Sen. Smith Unveils ‘Comprehensive Plan’ to Fix Florida’s Insurance Woes

July 11, 2006

  • July 11, 2006 at 2:15 am
    florida agent says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Why has it taken the state\’s lawmakers and legislators this long to address this problem-um\’ the writings been on the wall for at least a year or more. I am a comml agent who cannot get windstorm coverage for comml property owners in my particular county.period.end of story. On top of that NOW Citizens won\’t even write a commercial windstorm policy on a builders risk IN THE WINDPOOL. The central Florida economy is slowly grinding to a halt. Everyday folks can\’t afford to live here. Big coporations can\’t satisfy the loans on big new construction projects because they can\’t get wind coverage. GOOD JOB MR INSURANCE COMMISSIONER! Not!

  • July 11, 2006 at 3:01 am
    Your agent says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    I think it is great that a politician is taking a stance on something that is not a \”special interest group.\” Yet, it addresses a growing problem to the viability of our economy, and the continued growth of our state. There is no \”quick fix\” to the problems, and furthermore, this is a culmination of many perils. Hurricanes, politics, fraud, insolvent companies, bad agents, monoline carriers, unlicensed contractors…. the list goes on. I hope that our state politicians can see past their own interest groups and focus on a problem that EVERY Floridian faces – insurance woes.

    Good luck Sen. Smith

  • July 11, 2006 at 4:16 am
    D says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Comprehensive Plan my eye! The Devil\’s in the details and I don\’t see any details!!!
    Good luck with that. To me it just looks like more talk. If it was that easy, it would already be done.

  • July 11, 2006 at 6:52 am
    WRL says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Indeed, Sen. Smith\’s plan is long on not much. As \”D\” stated, \”Comprehensive plan my eye. The Devil\’s in the details and I don\’t see any details!!!\”

    Step One: Stabilize Citizen\’s and the current insurance market: Smith plans to funnel 80% of all sales tax collected for storm-related repairs, replacement or rebuilding to Citizen\’s and the Cat Fund.

    In other words, after the next storm, Citizen\’s pays the claims and eventually gets 2.4% of the cost of all claims back. Seems to be a timing problem there. And let\’s see, how much would 2.4% of all the repair costs help Citizen\’s who, after the Poe debacle, may have to pay 20, 30, 40% of all claims?

    And didn\’t Gov. Bush already come up with that idea, passing a large percentage of last year\’s bonanza to Citizen\’s, which only helped fill the void, it came no where close to filling the sinkhole, and we\’re paying 6.8% of all premiums this year to make up the shortfall from the \’04 season!

    Citizen\’s is actually in such desperate shape because:

    A. for years the politicians worked to keep their rates artificially low, despite requirements that rates be \”actuarily sound\” or the average of the highest rates being charged by private insurers. By standing up for the rights of their constituents they probably got a few extra votes.

    B. for years developers pressured state and local officials to weaken the building codes. Saving a few hundred $ per house was very important, and since developers are big contributors, the politicians went along. So now we have most of the state built of cardboard, and until all that cardboard blows away, rates are going to remain high. And the private insurers will stay out of the market in droves, because they can\’t get reinsurance.

    2. Revive Florida\’s Private Insurance Market: The state will set up a \”Trust Fund\” that will cover the first $50,000 to $100,000 of any windstorm loss, with private insurers picking up the excess.

    Sen. Smith apparently doesn\’t understand why first loss insurance is called first loss. It\’s because they pay the first part of any loss, the part that happens the most frequently and which gets most of the premium allocated to that risk. It\’s the most expensive part of the package.

    How does he plan to raise the huge amount of capital necessary to even set up such a plan? The amount would be staggering. He obviously hasn\’t done the arithmetic.

    And what about rate adequacy? If the rates are inadequate, we have the Citizen\’s problem all over again.

    3. Enhance Competition Among Private Reinsurers: Sen. Smith says a major 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.\”

    Huh? Reinsurers are unregulated and operate freely across state, regional and national boundaries. They can reinsure anywhere in the country they want to. 99.9% of all reinsurance contracts are negotiated far away from Florida. We couldn\’t keep them out even if we wanted to.

    But, they are in business to make money, and don\’t go where they don\’t think they can make money And guess what? They have been bled dry by Florida and the other Gulf states. They don\’t see any possibility of making a profit with windstorm coverage, so have simply stopped offering it. Only American auto makers continue to sell products they lose their shirts on.

    But Smith says if we just level the playing field they will come flocking back. Gee, who knew it was so simple.

    4. Provide Real Consumer Protection: He proposes to regulate insurance as tightly as the water and power utilities are. He will force insurance companies to open their books to justify rate increases (they already have to provide mountains of data) and will hold them accountable when they unfairly deny claims or cancel policies.

