By Mark Hollis
South Florida Sun-Sentinel

TALLAHASSEE -- Florida's teetering property insurance industry got what it wanted this year from the state: new power to raise consumer prices.

The Legislature crafted the industry incentives as insurers poured hundreds of thousands of dollars into election campaigns of lawmakers, state political parties and candidates for statewide offices.

Insurers now can automatically raise prices for homeowner coverage 10 percent without any state review. And to make Florida even more enticing to property insurers, legislators tossed in $250 million in loans for insurers willing to expand in this state.

The changes have been hailed across the country by the insurance industry as a big help to do business in a hurricane-battered state.

Consumer activists say it was a giveaway to an industry that already gets its way in Tallahassee.

Analysts say the legislation was not a surprise, given the industry's consistent political donations.

``It's always hard to say that the money bought something specifically, but the money certainly buys the industry access to decision-makers,'' said Sue O'Connell, research director for the Institute on Money and State Politics, a nonpartisan watchdog group based in Montana. ``It opens doors and allows them [insurers] access in a way that the typical citizen may not have. It also seems pretty clear from the way that industry distributes its donations that Florida is a pretty important state to the insurance companies.''

Since 1996, the property insurance industry has given $11.2 million to Florida candidates and state political parties, with roughly three of every four dollars to Republicans, according to research by the South Florida Sun-Sentinel.

The 2006 campaigns already have received at least $1.7 million from the property insurance industry, state records show.

O'Connell has examined property insurance industry campaign contributions across the country over three election cycles -- 2000, 2002, and 2004 -- and found Florida is vital to the property insurance market, judging by where the industry spends its campaign donations.

She said that in 2004, Florida ranked No. 10 among all states in total contributions from political donors. But in candidate contributions from the property insurance industry, she said, Florida politicians ranked second in the nation, behind only California that year.

Most donations to GOP

The insurance industry has given the bulk of its money to the party in power, the Sun-Sentinel has found. At least $4 million has been given in the last decade to the Republican Party of Florida, mainly from industry trade groups and associations but also from insurers, their lobbyists and executives.

By contrast, the Florida Democratic Party received slightly more than $1 million.

The contributions represent a small fraction of what's given each year to state parties and candidates in Florida. Other industries, such as telecommunications businesses, home builders and real estate agents, give more. Sun-Sentinel research found that about 2 percent of what's been given to all Florida campaigns and state parties since 1996 -- or $11.2 million of more than $557 million -- can be reported as having come from the property insurance industry.

Campaign finance analysts say the Florida insurance industry still packs a political wallop. That power was on display May 16 when Gov. Jeb Bush signed into law the 156-page property insurance bill that guarantees higher policyholder costs and bigger insurance industry profits.``This is the most significant, comprehensive property insurance legislation that has been enacted since Hurricane Andrew,'' said Len Brevik, the national executive vice president and chief executive officer of the National Association of Professional Insurance Agents. He said it's ``precisely the kind of innovation'' that Congress should mimic.

Critics call it a politically timid and anti-consumer answer to what ails Florida's insurance market. The law has been criticized in recent weeks by Democratic candidates for governor and some Republicans, such as state Rep. Randy Johnson of Winter Garden, a candidate to be Florida's chief financial officer.

``The insurance crisis has crept on the kitchen tables of Floridians and they are mad about it and responding to it. ...,'' Johnson said of reaction to increased rates. ``It is about insurance company greed, plain and simple.''

While some candidates criticize the law as an industry sellout, Florida's top insurance regulators, such as state Chief Financial Officer Tom Gallagher, a Republican running for governor, say it was just the start of a solution. His 2006 gubernatorial campaign has received at least $379,000 in donations from the insurance industry. Only the Republican and Democratic state parties and Bush's gubernatorial campaigns have received more money from the state's insurers than Gallagher has taken in for his 2006 race for governor.

He also has received at least $369,000 in industry donations during previous campaigns for other state offices, including the one he holds.

Gallagher campaign aides say Gallagher is not beholden to the insurers.

