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 ...
Dreams, you have danced around the real issue here.
Please tell me what a person is supposed to do if the either cannot obtain insurance or cannot afford the premiums?
Sell? To whom? To a cash buyer who won't need the same coverage levels?
And what does one do if this problem is so widespread and common that have the community faces the same problem?
See 220, 221 above and get back with me please.
And, the problem IS the government and the regulations they have enacted. They have mandated coverage even for those that own their homes free and clear, regulated rate increases and now are threatening to drive more carriers out of the state who might refuse to do what the legislature wants, even if they find it unwise. I've read multiple articles about the problem, because as an ex-Florida resident who has great interest in eventually returning after I retire, I follow this closely...not to mention that my daughter will probably be in Gainesville next year at UFL and I'm debating buying a condo or something rather than paying for a dorm.
Here are some articles that describe some of the main problems:
http://www.insurancenewsnet.com/article.asp?a=top_pc&id=74189
Here's an excerpt:
Gelber said he is pleased the House isn't going along with Senate provisions to allow homeowners to take on larger deductibles and to buy less coverage than what would be needed to rebuild after a major storm, and even go without any windstorm insurance if they have paid off their mortgages. Although such changes would reduce premiums, they also would mean homeowners would take on more risk, Gelber said. If their homes were destroyed, they would have to pay bigger shares of the costs to rebuild.
Here's another that deals with the OIR and rate increases which need to be approved:
http://www.foley.com/publications/pub_detail.aspx?pubid=3430
Ratemaking: To the extent an insurer has exposed its capital to the risk of hurricane loss in lieu of procuring reinsurance, the insurer is entitled to a reasonable rate of return commensurate with the risk. Beginning July 1, 2007, in any area the Florida OIR determines to be competitive, a property insurer may increase rates by up to 10 percent in any rating territory (subject to a five percent statewide cap) without being subject to disapproval as excessive or unfairly discriminatory.
Let's see....regulate rate increases, mandate everyone have certain coverages...that's a bad combination in and of itself, and this original article we were all responding to was a additional threat from the FL gov't to further reduce the insurance options available by potentially driving more carriers out of the state....Next we'll hear about the car insurance crisis in FL since no one will be offering that either. Yet, some on this thread are cheering the FL legislature on in this course of insanity....because, well, their property insurance rates are impinging on their lifestyle, or are 'unavailable'.
The answer is (since you apparently couldn't deduct it from my prior post) to get the government OUT of the insurance business other than to verify the financial strength of the companies/individuals that are offering insurance products in the state, and let individuals decide what coverage they want to pay for, and the insurers decide what rates they need to assume the risk. This will go a long way toward restoring the availability of insurance carriers AND increasing competition for lower rates (they may not be as low as you and others want or feel is 'reasonable', but at least you'll have options).
I understand the problem, and also that this may be catastrophic to FL real estate values and it's economy...but it's a problem that is due in large part to the same government that so many are flocking to for a solution now....and the reality is that the government can do nothing other than attempt to the solve the problem with some kind of income redistribution scheme...which will happen just as soon as the benevolent 'state' ends up assuming all or most of the risk of a natural catastrophe. You know who is going to pay for that, right?
I would be ecstatic to have a 10% rate increase. As it stands right now, I'm facing a 25% increase followed 3 months later by a 55% increase. That's on top of back to back 100% rate increases. When people in FL talk about double digit increases, they don't mean something in the 10-20% range. They mean something in the 80-99% range. The typical rate increase here is now multiples of what people pay in total in other states.
Sounds like you can not afford the risk of living in florida. it's just the facts. don't get angry and expect someone else to bail you out. work harder, make more, or change your lifestyle and move out of florida.
The problem is that the insurers cherry pick who they will insure. All the high risk properties get stuck in Citizens, which by law, has to be the most expensive in the state. insurers keep low risk properties and dump the high risk ones onto the state. So then private insurance rates are 1/5 or 1/4 the government rate. And then there are internal problem with the government run plan where the multimillion dollar beach home owner pay disproprtiontly lower premiums that average homeowners, but suffer the greatest dollar amount in damages. A few huundred of these homes got wiped out in 2004 and were responsible for 60% of the dollar figures (total payout or of the total debt, I can't remember), In other words, us working stiffs are seriously subsidizing the rich beach house owners. An effort was made last year to cap coverage, but the influential got that limited because 'proerty values are skyrocketing and it will hurt averge families if coverage is capped at $1 million dollars.' It's tat arrogance that has got the voter lighting the fires under the politicians to clean things up. As I've mentioned before, the current rates are far above what the risk levels are. A lot of out of stater's say we live in a high risk state and a period of increased hurricane activity. That is true, but the rates are well above what the risks are.
