State gets ‘F’ for insurance climate, reports says
Apr 10, 2008
Treasure Coast Palm--April 10, 2008
By Nadia Vanderhoof
A nationwide study conducted by a nonprofit institute says Floridians are paying higher premiums for their homeowners insurance than necessary because of cumbersome state regulations.
The Heartland Institute study gave the state an “F” grade for its insurance climate.
“It’s just awful, the worst homeowners environment in the country,” said Eli Lehrer, a senior fellow with the Competitive Enterprise Institute and The Heartland Institute who wrote the study. “The state richly deserves an F because it uses state power to set insurance rates.”
He added that Florida legislators have not solved the state’s insurance problem.
The study reported Floridians pay more for homeowners insurance coverage that is inferior to other states with positive insurance climates.
Additionally, despite it’s popularity with the public, new insurance legislation signed by Gov. Charlie Crist last year has failed to substantially lower rates in Florida.
“I would say that although it’s a good contest, Florida is worse off than Louisiana,” Lehrer added.
Lynne McChristian, a spokeswoman for the New York-based Insurance Information Institute, said the study’s Florida information was accurate. She explained that property insurance rates in Florida do not adequately reflect the level of risk for the state.
“Consider the rates of the state-run insurer, Citizens Property Insurance Corp,” McChristian said. “These rates were frozen by the Legislature last year until 2009. Properties insured by Citizens are presumably in areas of the highest risk, so it would make sense for their rates to be among the highest. Instead, those with insurance coverage from other companies are subsidizing Citizens.”
Lehrer said in order for Florida’s grade to improve, the 2007 legislation on insurance reform needs to be reevaluated and changed.
He proposes the following:
• The gradual phase out of the state-run insurer, Citizens Property Insurance Corp.
• Create a national coastal wind insurance zone
• Tweak the way Citizens is currently run by either selling off parts of Citizens portfolio to a private company or imposing a one penny sales tax to prop-up the company
McChristian said Florida might be able to eventually change its grade — but the state must commit to moving beyond short-term fixes.
“If there was a single, simple solution to the challenges facing Florida’s insurance market, it would have revealed itself long ago,” McChristian said.