Without a real, comprehensive and workable plan, accumulating financial stress could destroy the viability of the Florida’s insurance market and leave millions of Floridians without affordable and reliable insurance coverage, according to Sen. Rod Smith, of Alachua, Fla.
The candidate for governor has unveiled what he calls a “comprehensive four-point plan that will stabilize Florida’s insurance market, attract private insurers back to the state and include truly independent consumer protection in the regulatory process.”
Smith faces a strong field of opponents: Florida Attorney General Charlie Crist (R), U.S. Rep. Jim Davis (D-Tampa), and Florida CFO Tom Gallagher (R). All of Florida’s candidates for governor have just launched high-profile television and radio advertising programs across the state.
Smith, however, has a record of being a street-fighter, who has entered in these types of races before, and won. This was the case in 1992 when Smith defeated a Republican incumbent to become State Attorney for the Eighth Judicial Circuit in a six county circuit; and in 2000 Smith ran for the State Senate, once again winning a seat previously held by a Republican. In fact, most of the counties in his Senate district voted for George W. Bush the year he was elected to the Senate.
Criticizes ‘inactive leadership’
Smith criticized “the inactivity of Florida’s leadership” and its inability to “face-up to the insurance crisis facing homeowners and businesses. Despite two years of heightened hurricane activity and catastrophic claims, Florida’s leadership has not faced up to the insurance crisis facing homeowners and businesses,” Smith said.
According to Smith, his plan will accomplish four goals: stabilizing Citizens Property Insurance Corp. and the Florida Catastrophe Fund; attracting more private insurers to Florida; enhancing competition among re-insurers; and providing real consumer protection.
“Florida’s homeowners demand real solutions to this crisis, not sound-bites and platitudes,” Smith said. “My plan is built around solid, substantive proposals that will stabilize the market and attract more private insurers back to Florida, and it will provide real consumer protection for Florida’s homeowners that will force insurance companies to open up their books to justify their rates.
“I am the only candidate for governor with a real solution to fix Florida’s insurance crisis and lower insurance rates,” Smith said. “While my opponent’s plan offers bumper-sticker slogans, it does not create a funding source for the Catastrophe Fund, increase consumer protection or attract more insurers to Florida and it will significantly increase windstorm rates by requiring windstorm insurers to cover flood damage.
“My plan will provide real protection for Florida’s homeowners, attract more private insurers back into the market, and rebuild the CAT Fund to guard against the most catastrophic of storms,” Smith explained. “Plus it will get the state out of the business of selling and servicing insurance policies.”
Earlier this year, Smith was the first candidate to call for dedicating a significant share of the state’s non-recurring budget surplus to hurricane insurance relief. This action helped limit the magnitude of the immediate crisis facing Citizens Property Insurance Corporation. Smith and other Democrats in the legislature still pointed out that the use of one-time surplus monies only bought some time for the legislature to put a more comprehensive plan in place.
“Unfortunately, the legislation that ultimately passed this year does nothing to address structural problems in Citizens or the overall insurance market and in some cases enables insurers to raise rates without state approval,” Smith said. He emphasized that any effective plan must address the issues of solvency, accessibility, and affordability.
Smith said this goal can be achieved by enacting a plan to revive the private insurance market, get the state of Florida out of the no-win situation of serving as “the insurer of last resort,” and move it toward treating hurricane insurance more like a special regulated utility, such as power and water, rather than the current hands-off approach that discourages private insurers from insuring Florida.
“Only by treating hurricane insurance as a necessity, not a luxury, can Floridians be ensured that their homes, their businesses and their jobs will be adequately protected in the event of a cataclysmic weather event,” Smith said.
Smith’s plan is based on a four-pronged attack: (1) immediately stabilize Citizens and the Florida Catastrophe Fund, (2) phase out Citizens’ role as the insurer of last resort and attract private insurers to the property insurance market, (3) foster enhanced competition among private reinsurance companies, and (4) protect consumers through the establishment of an independent watchdog Commission and Public Counsel’s office with oversight and enforcement powers.
Step One: Stabilize Citizens and the current insurance market
Smith’s plan will create a consistent revenue stream to cover deficits in Citizens Property Insurance and fund the Florida Hurricane Catastrophe Fund and dedicate 80 percent of the sales tax collected from storm-related repair, replacement, or rebuilding of property, with half that amount dedicated to Citizens and the other half to the Catastrophe Fund.
Step Two: Revive Florida’s private insurance market
Under Smith’s plan, the state will provide base windstorm coverage through a premium-financed Hurricane Insurance Trust Fund. The policies will protect the first $50,000 to $100,000 of value and individualized premiums will be based upon the property’s actuarial risk. The policies will be serviced by private insurers who will collect premiums and provide coverage for amounts beyond the $50,000 to $100,000 covered by the Hurricane Insurance Trust Fund. This plan will entice insurers back into Florida and protect homeowners by spreading the risk more widely through the Hurricane Insurance Trust Fund.
Step Three: Enhance competition among private reinsurers
A major but often overlooked factor in skyrocketing insurance rates is the lack of competition in the reinsurance market, as a result of special interest provisions that keep major reinsurers out of the marketplace. Smith suggests leveling the playing field and attracting more reinsurers back into the Florida market, which will make it more affordable for private insurers to offer coverage to Florida’s homeowners.
Step Four: Provide real consumer protection
Hurricane insurance is as vital to living in Florida as power and water. Therefore, the market must be subject to the same type of regulatory oversight. Rather than merely moving the weak Consumer Advocate from the CFO’s office to the governor’s office as others have proposed, Smith proposes creating a truly independent Public Counsel’s office along with a regulatory commission that will force insurance companies to open their books to justify rate increases and will hold them accountable when they unfairly deny claims or cancel policies.
Supports national catastrophe plan
“The problem of catastrophic weather activity is hardly unique to Florida,” Smith said. “Property insurance rates are doubling and tripling in states across the Eastern seaboard. For this reason, the best solution remains the establishment of a national catastrophe insurance fund.”
Smith said Florida’s next governor, along with its congressional delegation, must work together with governors of other states impacted by natural disasters to pressure national leaders into action. He pointed out that no state can go it alone.
“The next governor of Florida must offer citizens a real and workable plan to assure that Florida’s homeowners and businesses are able to obtain coverage and are protected from catastrophic loss,” Smith concluded.
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