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 ...
Insurance companies were allowed to create Florida subsidiaries which allows them to complain about the huge losses in those subsidiaries.
The insurance industry is already heavily regulated and the companies are allowed to collude with each other. It's an industry that has never been compatible with the free market.
Didn't they have that problem with auto insurance in NJ a few years ago -- almost all insurers pulled out, and those left hiked the rate up sky-high?
If your house would cost $100,000 to replace, and the current hurricane predictions suggest that your house is likely to be destroyed by hurricane in the next 50 years, they would have to charge you at least $2,000 a year to break even (in future value -- they can charge less because money in present value has a greater future value as they can invest the reserves).
It actually amazes me how cheap my insurance is given the claims that could happen. We had hail damage from a bad thunderstorm and it cost my insurance company over $20,000 to repair everything -- that's over 20 years of my premimium payments, and I've only had a house 20 years, so at the moment I don't think they are breaking even. My car insurance they are probably ahead on, although I got a $20,000 payment for an accident there as well, so they aren't exactly rolling in dough for my insurance (my wife's had a couple minor things to, so we've probably collected almost $25,000 from auto insurance in our lives).
I don't think it is unreasonable that a person owning a $100,000 house in a zone likely to be flooded or hit by a hurricane in the next 50 years to be paying $1600 a year for insurance to cover their loss.
Note that if you can find a lender willing to front you an UNSECURED LOAN, you can always go without homeowner's insurance and take your OWN chances that, in the next 50 years, the 1600 you save on insurance, properly invested, will cover the cost of replacing your house if you get hit.
That in fact is what the insurers do for you when they offer insurance with WAIVERS. They let you buy insurance for stuff you can't predict at all, like fire, while excluding expensive coverage for things like floods. You can seek that out separately, or self-insure if you think you know better than they do.
If you think the insurance company is making a killing on you for your $1600 a year payment, you should be able to find SOMEONE who agrees with you and is willing to secure your house so you can self-insure and pocket those obscene profits.
I've been with State Farm over thirty years. When I moved to Florida, they didn't want to sell me homeowner's insurance. I ended up getting SF from an agent across town whose quota wasn't full. There's a SF agency near where I live, but they can't take my business. It's screwy. I agree, though, that if a company won't sell any home insurance in Florida, why should we let them sell auto?
post andrew and pre-andrew homes are not differentiated.
Therein lies the insurance company's guilt. They don't target homes across type or give meaningful discounts.
There are people I know who have the new hurricand glass which does not need shutters AND still have shutters. Those windows would survive a class 4 hurricane but the insurance comany gave them a 1-2 hundred discount TOTAL!
(note: flood insurance is a totally different issue. in fact I believe only the feds have it)
I don't understand. Are you saying that someone forces you to manufacture and sell fishing rods that lose money for you, because the customer might want them? How do they do that?
You should certainly be able to make only really expensive rods that only a few people would want to buy -- you have to SELL to anybody, but you don't have to OFFER FOR SALE whatever anybody WANTS to buy.
It is quite apparent that politicians, and many on this forum, have not even the most basic understanding of insurance, or that insurance is a business, not a charity.
If I own a home well inland in Florida (as in, much less likely to be blown down or washed away by a hurricane), why should I be forced to subsidize the risk that you incur by owning a house on the beach? You want a house on the beach, then you figure out how to insure it, either through self-insurance or by paying whatever premium an insurance company determines to be sufficient to cover the risk.
Insurance companies aren't interested in "policies that make big bucks". They are interested in finding the balance between premiums and risk that allow them to make a profit (in many cases, for their shareholders if they aren't a mutual). If their premiums are too high, no one will buy their policies. If they take on (or are FORCED to take on) bad risks, then their losses to claims will be too high, and they'll go under (which means, among other things, one LESS insurer in the marketplace, and a lot of people out of a job).
If you don't want to pay or cannot pay the premiums, it's your problem. Sell the house and move someplace where you CAN afford the insurance, or buy your house outright (so there's no mortgage company/bank insisting on you having insurance), and deal with the risk of losing it yourself, rather than making it everyone else's problem.
If insurance companies don't want to take on the risk (because it will generally mean they will LOSE money), all that is going to happen is that the insurers will leave the state altogether. It's pretty simple: if the state forces them to sell homeowner's insurance in order to be able to sell other types, the companies are going to calculate whether the expected losses on the homeowner's insurance is greater than the expected profits on the other lines.