``No one has been more forceful and cracked down on insurance companies more than Tom Gallagher,'' said Alberto Martinez, Gallagher's gubernatorial spokesman. ``He's called State Farm and Allstate out on the carpet whenever they've tried raising rates and not responding to their customer's needs. ... Tom has a record of fighting for consumers and a record of speaking his mind.''

Campaign finance records show Jeb Bush's campaign for governor in 2002 received at least $201,000 from the property insurance industry. This year, he gave legislators surprisingly little guidance on how to fix the state's troubled property insurance market.

During his State of the State speech in early March, Bush called for better hurricane preparedness but provided no direction about insurance issues, including what to do with financially troubled Citizens Property Insurance Corp. Citizens is the state-run home insurer, and now the state's biggest property insurer. Its size is a sore point the state never intended.

When Bush signed the new property insurance bill into law, he knew consumers wouldn't be happy. ``I will accept responsibility that we will have higher rates,'' Bush said.

Bush and Republican legislators made their first move when they created the Task Force on Long-Term Solutions for Florida's Hurricane Market prior to the 2005 hurricane season.

The 13-member task force conducted eight public meetings. The panel of mostly insurance industry insiders overwhelmingly recommended short-term, industry-friendly solutions, only some of which were adopted.

In a 58-page report, the task force repeatedly called for what the Florida property insurance industry wanted -- ``greater flexibility'' with regulators. ``The majority of the people on the task force had some industry tie,'' said Steve Burgess, a task force member and a consumer advocate who works under the state Office of Insurance Regulation.

`Afraid to be bold'

Some legislators, insurance industry lobbyists and analysts say lawmakers settled on the bill because of their concern about doing more harm than good.

``The single biggest issue that will cause the state's economy to stop is not handling this insurance situation correctly,'' said Sen. J.D. Alexander, a Lake Wales Republican on the Senate Banking and Insurance Committee. Records show Alexander, who helped negotiate the final bill, has accepted at least $95,000 in donations from insurance interests to his political campaigns since 1996.

Bush says Florida is better off with the law than nothing.

``It's not easy to make the tough choices,'' Bush said. ``If we had not made the tough choices this year, it would have come back to haunt us.''

Others don't see it that way.

``A lot of these issues are technical. So a lot of legislators aren't comfortable with certain things. When an insurance company lobbyist says `this and this,' it's pretty difficult for someone who is not an expert to know that they are lies,'' said Birny Birnbaum, an economist with the Center for Economic Justice, in Austin, Texas.

Robert Hunter, director of insurance for the Consumer Federation of America, said: ``The (Florida) Legislature is afraid to be bold. They were so afraid that the industry is going to bolt that they won't take the kind of action that needs to be taken.''

By HOWARD TROXLER, St. Pete Times Columnist

Florida's leadership, from the governor and Legislature down, remains weirdly sluggish about this insurance thing.

Hey, we're studying it. Meanwhile, another storm swirls to the south of Florida.

There are only two ways to go.

Either we get the private insurance companies to come back...

Or else the public sector (meaning, the government) takes over more of the show.

That's it. Two stinky choices. Either we kind of kiss the patooties of State Farm and Allstate, or else we go more socialist.

A lot of people say, "Let's just ORDER those so-and-sos to sell insurance! Let's tell them they can't sell car or life or anything else in Florida if they don't sell property!"

Easy to say. But it won't work, for a lot of reasons. The companies are separate entities. There's plenty of legal mumbo jumbo. Even if that law held up in court, some companies that had to choose would just pull out of Florida altogether. Maybe we could whip up an auto-insurance crisis too.

Nope. Either we get the companies to come back, or we take it over ourselves.

How do we get them back?

Some folks say we should let them charge as much as they want, no limit. Others say we need to fix the problem of "reinsurance," which means, insurance for insurance companies, but they don't say how.

Maybe you saw in the paper the other day a Q&A with a guy named Robert Hartwig, the president-elect of an outfit called the Insurance Information Institute.

"Let premiums float and become actuarily sound," Hartwig replied, when asked the answer to Florida's problem. "They aren't even close today."

They aren't even close today, the gentleman said of insurance rates in Florida.

And you know what? I am afraid he is right. No matter how high current rates are in Florida, they aren't high enough to justify the risk to the private companies.

