A timid insurance fix
St. Petersburg Times Editorial
The law on homeowners insurance contains too many half-measures and delays to count as the comprehensive solution Floridians need.
Gov. Jeb Bush had no choice this week but to sign into law the Legislature's feeble effort to make homeowners insurance more available and affordable. Doing nothing was not an option practically or politically, and over time some elements of the law should be helpful. Yet none of the provisions are bold enough to have an immediate effect as another hurricane season bears down on Florida, premiums continue to soar and insurers such as State Farm and Allstate continue to dump policyholders.
Stuck between the obvious need to prop up the state-run insurer of last resort, Citizens Property Insurance Corp., and homeowners protesting escalating assessments and premiums, legislators desperately sought a middle ground. The result is a compromise that is too timid to attract significant new insurance business, dramatically affect rates or fix Citizens quickly enough.
There is a loan program for medium-sized insurance companies that want to borrow $25-million and flexibility to raise premiums by up to 5 percent automatically. But the rate flexibility doesn't take effect until 2007, and there is nothing to attract larger, established insurers back into the market. Pouring $715-million into Citizens to lower assessments was the right thing to do, but it was wrong to stretch out the remaining assessment over 10 years and hope for the best in the meantime. Similarly, lawmakers did the right thing by making Citizens calculate rates the way most commercial insurers do. But they also phased that in because they feared going back home to explain to voters why they have to boost the rates to make Citizens more financially stable.
Their lack of courage is evident in other areas as well. Banning Citizens from insuring homes worth more than $1-million lowers the insurer's exposure and was widely praised, but that won't take effect until 2008 and there is a loophole. Legislators also tried to mute some complaints by making Citizens policyholders bear a greater burden than homeowners with policies from private insurers the next time Citizens faces a deficit after a hurricane and needs to make an assessment. But that doesn't seem to be a fair way to deal with a state crisis, particularly since it isn't the homeowners' fault that they couldn't find coverage in the private market.
The provision most certain to produce real results is a new $250-million grant program that will provide owners of homes worth less than $500,000 matching money for hurricane shutters and other improvements. Newer homes built to tougher building codes have fared much better in recent hurricanes. Home inspections and matching grants of up to $5,000 to better secure houses will help more homeowners be better prepared and, eventually, help insurers limit their losses. But that program won't be in place before this hurricane season, either.
Despite the Legislature's timidity, the best hope is that this insurance law at least points Citizens in the right direction and catches the eye of some smaller insurers tempted enough to roll the dice in Florida. A bolder Legislature would have steered a clearer direction and spent more time considering more sweeping changes - including whether it makes sense to bring insurers back by creating a state-run pool that would cover all hurricane damages over a certain amount.
This year, too many legislators were more worried about their political vulnerability than the vulnerability of a Florida where homeowners insurance is a scarce commodity. The only recourse now is to view these reforms as a modest start, hope this hurricane season is easier on the state than the last two and encourage the next governor and the next Legislature to act with more creativity and decisiveness.
The law on homeowners insurance contains too many half-measures and delays to count as the comprehensive solution Floridians need.
Gov. Jeb Bush had no choice this week but to sign into law the Legislature's feeble effort to make homeowners insurance more available and affordable. Doing nothing was not an option practically or politically, and over time some elements of the law should be helpful. Yet none of the provisions are bold enough to have an immediate effect as another hurricane season bears down on Florida, premiums continue to soar and insurers such as State Farm and Allstate continue to dump policyholders.
Stuck between the obvious need to prop up the state-run insurer of last resort, Citizens Property Insurance Corp., and homeowners protesting escalating assessments and premiums, legislators desperately sought a middle ground. The result is a compromise that is too timid to attract significant new insurance business, dramatically affect rates or fix Citizens quickly enough.
There is a loan program for medium-sized insurance companies that want to borrow $25-million and flexibility to raise premiums by up to 5 percent automatically. But the rate flexibility doesn't take effect until 2007, and there is nothing to attract larger, established insurers back into the market. Pouring $715-million into Citizens to lower assessments was the right thing to do, but it was wrong to stretch out the remaining assessment over 10 years and hope for the best in the meantime. Similarly, lawmakers did the right thing by making Citizens calculate rates the way most commercial insurers do. But they also phased that in because they feared going back home to explain to voters why they have to boost the rates to make Citizens more financially stable.
Their lack of courage is evident in other areas as well. Banning Citizens from insuring homes worth more than $1-million lowers the insurer's exposure and was widely praised, but that won't take effect until 2008 and there is a loophole. Legislators also tried to mute some complaints by making Citizens policyholders bear a greater burden than homeowners with policies from private insurers the next time Citizens faces a deficit after a hurricane and needs to make an assessment. But that doesn't seem to be a fair way to deal with a state crisis, particularly since it isn't the homeowners' fault that they couldn't find coverage in the private market.
The provision most certain to produce real results is a new $250-million grant program that will provide owners of homes worth less than $500,000 matching money for hurricane shutters and other improvements. Newer homes built to tougher building codes have fared much better in recent hurricanes. Home inspections and matching grants of up to $5,000 to better secure houses will help more homeowners be better prepared and, eventually, help insurers limit their losses. But that program won't be in place before this hurricane season, either.
Despite the Legislature's timidity, the best hope is that this insurance law at least points Citizens in the right direction and catches the eye of some smaller insurers tempted enough to roll the dice in Florida. A bolder Legislature would have steered a clearer direction and spent more time considering more sweeping changes - including whether it makes sense to bring insurers back by creating a state-run pool that would cover all hurricane damages over a certain amount.
This year, too many legislators were more worried about their political vulnerability than the vulnerability of a Florida where homeowners insurance is a scarce commodity. The only recourse now is to view these reforms as a modest start, hope this hurricane season is easier on the state than the last two and encourage the next governor and the next Legislature to act with more creativity and decisiveness.
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