Foxes Watching the Hen-House

Four months before the hurricane season, storm clouds are forming due to insurance reform measures suggested by Sen. Ron Klein, D-Boca Raton.

Klein told South Florida television stations and newspapers it’s essential to establish a “watchdog” to “protect the consumer” by intervening in hearings during which homeowner’s insurance rate hikes are proposed.

He also suggests: Citizens Property Insurance Corp. should compete with private insurers; insurance companies shouldn’t be able to dump policyholders without justification and must keep policyholders without any claims for five years; eliminating the Insurance Regulatory Commission; and preventing the use of secret “black box” models to determine if a policy should be canceled.

Klein hopes to find support for his proposals in Tallahassee as a reaction to the hurricanes that hit Florida and caused over $21 billion in insured losses.

Reactions to Klein’s suggestions were immediate, Sam Miller, Florida Insurance Council executive vice president, responded:
“The insurance community is committed to working with all parties to ensure Florida consumers can find and afford home insurance in the private market place,” Miller said. “Floridians want to see solutions, not finger-pointing and Hurricane Andrew proved positive reforms can be passed in a bipartisan fashion.

“The insurance community is committed to working with government leaders to protect Florida homeowners from future crisis,” he said. “We encourage an open, productive dialogue to serve the best interests of Florida’s policyholders.”

William Stander, Tallahassee-based regional manager for the Property Casualty Insurers Association of America, called Klein’s proposal “a massive increase in government intervention” within the insurance industry.

“Insurance is the last remaining competitive business in which the government still controls prices and Sen. Klein thinks more regulation is the answer,” Stander said. “He argues the market can better set the price.

“The real danger to his proposal is that while I can see some people thinking the ideas sound good, in the end his proposal will reduce private insurance availability and increase the cost of insurance,” Stander said. “[The legislation] will have the opposite and undesired effect.”

It’s foolish to attempt to overhaul legislative bodies that have been in place since Hurricane Andrew and which although sometimes slow–work. Such an attempt could ultimately boomerang on Klein, but at the same time wreak havoc and more bad publicity onto the insurance industry. The insurance industry is already over-regulated. Insurers in Florida can’t afford to expose themselves to large amounts of hurricane risk for the premiums they’re allowed to charge.

Due to Klein’s claims, he seems to lack of confidence in the democratic system. His attacks are a slap at Florida CFO Tom Gallagher–could this have anything to do with Klein’s political aspirations to become CFO, and if he wins be responsible for the state’s insurance regulation.

Topics Florida Legislation Hurricane Market