But I bet you that most Floridians would march on Tallahassee and burn the Capitol if the next governor and Legislature actually proposed free-floating insurance rates.

This leaves a public sector solution, which Gov. Jeb Bush and many Florida leaders decry as the path of "Big Government."

Well, there's no need to worry about whether we'll have Big Government. We already have Big Government. It is called the Citizens Property Insurance Co., and it now covers 25 percent of the market in Florida, with 1.2-million policies, and $400-billion worth of risk.

But it is the worst kind of Big Government. The state is covering the highest-risk policies, only the ones the private companies choose not to cover.

Two of this year's candidates for governor, Tom Gallagher on the Republican side and Rod Smith on the Democratic, stopped by the office Wednesday to make their pitches. Gallagher, a former state insurance commissioner, made the observation that we Floridians are more or less having to "insure ourselves."

But if that's the case, if we are on the hook for insuring ourselves anyway, then why not really do it? Why not spread the risk, instead of concentrating only the highest-risk Floridians under the public sector, while letting the private companies enjoy the benefit (and profits) of the lowest-risk customers?

Smith, for his part, proposes that the state of Florida cover the first part of all hurricane damages - say, the first $50,000 to $100,000 - when a storm is big enough to trigger the state's participation.

That echoes an idea floated in last spring's session of the Legislature by Democrats who wanted the state to cover damages above $100,000 or so, with private companies covering everything beneath that.

Horrifying? Distasteful? Well, are these ideas more distasteful that the insurance guy's claim that premiums "aren't even close" to high enough? Are they more distasteful than our current system, in which the state of Florida meekly follows behind the private companies with a Pooper Scooper, picking up those of us the private companies don't want?

Florida is at the point where the governor and Legislature need to be doing something more than just explaining why other people's ideas are lousy.

It is amazing, incredible, astonishing that the 2006 Legislature did not see further. We should hope and pray that it remains merely an irresponsible lapse, reparable in a timely fashion, and not The Worst Mistake The Legislature Ever Made.

Serious proposals on the homeowners insurance crisis are beginning to surface, but the candidates for governor aren't doing their part.

ST. PETERSBURG TIMES EDITORIAL

It doesn't take an opinion poll to determine that Florida's property insurance crisis is getting worse and is easily the state's top issue. Rates continue to soar, homeowners policies continue to be canceled and private coverage is next to impossible to find in many areas.

There is a powerful storm brewing - and thank goodness it's not another hurricane (yet). It is the anger among homeowners who can't find coverage or can't afford the coverage they have. It is the rising fear among business leaders with the same problems who see the downturn in the housing market and fear the state's robust economy will collapse without insurance that is available and affordable. Yet Tallahassee's response has been too slow and too timid, and none of the candidates to succeed Gov. Jeb Bush are offering particularly bold solutions. This won't wait for another study commission and another patch job by the 2007 Legislature.

The governor and the Legislature inexplicably failed to give this crisis the time and attention it demanded earlier this year. Bush stood in the shadows too long and waited for state legislators to take the lead. Then legislators waited until the last minutes of the session in May to cobble together a package too watered down to have an immediate impact on the insurance market. Pouring more than $715-million into the state-run insurer of last resort, Citizens Property Insurance Corp., helped lower assessments. Other provisions won't take full effect for months or are phased in. A new grant program to help homeowners harden their homes against hurricanes is smart but will take years to make an impact. The politicians who failed Floridians in the spring are getting the message from voters as they campaign this summer: Do something. Soon.

Since the Legislature adjourned, State Farm has won a rate increase of more than 50 percent. Nationwide is seeking an average increase of more than 70 percent. More homeowners are receiving letters from insurers that their coverage won't be renewed. Citizens has grown by 50 percent and become the state's largest insurer, with more than 1.2-million policyholders and rising. Realtors and businesses are sounding alarms, while insurers say they can't find affordable reinsurance. These trend lines can't continue much longer without significantly harming the state's economy and the household budgets of countless families.

