Posted on 01/18/2007 9:00:06 AM PST by doc30
TALLAHASSEE - Florida lawmakers appear ready to deliver on one of Gov. Charlie Crist's campaign promises to punish insurers who have retreated from the state's property market while still writing other insurance in the Sunshine State, such as auto.
In a surprise voice vote Wednesday, the Florida Senate agreed to force Florida insurance companies who write property insurance in other states to offer it here if they want to continue writing any insurance in this state. The House has a similar proposal.
"The 'cherry-picking' in this state has got to stop," said Sen. Mike Fasano, R-New Port Richey, as he proposed the new language on the Senate floor with co-sponsor Sen. Ronda Storms, R-Brandon. "We've got to send a message to the insurance industry, because we've heard that message from our homeowners back home that they won't tolerate the cherry-picking in this state any longer."
(Excerpt) Read more at sptimes.com ...
That's because you are now covering the high risk previously uninsurables. States frequently cover the those by requiring all insureres to cover a certain number of them or to pay a fee on all low risk policies which are pooled to cover the high risk policies.
If this is true, why doesn't someone with money, like Warren Buffet, come in an underwrite insurance for a couple thousand homes in the area? He could easily afford it, and the cash flow vs risk would be better than any money he can make any where else.
What you are telling me is that if I have a ten million dollars sitting around invested, I could come down and charge $4000 to insure the house, undercutting the insurer by so much nobody would refuse me. If I do that with 100 homes scattered throughout the state, then unless I'm remarkably unlucky, I could lose a home a year and still make a cool $300,000 a year on an "investment" of nothing.
Why not place an ad in the paper for 99 other people to form a limited partnership mutual company, which would insure all of your properties?
This is what is so maddening about the discussion. I'm guessing it would be impossible to do what I just said, probably because of STATE REGULATIONS. But if you COULD do what I just said, that would force the insurers to charge a fair price, for else you could find the better price.
It is regulation that stifles competition and makes prices unfair. Home insurance is just too easy a task to be overcharging double or triple unlesss there are hefty artificial barriers to entry.
What if I just wanted to insure YOUR house. I've got a little extra money, you seem like a good guy, and I have a feeling your house won't get hit by a hurricane.
You think government should forbid me to take money from you, in return for the promise to rebuild your house if it is damaged in any way -- unless I also agree to insure every other house in florida?
What business is it of government to interfere in the signing of a contract between two private individuals?
Well, they could. They already have the risk of a home losing value, or a homeowner damaging a home in a way not covered by insurance, or a flood, etc. They charge interest on the mortgage, and part of that is to cover losses from some mortgages going bad in some way that can't be recovered by selling the property.
A lender would only have to raise their interest rates, in exchange for not requiring insurance.
Of course, a homeowner would still be faced with the loss of their house and property in a disaster.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
You have just identified a hole in the market providing an opportunity. Why don't you start a business providing mortgages to those who don't want to buy insurance or can't get it.
You say you don't personally want to carry paper on an uninsured property? Maybe that's the free market talking after all!
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
Yes - but you still have to get insurance to get a loan.
No bank in its right mind would finance a proprty under such restrictions, at least not in Florida.
Congratulations, those on this thread who cannot understand that there ain't no free lunch have already killed the insurance industry! Now they're working on the banking, construction and real estate industries.
There was a time conservatives understood the concept of business, markets, and freedom.
Sadly, that time seems to have passed.
Insurance, like every other business, is pretty simple. A person wants to make money, so they look around for a need not being met. Oh, there's a bunch of people with houses that could burn down, and they are expensive to replace, and most people don't have that much money sitting around and can't afford such a big loss. But only a few burn down.
IDEA!!! We offer to "insure" people against such an event. To make money, I have a simple job. For each house I insure, I calculate the replacement cost for every possible damage, and the likelyhood of that damage. That gives me a yearly "cost" associated with that house. That's what I charge for that house, plus a fee so I make money.
I do that for every house -- so every house pays a different amount, based on my own decision as to what the risk is for that house.
