TALLAHASSEE — As homeowners across Florida open their windstorm insurance renewal notices this year, they are learning they're going to be paying hundreds or even thousands of dollars more for their premiums.

What they may not know is that today and for the past three decades, they have also been sending tax money, both indirectly and directly, to property insurance companies — not to keep their own premiums low, but to ensure those companies' profits.

The state assists private insurance companies by providing windstorm insurance for those properties most at risk, allowing the private insurance companies to cherry-pick the low-risk, high-profit policies; by offering tax-subsidized reinsurance to insurance companies at a lower cost than they can get it elsewhere; and by paying some private companies incentives to take over high-risk policies in addition to the premiums they receive from those policies.

These subsidies are part of the reason why, despite record hurricane damage last year, the nation's major insurance companies nonetheless posted record profits.

Now, they are also looming as one of biggest issues of this election season.

"Floridians are getting tired of this," state House Democratic leader Chris Smith said. "Some folks are paying more in insurance premiums than they're paying in mortgage payments."

Democrats, hoping that the electorate's anger over hurricanes will translate into a shift of the political winds as well, are offering a radically different solution. They want the state to effectively become the windstorm insurer for every home in Florida up to a certain amount such as the first $100,000, or perhaps even the first $500,000, of a home's value. Democrats say the plan will save homeowners money because the state won't have to pay taxes or make a profit off selling insurance.

'Citizens on steroids'

Republicans generally scoff at the plan as "socialistic." They defend the current system — under which the state-run Citizens Property Insurance Corp. underwrites homes that the private industry doesn't want — as an imperfect means of keeping private insurers in Florida and providing coverage for those whom private companies will not insure.

"To me, it would seriously jeopardize the economy of our state. This thing would be Citizens on steroids," said Chief Financial Officer Tom Gallagher, a Republican candidate for governor. "We need to get Florida out of the insurance business."

Gallagher said the state first needs to make insurance available, and then make it affordable. But he has not offered any specific solutions of his own.

"We're working on some things," he said.

Democrats argue the current system is already socialistic — just a sort of crony socialism designed to help insurance companies, rather than ordinary Floridians.

"The truth of the matter is, when our (Republican) colleagues had to choose between homeowners and insurance companies, if you look at your premium, you know who they went with," said Rep. Dan Gelber, D-Miami Beach, a chief promoter of the Democrats' plan. "The solution to obscene rates shouldn't be rate increases."

One Republican, chief financial officer candidate Randy Johnson, wants to move in the opposite direction of Democrats. He proposes freezing property and casualty insurance rates until home and business owners can weigh in at public hearings and then deregulating the industry over the long term to encourage more insurers to come into the state.

But Democrats have at least one Republican ally in this debate: Attorney General and gubernatorial hopeful Charlie Crist, who for months has criticized Citizens as a "failed insurance company" under the stewardship of his GOP primary opponent, Gallagher.

"It probably will be better than what we have right now," Crist said of Gelber's proposal in a recent interview. "That's an initial impression: That's not an idea I would cast aside. I think it has merit."

Insurance key to economy

That state government is involved even to the extent it is today is testament to the crucial role property insurance plays in the lifeblood of Florida's economy: real estate development. Similar price hikes and lack of availability in, say, trip cancellation insurance, almost certainly would not lead the state to create a program to help residents buy it.

Homeowners insurance is something else entirely.

Without an income tax, Florida for decades has relied on real estate transaction taxes and increasing sales tax revenues from new residents to pay the state's expenses.

If no homeowners insurance were available, banks would stop writing mortgages for new construction. And if banks stopped writing mortgages, the Florida economy would grind to a stop.

"It's actually become an economic development crisis in Florida. It's not just a property and casualty crisis," said Senate President Tom Lee during the spring legislative session. "If we don't have an adequate supply of capital in this state to write insurance policies to cover that construction, we will come to a screeching halt in Florida, and that's not an option this legislature wants to entertain."

