Florida Rep. Proctor Challenges Commissioner McCarty’s Insurance View

In my opinion, Florida Insurance Commissioner Kevin McCarty’s assertions that our state has “one of the most” competitive property insurance markets in the country and that easing rate regulation will not encourage private carriers to return to the Florida market, are both open to serious question. If that were true, then why are so many companies restricting their writings or leaving our state altogether? But more importantly, the Commissioner’s extensive article fails to respond directly to the fundamental issue. That is: why a homeowner in Florida cannot purchase a policy from a licensed company of his choice at a market regulated rate?

The state-created Citizens Property Insurance Corporation is unfairly competing directly with private insurers and as a result is now Florida’s largest homeowners’ insurer. Both Citizens and the Florida Hurricane Catastrophe Fund are dangerously overexposed and may not have sufficient capital to pay all their claims if a major hurricane or several hurricanes hit Florida this summer.

Florida’s families could be required to pay thousands of dollars in state assessments for several years if Citizens and the Cat Fund have to be bailed out by insurance policyholders. Moreover, credible, independent financial rating agencies have questioned whether several of the small, start-up property insurers that Commissioner McCarty touts as being the foundation of Florida’s “competitive market” will still be standing after a major storm. These are the alleged “40 new companies”.

In fact, one rating agency has issued a May 15 deadline for some of these small insurers to demonstrate that they have adequate coverage from the Cat Fund or private reinsurance – or several may face ratings downgrades or have their ratings withdrawn altogether, potentially putting consumers’ home mortgages in jeopardy.

These are the realities of the current Florida homeowners market with which the Florida Legislature is contending.

These are the circumstances that give impetus to the legislation I am sponsoring this spring in Tallahassee. House Bill 1171 provides consumers more options in purchasing homeowners insurance.

My bill would allow a narrowly-defined group of large, well-known, and financially strong property insurers to offer policies to consumers at market-based, actuarially sound rates – – free from the overly burdensome rate regulation private property insurance companies now face in Florida, while still providing for necessary consumer protections.

The bill will allow Florida’s consumers to choose for themselves what they’re willing to pay to have their home insured by a company that they know provides good customer service and has the capital to pay their hurricane claims.

In my role as a Florida state representative, I have heard from constituents – as have many of my colleagues – who were frustrated to learn that their homeowners’ insurer was cancelling their policy because the necessary rate request was denied by Commissioner McCarty’s office.

Constituents all ask the same question: Why is the state deciding for me what I am willing to pay to protect my home? Why can’t I make that decision myself?

My bill includes important safeguards to make sure consumers know exactly what they are buying if they choose one of these free market policies. For example, consumers must be provided with a side-by-side comparison of the rates and coverage they are offered under one of these policies, comparing what they would pay Citizens Property Insurance or a private company with fully regulated rates.

Consumers also would be encouraged to discuss all of their coverage options with their agent, and they would be directed to Commissioner McCarty’s own “shop and compare rates” website.

Of course, the intent of my bill is also to encourage large private property insurers to return to Florida to compete for our citizens’ business and to bring desperately needed new private claims-paying capital into our hurricane-prone state.

If price regulation is the solution to assuring consumer choice – as Commissioner McCarty seems to claim – why then is Florida having so much trouble generating real competition in its dysfunctional homeowners’ market? Why are there so many small private insurers in this state facing questions about their basic ability to meet claims-paying obligations after a hurricane?

Why not permit consumers to decide what they’re willing to pay for peace of mind when they’re insuring their homes. If the price is too high, consumers will reject the offer or fire the insurer – if the price is right, they’ll hire them. A truly competitive homeowners’ market is based on consumers having choices among many private insurers. A financially stable market is based on having a healthy mix of large, medium and smaller companies that contribute private claims-paying capital.

Proctor, a republican, is from St. Augustine and is a member of the Florida House of Representatives.

Topics Florida Catastrophe Carriers Legislation Property Hurricane Homeowners