Florida’s CFO beginning to get a Sink-ing feeling about state’s insurance reforms

This is a good interview by the Miami Herald of Florida Chief Financial Officer Alex Sink, who sounds as if she is about ready to start hunting down the people who said Florida’s legislative insurance reforms would bring down property insurance premiums 20 percent or more — they haven’t.  Here’s an excerpt:

Q: What happened to those rate cuts that homeowners had been promised?

A: Who told us that we were going to see 20 percent rate reductions? It was the OIR [Office of Insurance Regulation], which hired Robert Hunter [insurance director for the Consumer Federation of America and former Texas Insurance Commissioner] for pretty big money to do an analysis of what we could anticipate.

My question is — and I’m going to bring this up to the [Florida] Cabinet — we heard 20 percent and we got 10 percent. What happened?

We took on an enormous amount of extra risk (in the CAT Fund) because we all agreed our policyholders were hurting, our economy was hurting and we needed rate relief.

We should always go back and find out whether it was a miscalculation, bad information or whether in fact the insurance companies aren’t doing what they were supposed to be doing.

But think about this: State Farm was out there from the get-go, saying “our rates could come down between 8 percent and 10 percent.”

Citizens wasn’t [directly] impacted by the CAT Fund changes, but it was out there saying “our rates might come down about 10 percent.”

So, between State Farm and Citizens, that’s 50 percent of the market.

How do you get 20 percent if 50 percent of the market is saying they are only going to [drop] rates about 10 percent?

There is more good stuff in the interview about her worries that the state-run property insurer, Citizens Property, is taking on way too much risk and, at the same time, is being prevented by lawmakers from charging actuarially sound rates. 

Here’s another story from the Southwest Florida News-Press where Gov. Charlie Crist is optimistic and says, "We have turned the ship."  That’s probably what the captain of the Titanic said after they saw the iceberg.  

 

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