scrapped the idea, fearing public criticism of any plan that would prompt rates to rise.
Citizens’ rates have been stuck at 2006 levels since the January 2007 special legislative session. Even then, Citizens’ rates were said to be inadequate and were set to increase by more than 50 percent.
Insurers, as well as the financial experts advising Citizens and the Florida Catastrophe Fund, predict that the longer rates remain frozen, the wider the leap it will need to get to rate adequacy.
Sink first sounded the alarm last fall when she questioned whether the Cat Fund could deliver on its expanded coverage authorized by the legislature in 2007. She tried unsuccessfully to reduce some of the Cat Fund’s liability during the 2008 session, again because, judging by her office estimates, lowering the liability of the upper limits of the Cat Fund by 25 percent (as she suggested) would have caused a rise in rates of anywhere between one-and-a-half percent and three percent.
Legislative leaders were unwilling to consider any measure that would produce rate hikes.
Sink indicated that her office will continue pushing to limit the Cat Fund’s liability, referring to the failed 2008 legislation as “our first try.”
She said she was encouraged by the large number of newspaper editorials around the state endorsing her idea: “It tells me that the media is getting it.”
Dudley Takes Over as Chair
In addition to the speech by Sink, the FIC program offered major addresses from Alex Soto, Miami independent insurance agent and IIABA immediate past president; and J. Bruce Ferguson, senior vice president, state relations department, American Council of Life Insurance.
Attendees also heard from a panel representing the boards of PIA of Florida and FIC. The two associations are joining forces for an insurance agent/insurance company partnership to educate consumers and the media as well as rebut misinformation about our industry (see page 14).
New officers and directors are traditionally introduced at the convention. Bill Dudley was installed as 2008/2009 chair of FIC’s executive committee and board. Dudley is AFLAC’s state governmental relations regional counsel from Columbus , Ga. New officers elected by the board on Sunday include Harry Spring of Humana in Tallahassee , who joins the rotation to eventually become FIC chair.
Kurt Driscoll, First Professionals Insurance Company of Jacksonville , received the 2008 Wade Holland Distinguished Service Award.
The Harry Landrum Award for important service from members of the Florida legislature was presented to state Reps. Don Brown (R-DeFuniak Springs), and Dennis Ross (R-Lakeland), and Sen. J.D. Alexander (R-Lake Wales).