Posted On: February 23, 2007, 5:17 pm CST

Posted By: temblor

Wait a minute!

Sometime back Kim David said he owned his own insurance agency, and had for 15 years!

And he kept complaining about Increased cost of living and rental income not being covered by the insurance cos.

It would certainly seem that what he is really griping about is that he did not see that these things were insured for his clients (was he selling them dwelling fire and leaving out the extensions of coverage, instead of selling them a homeowners?) and not selling his commercial clients loss of income?

Then, of course, when they needed those extensions of coverage, and the companies declined to cover them, he got his rear in a sling?

If he really wants to know how well the government runs insurance operations, he need only look at Florida's Citizen's Insurance Co. or Florida's Catastrophe Fund.

Despite having years to build their reserves, both were bankrupted in '04 and again in '05 because the politicians kept the rates well below actuarially sound to please their constituents. Those shortfalls were made up by assessing not only Citizen's policyholders, who had benefited from the artificially low rates, but everyone else who had property insurance, and many other coverages. In '06 the surcharges to cover the '04 shortfalls were ~12% of premiums. They still haven't decided how to cover the '05 shortfalls except the Cat Fund sold $13 billion in bonds, payable over 10 years by policy surcharges.

Despite Citizens rates that are obviously too low, the legislature, in special session, just reduced them even more.

With no way to fund it, and $13.5 billion of debt to still pay off, they nevertheless increased the capacity of the Cat Fund (on paper, there's no money there), which offers reinsurance to insurers at costs below open market, mandated that insurers buy that reinsurance, and pass the savings on to their policyholders.

Now the only way to truly reduce rates is to reduce the amount of damage storms can do, that means making buildings better able to withstand high winds through various mitigation procedures.
Reduce losses, and the rates come down.

The state initiated a mitigation program to make single family homes more wind resistant. The program was funded with $350,000,000 of state and federal money.

To qualify for a matching 50/50 grant to pay for mitigation (storm shutters, etc.) the house must be inspected by the state, and a report issued. Only after the report is issued can the homeowner make the improvements and apply for the 50/50 grant.

The program began in 1/06. By the end of 06 only 12,000 homes had been inspected. That is 48 inspections a day. For probably several million homes.

And, to date, not one report has been issued!

State CFO Alex Sink tried to get the legislature, in it's recently completed emergency session, to address the mitigation program. They ignored her.

That, my friends, is how well the government runs insurance programs. They will cave to political expediency every time, and worry about how to pay for it later.

Bill Lockhart
Advanced Insurance Underwriters
Hollywood, Fl.