There are some indications the message is finally getting through. Bush, Chief Financial Officer (and Republican candidate for governor) Tom Gallagher, and Senate President (and CFO candidate) Tom Lee want the state Cabinet this week to consider creating a new statewide insurance pool for business. The idea is not to create another Citizens for businesses but a reinsurer for private insurers. That would limit the private market's risk and encourage insurers to write more policies with more reasonable premiums. It is a reasonable response. So is a proposal by Gallagher and others to make it easier for insurance companies to tap into the Florida Hurricane Catastrophe Fund after a storm. Lowering the losses an insurer would incur before tapping into the fund could entice some homeowners insurers back into the market. But it would require legislative approval and more money from the state or policyholders after a storm.

Much of the discussion among the candidates for governor hasn't been as helpful or thoughtful. Everybody wants a national catastrophe fund, but Congress isn't going to create one any time soon. Attorney General Charlie Crist, who is leading Gallagher in the race for the Republican nomination, has yet to even offer a substantive proposal. He wants insurers selling other lines of coverage in the state, such as auto insurance, to be required to sell homeowners insurance. That might draw applause from frustrated homeowners, but it won't work. Two of the top auto insurers, Geico and Progressive, don't even write property insurance.

The Democrats aren't much better. U.S. Rep. Jim Davis and state Sen. Rod Smith tangled in last weekend's debate over how property owners collect from multiple insurers when there is both wind and flood damage. That's important, but it's a side issue now. So are many of the provisions of Davis' "bill of rights" for homeowners, such as where a consumer advocate for insurance customers sits in Tallahassee.

The most intriguing idea was floated by Democrats in the Legislature last spring and is part of Smith's package: Creating a new state-run pool that would cover all hurricane damages up to perhaps $100,000. Private insurers would collect that premium and cover everything else. That might prove unworkable, but it's worth a serious look and reflects the scale of the brainstorming that's needed.

It makes no sense to call a special session of the Legislature without a proposal on the table that would make a real impact. Any solution that brings private insurers back won't be cheap. It likely will require a significant commitment of tax dollars or assessments or some combination. And it should be broad-based, with the benefits and the burdens spread as widely as possible.

This is a statewide crisis that affects us all, and the next hurricane will only make it worse. Solving it will require leadership and ideas as large as the problem.

And that can't wait until spring.

Palm Beach Post Editorial

Thursday, July 27, 2006

The August edition of National Geographic carries the headline "Killer Hurricanes; No End in Sight." Even scarier for Floridians, there is no end in sight to the refusal of Gov. Bush and Republican leaders in the Legislature to acknowledge how little they have done to deal with the state's property insurance crisis.

Democrats had ideas during the March-May legislative session, but the governor and the GOP didn't want to listen. They listened only to the insurance industry. So, Democrats are taking their ideas on the road. This week, they were in Palm Beach County. If the governor is ignoring them, though, another Republican is paying attention. Attorney General Charlie Crist, who is running for governor and watches polls the way forecasters watch radar screens, indicated some support for the Democrats' approach.

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That approach is simple: The private property insurance market is broken, and relying on private companies and state-run Citizens is a costly mistake. The Democrats want to take hurricane coverage from Citizens and create a new layer of wind-only insurance statewide that includes all homeowners.

Those at higher risk would pay more, but private companies would be out. Coverage would be anywhere from $25,000 to $100,000, depending on what studies of the concept determine would work best. Private companies would administer the policies, and could compete for wind coverage above whatever level the state sets. The hurricane catastrophe fund probably would be abolished and its assets shifted to the statewide pool.

Democrats brought Robert Hunter, director of insurance for the Consumer Federation of America, to speak for their plan. Mr. Hunter points out the obvious: Allowing private insurers to dump all high-risk wind policies into Citizens "causes all sorts of distortions." Notably, there is no spreading of risk.

The Legislature made things worse this year by requiring that Citizens rates be "actuarially sound," meaning that Citizens can charge rates to cover the worst-case, most-expensive scenario. Since Citizens has all the riskiest policies and must charge the highest rates in the state, the Legislature's move allowed all the private companies to jack up their rates, based on the industry's calculations. Conveniently for the industry, the Legislature this year also shifted decisions on rate increases in favor of the companies. Previously, an insurer had to prove that its proposed rate increase was not excessive. Now, the state must prove that the rate is excessive.