    Good idea! Let\’s over-regulate them, that\’ll bring them back in droves even if they can\’t get reinsurance.

    Unfairly deny claims: Exactly how would this be determined? What resources would it require to determine whether thousands of claims may have been unfairly denied? Would this include people who didn\’t buy flood insurance but got hit by storm surge and thought the denial was unfair? And would this organization also determine when companies can fairly underpay claims because the insured\’s violated the clauses in the contract requiring them to insure to proper replacement value thus paying less premium than they should (one of Citizen\’s biggest problems)? Seems to me you couldn\’t have one without the other.

    Sen. Smith seems unaware that after 90 days in force, it is virtually impossible for an admitted insurer to cancel a policy, except for non-payment. Cancellation is a non-issue.

    Strangely missing from the plan is the requirement that certain counties in the panhandle, who are exempt from the statewide building code because \”they never get hit by hurricanes\” (but somehow recently got visited), be required to adopt the code. Of course, this would only make future construction better, it does nothing for existing structures, so, who is to subsidize all the damage to their cardboard structures until they finally get blown away?

    See Sen. Smith? It\’s just a matter of a few details.

  • July 13, 2006 at 7:38 am
    Jeane Flueckiger says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    I\’v just purchased a new home in Florida and can\’t find a reasonable insurance that I can afford 5200 to 6100 is not reasonable for a single family doesn\’t Florida want any more residents, I\’m just not sure how I can afford such outrageous insurance premimums.

  • July 13, 2006 at 9:48 am
    WRL says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Indeed, Sen. Smith\’s plan is long on not much. As \”D\” stated, \”Comprehensive plan my eye. The Devil\’s in the details and I don\’t see any details!!!\”

    Step One: Stabilize Citizen\’s and the current insurance market: Smith plans to funnel 80% of all sales tax collected for storm-related repairs, replacement or rebuilding to Citizen\’s and the Cat Fund.

    In other words, after the next storm, Citizen\’s pays the claims and eventually gets 2.4% of the cost of all claims back. Seems to be a timing problem there. And let\’s see, how much would 2.4% of all the repair costs help Citizen\’s who, after the Poe debacle, may have to pay 20, 30, 40% of all claims?

    And didn\’t Gov. Bush already come up with that idea, passing a large percentage of last year\’s bonanza to Citizen\’s, which only helped fill the void, it came no where close to filling the sinkhole, and we\’re paying 6.8% of all premiums this year to make up the shortfall from the \’04 season!

    Citizen\’s is actually in such desperate shape because:

    A. for years the politicians worked to keep their rates artificially low, despite requirements that rates be \”actuarily sound\” or the average of the highest rates being charged by private insurers. By standing up for the rights of their constituents they probably got a few extra votes.

    B. for years developers pressured state and local officials to weaken the building codes. Saving a few hundred $ per house was very important, and since developers are big contributors, the politicians went along. So now we have most of the state built of cardboard, and until all that cardboard blows away, rates are going to remain high. And the private insurers will stay out of the market in droves, because they can\’t get reinsurance.

    2. Revive Florida\’s Private Insurance Market: The state will set up a \”Trust Fund\” that will cover the first $50,000 to $100,000 of any windstorm loss, with private insurers picking up the excess.

    Sen. Smith apparently doesn\’t understand why first loss insurance is called first loss. It\’s because they pay the first part of any loss, the part that happens the most frequently and which gets most of the premium allocated to that risk. It\’s the most expensive part of the package.

    How does he plan to raise the huge amount of capital necessary to even set up such a plan? The amount would be staggering. He obviously hasn\’t done the arithmetic.

    And what about rate adequacy? If the rates are inadequate, we have the Citizen\’s problem all over again.

    3. Enhance Competition Among Private Reinsurers: Sen. Smith says a major 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.\”

    Huh? Reinsurers are unregulated and operate freely across state, regional and national boundaries. They can reinsure anywhere in the country they want to. 99.9% of all reinsurance contracts are negotiated far away from Florida. We couldn\’t keep them out even if we wanted to.

    But, they are in business to make money, and don\’t go where they don\’t think they can make money And guess what? They have been bled dry by Florida and the other Gulf states. They don\’t see any possibility of making a profit with windstorm coverage, so have simply stopped offering it. Only American auto makers continue to sell products they lose their shirts on.

    But Smith says if we just level the playing field they will come flocking back. Gee, who knew it was so simple.

    4. Provide Real Consumer Protection: He proposes to regulate insurance as tightly as the water and power utilities are. He will force insurance companies to open their books to justify rate increases (they already have to provide mountains of data) and will hold them accountable when they unfairly deny claims or cancel policies.

    Good idea! Let\’s over-regulate them, that\’ll bring them back in droves even if they can\’t get reinsurance.