They already did something like this in New Jersey back in the 1990's. The state said that all insurers selling health insurance in the state had to insure anyone who wanted coverage, had to cover all kinds of illnesses, had to accept any and all pre-existing conditions, etc. The result? Within two years, premiums had more than tripled, the number of insurers selling health insurance in the state was drastically reduced, and far MORE people were uninsured than before the state forced "guaranteed/universal coverage" on everyone. So, you had less competition among insurers, even MORE people not buying health insurance (because the premiums were so high), and those that were still insured paying ever higher costs (premiums) to cover the ever increasing number of people who couldn't afford the now ridiculously high premiums. Higher cost, less choice. That's a liberal result if I ever saw one.
Complaining about insurance companies not wanting to cover your house which is in a hurricane prone area is the same as the overweight, junk-food scarfing, cigarette smoking slob who insists that they should be given health insurance for the same premium as someone who watches what they eat, exercises, etc.
You do not have a consitutional right to insurance. If you support the state's contention that insurers should be forced to cover high-risk real-estate, one of three things WILL happen:
A) Most insurers will simply leave the state
B) Premiums for ALL insurance in the state (homeowner's, auto, etc.) will increase, resulting in fewer people being able to buy it, which in turn increases the premiums on those who can, which in turn drives even more people to be uninsured as premiums rise above their ability to pay
C) Companies will operate for a while at a loss, but eventually go under.
It was done using complex language (leagaleese) and fine print which stated things such as the coverage was inapplicable if it was in a residential or non residential or commerical or non commercial structure.
"insurance companies which literally wrote polices which stated your insurance is automatically invalid if you actually make a claim."
I'd love to see a cite for this. Or is it just hair-on-fire hyperbole?
There is no such thing........
"Therein lies the insurance company's guilt. They don't target homes across type or give meaningful discounts."
Alas, state regulations don't permit them to.
The solution to regulations is not MORE regulations.
It's de-regulation.
I thought everyone here was conservative.
It's about time!!!! If Insurance companies only want to cover the safe areas - they can leave. Why should they get the profits on protecting nothing and the citizens of Florida have to pick up the real risk. Go for it Charlie.
"The actuaries know that the losses all balance out in the long run.
Yes, but the problem is that sometimes the short run comes before the long run, and you get wiped out.
We have that now. It is called Citizen's Insurance. Funded by the state, it has the highest premiums, and is broke. There is a pass-through charge on all insurance policies from all carriers to bail it out. What the companies are doing is dumping those near the coast, and keeping those safely inland. Basically cherry picking the best ones, and letting the potential losers go to Citizens, keeping it in the red.
Insurance companies make all their money on car insurance and investments. Homeowner policies are a loser (or break even at best). Car insurance profits have subsidised Homeowners for years.
I have no problem with any company making money. Even a lot of money. I do not even know if this is the right move. But something...SOMETHING needs to be done.
Now.
What the Governor is proposing will cause many insurers to drop Florida all together and the price of property casualty insurance will sky rocket.
They didn't get wiped out. But that is what reinsurance is for, the catastropic losses. Most companies have several layers of reinsurance, especially in cycles when rates are cheap.
I studied the issue in law school. Much of was covered under issues bargaining power, adhesion contracts, and unilateral modifications. Then there is the much frowned upon "blue lining" which judges rewrite unconscionable clauses of contracts. (ie contract clauses which permit the plaintiff to enter a admission by consent against the consumer in any breach of contract complaint)
so no it is not hyperbole.
see also in advertising the old case law line of the Carbolic Smoke Ball.
This was foreseeable when states began requiring insurance as a matter of law; the insurers supported all of these laws and now the bill has come due.
Link homeowners insurance to liability so that even property owners without mortgages must buy policies to protect the neighborhood and then set up a pool whereby the insurers can spread the risk over the range of companies participating.
Of course this could lead to a state insurance program guaranteed by the state's resources, primary of which are the taxpayers, and when the next natural disaster hits the infighting will begin anew.
The closer we get to a risk-free society the more restrictions we endure.
And the state faces the prospect of a substatial portions of its residents having to abandon their homes and leave the state.
If they can't get insurance or afford the premiums, what other choice will they have?
The mortgage company isn't going to sit there and permit uninsured homes.
Landlords with large holdings are really in trouble.
Thinking of this problem we have in Florida, it occurred to me that maybe the problem is "too many insurance companies." Since all insurance companies are incorporated in Florida, so as to insulate their other states policyholders from adverse risk associated with Florida, no one single company can spread the risk throughout their Florida policyholders thin enough to make it less expensive per household. Like Wal-Mart, maybe buying in huge numbers to lessen costs, there should only be one company or to insure ALL of Florida. And insure only the house or business building, not contents. Contents and inventory could be left to the regular insurance companys to insure. All or escrow payments for insurance could be sent to the county tax collector instead of individual insurance companys and funnelled to the state for inclusion into a huge pool of money that could be invested in T-bills, utilities, building materials suppliers (Home Depot, Lowes, 84 Lumber, etc), construction companies, and the like. ...........Just a thought.....
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