BTW, I'm not the only bright person in the world, there are thousands of others who could do the same thing. So a smart homeowner is talking to all of them, finding the person who is willing to take the greatest risk for their business by offering the cheapest insurance.
There is no "spreading of risk" in the sense you describe. The "spread of risk" is over TIME. But that's a small fault, because obviously if I insure thousands of homes because I've been a really good salesperson, the risk spread over time translates into losses every year, spread over the houses -- assuming I didn't do something really stupid, like sell policies to a thousand people who all lived right next door to one another. If I did, it's like investing all your money in one stock -- great if the stock goes up, disastrous if the company goes bankrupt.
But I didn't NEED to sell a thousand policies for this to work -- I merely needed to have, in my pocket, enough money to pay out on whatever I was insuring, whenever the insured risks happened to be realised.
If you want to get picky, you would note that I've really described how you budget replacement costs for capital with known failure but unknown occurance of failure -- in fact a house could go forever without EVER having an insured loss.
But the rule stands -- I valued each house based on that risk, and I made money based on that house matching it's risk profile. The fact is that I needed to insure only one house if I get lucky, but if I don't I'll be OK if I insured a lot of houses.
In any case, the amount I charge for a house is NEVER, I repeat NEVER, based on how many other houses I insure, or how much I charged for those houses. No matter how many houses I have insured, the NEXT HOUSE I insure is charged exactly what my formula dictates for THAT HOUSE.
The only reason this doesn't happen is because of regulation. Some lawmaker decided it wasn't "fair" for people to get charged different amounts, or maybe some unscrupulous businessmen used their business to settle personal scores (which in a perfect world would just mean others would take their business from them).
So now the state starts regulating how you can charge people for stuff, and next thing you know some people are paying more than they should so others can pay less than they should, and the more you make that happen the more pressure there is on the insurance companies to falsify or make up stuff so they can insure more of the people forced to pay more, and fewer of the people allowed to pay less.
Maybe the government will do a stupid thing like set up an "insurer of last resort", for which every insurance company pays a fixed fee based on the NUMBER of people insured. Now it's like the OK Corrall.
Every insurer tries to dump their worst houses into the common pool, while cherry-picking the best houses, thus driving up their profits. What a STUPID WAY TO RUN A STATE.
And then people blame the insurance companies, who are in fact doing exactly what the law seems to encourage them to do.
I read a short story once that illustrated this so well, but I can't remember it's name. Anyway, there's like a public facility where every citizen can get goods like watches, jewelry, cars, whatever it is you want.
At the end of each year, the state adds up all the money spent to buy the goods people took, and sends a bill to each person evenly.
So of course, each person sets as their goal to make sure they take more goods than what they have to pay in costs. Which drives up the costs for everybody.
Do they do it? Why don't you? Do you not like printing money?
Congratulations, those on this thread who cannot understand that there ain't no free lunch have already killed the insurance industry! Now they're working on the banking, construction and real estate industries.
For those in Florida I suggest they take the option of wind and storm or are you really talking about hurricanes?
I don't expect a free lunch nor do I expect to pay for those who want to live in the hurricane areas. Construction would not be harmed as demonstrated recently by the guy that paid $1,000,000 each for mobile homes in some park to obtain prime property on the beach to build a shopping mall, etc. Someone will build--let that someone be someone who can afford their loss. This reinsurance of the Federal Government has to stop. The property should be uninsurable.
Banking? They must be making a ton off the loan-sharking interest rates they charge on credit cards not to mention the penalties if you miss a payment.
No sympathy from me for any of these areas. I am tired of subsudizing them in one way or another.
Uh, free market ring a bell? Note my home state.
Or, as I say in investments; in the long run you are all dead.
the problem, the way I see it in FL, isn't that there's a free lunch, but that we are paying for three lunches when we only get one.
the problem, the way I see it in FL, isn't that there's a free lunch, but that we are paying for three lunches when we only get one.
I doubt they had blue tarps on their roofs.
hmmmmmmm i dont know
Insurers' trick: profit amid cries of poverty:
http://pqasb.pqarchiver.com/sptimes/access/1191337521.html?
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