"We want to be heard on this," said Rep. Dan Gelber, D-Miami Beach, the House minority leader. "We didn't make this a political issue. The Republicans did, by not even listening to us." Rep. Gelber wants Gov. Bush to call a special session on insurance, but that would require the governor and Republican leaders to admit, in an election year, that they didn't do enough.

The problem is that Gov. Bush and other Republicans continue to believe that the private market can solve the problem. When he named a committee to study the insurance issue - a move designed to get the GOP past the election - the governor asked for ways to create "incentives for private insurance" and to reduce Citizens policies by "substituting private alternatives." Incoming House Speaker Marco Rubio, R-Miami, told The Miami Times, "You have to let the natural market adjust." Of course, he also said of this hurricane season, "I'm mostly in prayer mode."

In fact, there no longer is a "natural market," and Floridians have been subsidizing hurricane insurance for years. To keep insurance costs from stomping on the state's economy like a foot on a garden hose, to use Democratic gubernatorial candidate Rod Smith's comparison, Florida must spread the risk in ways the private market won't.

Even the private companies are starting to acknowledge that the Democrats might have the answer. They deserve the hearing the Republicans didn't give them.

Democrats use rising policy rates as a rallying cry for the fall elections.

BY MELISSA SANCHEZ
Miami Herald

Stan Zeidel was floored to discover the insurance premium for his Boca Raton condominium had more than tripled to $192 a month.

Last year, he and his neighbors in the Courtyards of Boca homeowners association each paid $52 a month.

''That's outrageous,'' Zeidel said Tuesday during a public forum on homeowners insurance attended by about 50 people at Broward Community College in Davie. ``Some of the people are on fixed income, some of the people aren't even living in their homes because of [Hurricane] Wilma.''

In response, the Florida House Democrats who organized the forum touted a plan to have the state cover windstorm damage.

Rising homeowners insurance rates have become an election issue, especially for Democrats who contend the Republican-led Legislature sides with insurance companies instead of residents.

During the last legislative session, Democrats proposed eliminating the state-run Citizens Property Insurance and creating a statewide fund to provide homeowners with a layer of windstorm-loss coverage.

The bill died in committee, and lawmakers in May passed a massive insurance-reform bill that raised rates for most homeowners.

Meanwhile, several private insurance companies have announced double-digit rate increases or plans to not renew policies in risky areas. As a result, many homeowners' only insurance option is Citizens.

Citizens was created in 2002 to cover Florida's most at-risk properties. In South Florida, that means homes and businesses within a few miles of the coast, said Citizens spokesman Rocky Scott. But as private companies dropped at-risk policies after two devastating hurricane seasons, Citizens became the state's largest insurer.

Zeidel said he did not care which party introduces a successful bill to make homeowners' insurance more affordable. He just wants to see it happen.

He yelled into the microphone during Tuesday's forum, asking the six Democrats how they would keep from ''failing'' again.

Sharon Aron Baron, a Davie homeowner who attended the forum, said her insurance rates skyrocketed this year -- from $5,307 to $14,485 a year. ''I'm going to try to cut my coverage,'' she said. ``How are people going to afford this? This is more than my property taxes.''

The Democrats had proposed creating a state windstorm pool that would cover the first $100,000 of losses after a deductible. If homeowners want more insurance, they can buy it from private insurers who might be more willing to sell the coverage if they knew their losses would be limited. Allstate Insurance did some research for the legislators and found that the bulk of the claims from a major storm were less than $100,000.

Rep. Tim Ryan, D-Dania Beach, said the Democrats' approach would tempt ''more private insurance into the market,'' adding that ``government must be involved in order to provide some type of coverage.''

But Florida Republican Party spokesman Jeff Sadosky said the Democrats' proposal ``creates a government bureaucracy where there doesn't need to be one.''

He said Democrats are ''playing up the issue and casting blame'' as the November elections approach.

The Republican Party doesn't plan to introduce a bill to counter the Democrats, he said, but will address the issue with a series of bills.