    Unfairly deny claims: Exactly how would this be determined? What resources would it require to determine whether thousands of claims may have been unfairly denied? Would this include people who didn\’t buy flood insurance but got hit by storm surge and thought the denial was unfair? And would this organization also determine when companies can fairly underpay claims because the insured\’s violated the clauses in the contract requiring them to insure to proper replacement value thus paying less premium than they should (one of Citizen\’s biggest problems)? Seems to me you couldn\’t have one without the other.

    Sen. Smith seems unaware that after 90 days in force, it is virtually impossible for an admitted insurer to cancel a policy, except for non-payment. Cancellation is a non-issue.

    Strangely missing from the plan is the requirement that certain counties in the panhandle, who are exempt from the statewide building code because \”they never get hit by hurricanes\” (but somehow recently got visited), be required to adopt the code. Of course, this would only make future construction better, it does nothing for existing structures, so, who is to subsidize all the damage to their cardboard structures until they finally get blown away?

    See Sen. Smith? It\’s just a matter of a few details.

  • July 15, 2006 at 5:37 am
    John Jung says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Due to the fact that most insurance co. would rather drop policies than take the risks, there really is no insurance market in FL.

    So the only solution is that the state government take over all windstorm coverage. If there ever is a catastrophic payout, the government could raise taxes especially on tourism. Maybe raise sales or levy a \”tourism tax\” to pay back the damage.

  • July 17, 2006 at 7:18 am
    John Jung says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    First off, to the contrary of many\’s belief FEMA\’s Flood Insurance program is not a federal subsidized program. It\’s operation is suppose to be self-sufficient.

    Here are many problem currently with our national insurance crisis:

    ~Many property owners do not purchase flood insurance or earthquake insurance and later expect the government to provide hand-outs if they are hit.
    Our government pays out too. ex: NEW ORLEANS, N.Y. 9/11, ect….

    ~Insurance cos. pass the cost of payout to the federal flood insurance program when they should be paying out under homeowner\’s payout.

    ~If we are going to continue to do things like this. We should scrapped the National Flood Insurance program and create a National Disaster Insurance.
    Some may say why should our state fund higher risks states. The reality is that FEMA through aids & grants are already funding disasters but without collecting premiums much of the time.
    And if small states complain, they should consider about why they get so much \”federal aids\” like highway funds, project grants, agricultural subsidies, ect… when they have so little of the population that pay in the taxes.
    We could nitpick to the bare, but that is NOT how a country (the UNITED STATES) operates. In part, a country is part socialism even in a democatic country.

    We take collective money to provide part well-being for everybody.

  • July 17, 2006 at 7:41 am
    John Jung says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    another coastal agent,

    I respect your opinion, but the situation is not that simple. Insurance cos. are not wanting to take the risks at all creating technically a monopoly market
    (Homeowner\’s with mortgages are forced to buy the insurance).
    Insurance cos. do not want to even be in the risks market. They either fold up & leave saying it\’s not worth the head ache and the risks of soiling our reputation in case of disaster, or they do not want to assume risks by mass buying re-insurance at whatever costs and then just passing it on to consumers. So technically, they are charging premiums so high that they have low or no risk at all. I would love to be in a monopolistic business that have no risks just profit potential.
    Take a look at why so many gov\’t & ex-gov\’t officials are starting small property & casualty insurance cos.
    They paid themselve salaries & commissions. If they God-forbid gets hit hard by a disaster, they know they can fold up and hand everything over to the state to bail them out. In the meantime, they even get free cash from the state for taking policies off the state-run Citizen Insurance. Heck, I want to open an insurance co. & get in on this racket.

    THIS IS TOTALLY MESSED UP.

    SOLUTION IS PURE & SIMPLE:

    Since the federal national disaster looks dead, the state of FL should have a state -run insurance for natural disasters. Then private insurance would cover the rest. The private insurance should be real cheap since all risks left is low & predictable (like fire, vandalism, liabilty, ect..)

    I would like to hear a rebuttal of why this plan would not work.

    THE 1ST CANDIDATE RUNNING FOR GOVERNOR THAT SUGGEST SOMETHING LIKE THIS WOULD PROBABLY WIN. IT\’S A SOLUTION.

    HAVE YOU NOTICE, WHY ALL THE CANDIDATE ARE TRYING TO AVOID THE INSURANCE TOPIC?
    THEY HAVE NO SOLUTION THAT WILL WORK.

  • July 17, 2006 at 3:55 am
    L says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    That’s right why don\’t you have tourists subsidize residents in Florida. They don’t live in the region, but they should pay so Floridians can enjoy their beach front property. Why don’t you go after vacation homeowners? Oh wait you already have. They pay at least 2x the amount of property taxes even though they use fewer services than residents. Why is it that Florida residents feel that they should be subsidized for everything?



Add a Comment

Your email address will not be published. Required fields are marked *

*