To that end, Florida has created several quasi-public entities since the 1970s to take on risky properties that the private market doesn't want, making it easier for the private companies to remain profitable. Anyone with property insurance, private or otherwise, has helped shore up those entities through assessments paid through their private insurance companies.

And this year, the Republican-controlled legislature and Gov. Jeb Bush approved giving Citizens $715 million in direct tax money to help pay down its $1.7 billion deficit from two devastating hurricane seasons. The rest will come from additional assessments on policyholders — including non-Citizens customers — in coming years.

Citizens meanwhile paid $156 million in incentives to private companies that were willing to take over some of its policies during the last three years.

The Florida Hurricane Catastrophe Fund also has sold cheap reinsurance to private companies with the understanding that Florida policyholders will fill it back up if it runs out.

Democrats have floated several different plans over the past few months, including one that Republicans killed in an early committee meeting during the legislative session.

Gelber, who will become the House Democratic leader at the end of this year, is making the rounds with one featured on a Web site sponsored by the party — stormingmad.com. It would eliminate the current situation in Florida, where insurers can write the all-perils policy for a house (fire, theft, liability) but choose not to write the windstorm coverage, leaving that to Citizens instead. Outside the high-risk pool area — which is roughly east of Interstate 95 in Palm Beach County — companies must write all coverage, windstorm and all-perils, or nothing.

Spreading the risk

The Democrats' plan would eliminate those geographical distinctions. It would require the state to take on the first layer of a home's windstorm coverage — numbers have ranged from $50,000 to $500,000 — regardless of location. Private industry would compete to write the rest. Under the plan, private insurers would write and manage a policy, handling all the claims processing.

The plan would also eliminate the Florida Hurricane Catastrophe Fund. Democrats say the plan would mean lower premiums for homeowners, but they haven't calculated what the savings would be. They also say the program would spread the risk over a wider range of low-risk and high-risk properties, which could help the state avoid the deficit problems that Citizens has had.

"It's basically just to say the government involvement is not going to be in a certain risk pool, a leper colony of risk, but spread out," Gelber said.

Sen. Rod Smith, D-Alachua and one of the Democrats running for governor, proposes a plan similar to Gelber's but with a cap set at $50,000. Smith's primary election opponent, U.S. Rep. Jim Davis of Tampa, supports a different plan of improving consumer advocacy and forcing insurance companies to cover flood damage, too.

The insurance industry is not entirely opposed to Gelber's idea but said that the details would prove crucial.

"It may very well be somewhere down the road the state may make a decision that the only way homeowners can afford insurance is through a heavily subsidized state program," said Sam Miller, spokesman for the Florida Insurance Council. He said some companies are interested in looking into the idea. "No one's dismissing it out of hand."

Miller said Gelber's plan does raise some concerns because it eliminates the catastrophe fund and the high-risk pool — two features that Miller said insurers will need as long as they remain in the windstorm business.

Miller said he also doubted whether the plan would save homeowners any significant money. He pointed out that homeowners insurance has been a money-losing business in Florida for the past two years and that was unlikely to change if the state took over.

"People should not believe we can shift the chairs on the deck and somehow dramatically reduce the amount of money that has to come from somewhere to pay these hurricane claims," he said. "To say the profit factor will take care of it and the tax exemption will take care of it, that hasn't been demonstrated."

Regardless, Democrats are intent upon making this one of the main campaign issues this fall.

Last month, the party rolled out its insurance plan Web site, and its leaders are asking the ruling Republicans to call a special session on property insurance before the November election, but that appears unlikely.

If the issue is to become a problem for any Republican, it's most likely to be Gallagher. He served twice as insurance commissioner and in 2002 won the Chief Financial Officer seat, which holds the closest links to the Office of Insurance Regulation of any on the Cabinet.

And Gallagher's primary foe has said the insurance mess clearly is fair game as a campaign issue.

"There's no question that it resonates," Crist said, adding that he didn't plan to blame Gallagher personally. "That's for the voters to decide, and I'm sure they will. They're smart, and they'll figure things out."