1. Of course the insurer's are going to try and cherry pick their customers...it's one of the parameters of their business, which is limiting their risk profile. Do you not try to limit your risk or consider the risk/benefit profile when making your investments?
2. If the premiums are so much above the risk involved, why would the insurer's be decreasing their coverage of the area? I do not know too many businesses that turn away 'easy money'. If the premiums they are charging are 'too much' for the risk they are assuming, then why would anyone buy the service at all?...Yes, that is a rhetorical question that we all already know the answer to, and brings me to point 3.
3. Anyone that cannot see that the government's decree that everyone have property insurance has a lot to do with the problem is blind....sure, everything was hunky dory in the many years of decreased weather activity...homeowners got what they assumed was reasonable insurance, banks/mortgage companies shelled out huge loans on pricey real estate, and the insurance companies made money. The price of the real estate rose dramatically...but all that did was increase the risk exposure of the insurance companies in the event of catasrophe. Even the state got involved in the insurance business, as some homes became commercially uninsurable.
Then 2004 and 2005 hit, and insurance companies wrote checks for tens of billions, exposing for them all too clearly the true 'risk' involved in their business. Some undercapitalized companies went out of business...the bigger ones realized that their true risk exposure COULD be realized...quickly. Now more insurers are considering getting out of the FL property casualty business.
If you want to read a most interesting report from the FL OIR, you can see it here:
http://www.floir.com/pdf/TheDifferenceADecadeMakes.pdf
The report estimates that the total value of FL commercial and residential real estate at $1.2 TR-illion, which is a lot of risk to be covered.
Why are you surprised that the 'average' guy/homeowner is subsidizing the 'poor risk' and wealthy homeowners? As I stated in an earlier post, we see that in medicine DAILY. The government caps the health care costs of two of the most likely groups to incur large health care costs...the poor and elderly...and then the medical community passes those costs on to those with insurance because SOMEONE has to pay the true cost of the total care delivered.
As you look at this situation, it should be clear that SOMEONE will take it in the shorts...someone will pay for the true cost involved. The only question is, who?
The government's answer is ALWAYS to spread the risk out amongst all constituents that have capital...because that's all they can do since they themselves do not produce anything of value to cover the cost.
Don't get me wrong, there are alternatives IMO...but every alternative starts with the government getting out of the insurance business and deregulating the industry. This will probably have profound economic impacts on the state, most likely a depreciation of real estate values across the board...some high-priced real estate on the ocean may in fact be 'un-insurable', but the people that take that hit will be the owners of the property and the banks and not the guy with the modest house well inland who's risk is much less.
Turn off your bias filters and actually READ what I wrote.
There's a real economic collapse on the horizon in Florida and nowhere was anyone looking for a bail out.
You as well as many others typed your response before reading my remarks.
But FWIW, we have people here who have gone two years without insurance companies paying for legitimate claims.
So this isn't just a case of a couple people whining about poor customer service and a modest increase in premiums.
I would also imagine that if insurance rates went from two to four times their current rates for your area in one year for those that could obtain insurance that your people would face the same predicament.
And there'd be those idiots that would say, gee, too bad, go out and earn more....
What has me absolutely stunned and slack jawed is the willing and eager calls by those who are ostensibly "conservatives" to adopt socialist measures if the normal give and take of the markets puts them on the "give" rather than "take" side of a particular transaction.
I have posted one market based idea for correction of the current crisis. Another corrective that is market based would be to ALLOW insurance companies to do a radical tiering of risks, giving incentives to those building further inland (although Florida, being a peninsula would not benefit THAT much, every little bit helps).
The bottom line is, though, that Florida is a DANGEROUS place to live, if you want to protect your property. I do not want to subsidize your risk on Wall Street, at the craps table in Vegas, or your choice of putting your home in a Hurricane prone area. If you have put money in there and you will have to lose to get out, you should do like I have done, which is eat your losses, go on, and shut up whining like some Democrat precinct chairman who is always looking to blame someone else.
I really thought you were more intellegent and informed than to give me a cookie cutter answer that doesn't address my comments.
Suppose that tomorrow nearly everyone in your community finds out that, through no fault of their own, they cannot afford property insurance and that the insurance is so expensive that you cannot keep your uninsured propery but you cannot sell it either.
What do you and those thousands of others do?
Now. With that out of the way, please help me see where I have failed to address your comments.
You have stated, in essence, that things are tough for Florida homeowners. You have stated that things are SO tough that the only option in the current market situtation is to fold up and sell your home, and that there are no buyers, so that the only option for many is to walk away from their homes. Is that a correct representation? You are saying that because of the extreme nature of the market that "something has to be done" and by that "something" you mean state intervention. Is that correct? If that is correct, then please take a second look at my neurally deficient howling screed and you might see that I actually HAVE addressed the problem in the following manner:
1) We should seek solutions to this, and any other market distortions, from the point of view that THE MARKETS THEMSELVES HAVE THE BEST CORRECTIVES if you let them function in freedom.
