Until Florida creates an atmosphere of political and regulatory stability, and allows companies to turn a profit, the private market will remain reluctant to write homeowners in the state, said a panel of insurance executives.
Speaking at the Florida Association of Insurance Agents annual convention and educational symposium in Orlando, Mike Stone, president of RLI Insurance Co.; Tom Van Berkel, president of the Main Street America Group, and Florida Family Insurance Co. President Peter Corrigan offered their thoughts on the Florida market.
The topic of rate was at the top of the list of why private companies continue to avoid doing business in the state.
Stone said the Peoria, Ill-based RLI does offer surplus lines and umbrella products in the state. However, he said, until the company could project greater profits it has no plans to expand its business in the state.
“Florida is nice place to visit,” Stone said to a round of laughter. “But without rate adequacy we cannot commit capital. We need a fair rate of return and we prefer double-digits.”
Main Street is a regional insurer that offers commercial and personal lines coverage in 27 states. However, although the insurer is based in Jacksonville, Fla., it has restricted its activities to only market commercial policies.
Van Berkel said Main Street would like to write homeowners in the state. But without seeing sustained improvement in rates, he said, the insurer is unwilling to take the risk in a state where hurricane risk is high while rates remain marginal.
“We want to write personal lines in Florida, but we don’t have confidence in the market’s performance,” he said.
The executives also raised concern about the state’s regulatory and legal environment.
Corrigan said that his company’s experience has been that while state regulators have been tough, they have been fair when it comes to rates and getting forms approved.
“On the rate side, although we get what we need, it doesn’t come quickly,” Corrigan said.
However, citing a recent state regulation report card by conservative think tank R Street Institute where Florida was the only state to receive a failing grade, Corrigan said perception often overtook reality. “It doesn’t matter what we think, it is what we have to deal with,” he said. “And companies have a negative perception when it comes to regulations.”
They also cited dramatic shifts in the philosophies of political leadership as a concern, with the change from former Gov. Charlie Crist to current Gov. Rick Scott as a prime example.
Crist, a Republican who governed as a populist, is widely blamed for the growth in the state-backed Citizens Property Insurance Corp. after he froze the insurers rates in 2007 and allowed it to compete with the private market. In 2009 he instituted the current “glide path” that restricts Citizens annual rate increases to 10 percent.
“It was a punitive time where the industry was seen as the bad guys and that hurt Florida,” said FAIA President Jeff Grady.
Although the more conservative Scott did not have the full support of the industry during his 2010 gubernatorial campaign, he has since been praised for his leadership in reforming the state’s auto no-fault law and aggressive posture toward depopulating Citizens. However, Scott remains an unpopular leader whose latest public approval rating measured by the Public Policy Poll was at 31 percent, raising the possibility of another shift in the next gubernatorial contest.
Grady also noted the legislature’s predilection to pass property insurance reform bills.
“After every storm, the legislature writes another bill with 100 things in it that everybody has to understand,” he said.
Stone lamented how the industry is often portrayed by lawmakers and others after every disaster.
“The way we perform should be applauded,” he said. “But when you have 100,000 people in the industry demonized day in and day out it is tough.”
One thing the executives agreed on is that independent agents play a key role in marketing policies and educating clients.
Corrigan said that Florida Family depends on independent agents as its sales force.
“Independent agents are the best ones to sit down with a customer and say, ‘Here are your options’ and design something for them in the best way,” said Corrigan.
Van Berkel agreed.
“Agents are the best way to distribute products, plus the majority of consumers trust their agent,” Van Berkel said.