Our views: Spike deregulation

- Crist should veto bill that allows big insurers to skip rate approval process -

June 10, 2009

http://www.floridatoday.com/

No more caving to deep-pocket special interests at the expense of ordinary Floridians.

That's our message to Gov. Charlie Crist, who last week signed into law a bill gutting growth management laws that require builders to pay their fair share for roads -- forcing the costs on taxpayers down the line.

He's now studying a bill that would deregulate some premiums for property insurance, and at last report is leaning toward a veto.

That's the right decision to protect homeowners against the rigged numbers, systematic overcharging and betrayal of faithful policyholders insurance industry giants have gotten away with in the past.

The bill would allow big insurers like State Farm to raise rates without approval from the Office of Insurance Regulation.

State Farm plans to dump 1.2 million policies statewide by 2011 -- including 34,000 in Brevard County -- because the OIR refused its outrageous request for a 47 percent rate increase.

Lawmakers backing the deregulation bill say it will entice insurers like State Farm to stay in Florida and spur more free-market choice.

That includes Brevard County's entire delegation in Tallahassee -- GOP Sens. Thad Altman and Mike Haridopolos and Republican Reps. Steve Crisafulli, Debbie Mayfield, Ralph Poppell, John Tobia and Ritch Workman.

Don't buy it.

Consumers would suffer

Here's what might really happen if Crist gives the reckless bill a thumbs-up.

• Steep rate increases for homeowners still covered by State Farm and other giants.

  
  

  After a similar deregulation move in Texas, insurers there chose only to sell policies "at very excessive rates," according to Robert Hunter, former Texas insurance commissioner.

  
  

  That's why consumers' groups are rightly calling the measure "an invitation for insurers to game the Florida regulatory system and abuse consumers," in a letter to Crist.

  
  

• More dumped policies.

  
  

  State Farm and other companies will use unaffordable premium hikes to "effectively non-renew policyholders under the ruse of consumer choice," according to Insurance Commissioner Kevin McCarty.

  
  

  That could force more Floridians into Citizens, the troubled state-run insurer of last resort, which already has 1.3 million policyholders.

  
  

Lawmakers this year undid a rate freeze on Citizens' rates in place since 2006.

By allowing moderate 10 percent average annual increases, they correctly lowered the state's risk of possibly not having enough reserves to pay hurricane claims and put Citizens on the path to actuarial health.

But it's not there yet.

A new influx of policies would prolong the risk of higher assessments on all Florida residents should catastrophic storms hit.

Keep in my mind that some 40 new carriers now offer property insurance in the Sunshine State, showing that free-market competition is already heating up.

And that unregulated insurance -- known as surplus lines -- already exists for affluent homeowners under no budget constraints.

Full, impartial scrutiny

As for State Farm's claim it would become insolvent without the 47 percent rate increases denied by OIR?

Baloney. The industry is highly profitable.

State Farm's parent company, State Farm Mutual, made $5.1 billion profit in 2007 and raked in high profits from 2004-06, despite destructive hurricanes. It was less profitable last year, but mainly because of stock market losses.

And don't buy the argument that overregulation by state government is to blame for State Farm's problems.

Florida Administrative Law Judge Daniel Manny delivered the low-down on those claims in January, saying State Farm's rate hike request was rigged with "sham transactions" and "economic distortions" to hide real numbers on profits.

That greedy record is why Crist should stand up for consumers -- not the industry -- and veto the bill.

Life in hurricane alley may make property insurance rate hikes inevitable for Florida homeowners, but they should come only after full, impartial scrutiny by the OIR.