Editor’s Note: Caught in the middle

State legislatures are meeting, or will soon meet in most southeastern states to consider insurance proposals, many of which attempt to regulate the industry and prepare for the 2006 hurricane season.

Associations in southeast states told Insurance Journal their utmost concern is what proposals will be made and their outcome.

Issues vary from state to state, with wind vs. water damage, policy provisions and rate increases key issues on the Gulf coast. Other states, like North Carolina, West Virginia and Florida are tackling insurance fraud and workers’ compensation issues.

Independent insurance agents are scapegoats for consumers, legislators and the press, all of whom view them as a reason increased regulation is necessary. Critics don’t realize that agents can’t win-it’s the age-old story about killing the messenger.

Insurance rates are set by actuaries who quite simply use statistics to determine what their losses were and passing that information on to budget managers who decide how much a policy should cost. Insurance carriers are, after-all, profit-making entities. I don’t know of one that claims to be in business to sustain a loss.

Then, of course, the bill goes to the consumer and the agent receives angry phone calls from policyholders complaining about increased rates.

After an insurance agent calmly explains to the homeowner, his customer continues to complain to everyone and anyone who will listen-his wife, the press and his state representative.

One often has to wonder about the motivations of politicians when they decide to crusade to make changes or regulate any industry. Is their motivation due to the need for change, due to pleas from consumers, or as a way to be noticed by the public as their benefactor, and thus be elected or reelected?

Then, to muddy the waters even more, state-run insurance companies, like Florida’s Citizens Property Insurance Corp., enter the picture. Homeowners forced to use Citizens as their insurer of last resort discover in a hurry that Citizens initial rates are no bargain and they tend to escalate by double-digits every year.

The Florida Legislature enacted changes in 2005 envisioned to at least slow-down the Citizens situation, but they were instituted just as the hurricane season hit-so up to this point few have any idea if they helped or not.

Proposals abound, some crusaders suggest the creation of a new mechanism for insuring wind damage; the Florida Association of Insurance Agents suggests reforming certificates of insurance abuses, which would result in less agent dependence on Citizens (see page 10); while other carriers are investigating the feasibility of charging higher “vacation home” rates in an effort to lower premiums on primary residences.

What will work? The fact is that everyone IS guessing, however, no one seems to be on the same page; everyone seems to be trying to out-guess and out-maneuver someone else-and the days are going by quickly and the 2006 hurricane season is on the near horizon. Everyone needs to get on the same page, work together and attempt to suggest a solution that will solve the problems.

Topics Florida Agencies