2) This corrective will involve pain, at times.
3) Government intrusion into markets should only be within the Constitutional (State of Florida Constitution in this case) prescriptions for and proscriptions against, power. This largely limits the state to defining and enforcing voluntary contracts.
Screeching "but you don't understand how BAD it is" is not a response.
If I have missed something here, I am happy to be enlightened.
But yes, there are tens of thousands of individual policy holders that face severe problems, but the problem is bigger than those individuals and my focus has been on what could happen if there are no good choices for those policy holders.
(Let's also remember that these policy holders came to the state and bought policies under the existing rules and conditions without knowing or understanding what level of state involvement there was in the rate structuring.)
Now I think you are starting to get the point that there seems to be a significant number of property insurance policy holders who now, after years of fairly stable rates, now face unaffordable rates. And this isn't just homeowners.
At this point, blaming the state's past invovlement isn't constructive even where correct.
This isn't a matter of a few people rebudgeting; it is businesses that can't be insured that close with layoffs; it is the rental market drying up because landlords/property investors can't insure their apartment and rental homes; it is yankees with secondary homes in Florida that are not insurable; it is city and state revenues that take severe drops; and I don't think that it is unrealistic to foresee a true economic disaster in Floria.
If that happens, what next?
1) We should seek solutions to this, and any other market distortions, from the point of view that THE MARKETS THEMSELVES HAVE THE BEST CORRECTIVES if you let them function in freedom.
I would normally agree, however the cows are already out of the barn. While we can leave the door open and wait for them to return, there's a lot of bad things that can happen and my questions are directed on the immediate problems.
2) This corrective will involve pain, at times.
Pain we know. But do you have a corrective action in mind?
3) Government intrusion into markets should only be within the Constitutional (State of Florida Constitution in this case) prescriptions for and proscriptions against, power. This largely limits the state to defining and enforcing voluntary contracts.
Agreed. However, once again, it is too late right now to talk about what should or should not have happened before. Realize, too, that there are more than a few people who are still battling insurance company on justified wind damage claims. Some insurance companies have shown themselves in need of legal remedies to fulfill their portion of voluntary contracts.
Again, my questions are these:
1)With the prospect of property owners unable to insure their property and unable to sell their property, what do you recommend that they do?
2)With the state aware of this situation and the potential for widespread economic loss, what does the state do?
And one point to consider,Floridians, for the most part, are not living in mansions on the sand of the beaches but are living in more modest traditional homes miles inland.
If, after leaving off your 600 dollars a year cable bill, leaving off your extra 300 dollars a year for an extra phone line (long distance service is optional), cutting your "eat out" budget to the bone (avg american family spends at least 1500 dollars a year eating out), and other horrid brutal recommendations, we might have to do what we did when living in Beaumont TX when the oil boom busted. We walked away from the house. Was it painful and a waste of money? Yeah. Did it ruin us? No. It is called "being an adult and taking responsibility for the choices I make." Even when the results of those choices could not have been foreseen.
Now what happens if a couple million people pack up and leave Florida in 2007?
Even after trying to make it personal, you still didn't answer the question.
Maybe I gave you way too much credit when I thought you understood the situation.
But it seems that you are advocating that tens of thousands of residents pack up and leave their homes so that they can be 'responsible adults'.
Then what does that leave and what does that solve?
That is a good question. It MUST be framed against the backdrop of another question, though. That is: "Is the state's economic / population growth over the last several years predicated on unrealistic risk/reward scenarios regarding the weather?" If that is the case, the answer is "there is nothing they CAN do."
If, otoh, the current batch of companies are too risk averse to write policies, then the state has no other choice but to relax the requirements for insurance companies to operate (lower capital requirements, usually). The problem is, the companies who WERE small insurance operatives offering to fill those gaps almost ALL went bust down in Kendall a few years back, and the state fund had to bail them out. That should tell you something about the "real" risk.
The economic risk to the state will not allow it to abrogate the basic rules of market behavior, though. Legislatures and political bodies have left bloody corpses of punctured hubris behind every time they have tried.
The wails of class warfare that I hear over issues like this are almost never good for anything but to incite stupid decisions on the part of legislators. Of course, they are always quick to oblige.
Same thing that happened in Texas in 1986 after the oil bust. The world stops spinning, we have people starving in the streets and a complete collapse of the entire economy, chaos reigns and there is anarchy......., or, lots of people wake up and realize what the word "risk" means, and we recover. You tell me which one happened.
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