Gov. Crist threatens adjustments in Florida CAT fund if insurers ask for higher rates

It looks like Florida Gov. Charlie Crist has got more saber-rattling to do, from the looks of this story.  The story says as follows:

Upset that consumers haven’t seen big savings in their homeowner’s insurance, Gov. Charlie Crist said Tuesday that the state could back out of a deal that provided insurers with cheaper coverage while the state assumed a much bigger risk for a mega-storm season.

Prompted by Chief Financial Officer Alex Sink, Crist said he was willing to reconsider the state’s move to pick up another $12 billion in backup coverage for the private insurance market.

"It’s a good thought," Crist said. "What the Legislature gave they can taketh away."

A question: does anyone in a position of authority in Florida have a plan, or is the idea to just reel from one crisis to the next?  What’s the end game of this management by fiasco?  By the way, here’s a post from the insurance blog of the Palm Beach Post saying that Crist "slammed his fist in anger" as he "accused insurers of conspiring with each other to keep rates high." Holy Cow, what’s next, is this guy going to take his shoe off and pound it on the table like Nikita Khrushchev? (Note: Some say Khrushchev did not actually take his shoe off, but was wearing his shoes and brought a third shoe, a light brown sandal, as part of a premeditated plan for pounding.  Some say he did not pound a shoe on the table at all because he was too fat to bend down and take off a shoe — an argument that would be beside the point if he brought a third shoe.  Some say he held the shoe in his hand but technically it was the heel of his hand that hit the table, not the shoe). 

While Florida is seeking ever more regulation of the insurance market, Massachusetts is, as this editorial in the Salem News points out, trying a limited experiment with allowing market rates to take effect. I say limited because of the following in the editorial:

Insurance Commissioner Nonnie S. Burnes wants to reintroduce competition to the auto insurance market gradually. The hope is that this will attract more insurers to offer their products to the state’s drivers at competitive prices. Since 1990 due to the tight controls, 35 companies have pulled out of the car insurance market in Massachusetts; and today only 19 remain.

Currently, the state sets the rates all insurers must charge. The rates vary by community with drivers in urban areas like Lynn and Lawrence paying among the higher premiums in the state.

Under Burnes’ plan, insurers will set their own rates and submit them to the state for approval. Burnes has said she will show "extreme skepticism" toward insurers who propose to base rates on socioeconomic factors, including education, occupation, homeownership or credit scores. She will also retain the power to reject rates she believes are discriminatory or alter rates that she deems unfair in a given territory.

Not allowing insurers to take those factors into their actuarial calculations is merely another name for a subsidy of one discernible risk class by another.  I say if you want to subsidize some people over others, fine, just try to justify it honestly as a subsidy instead of couching it in other, more inflammatory rhetoric. You might want to keep in mind this study correlating credit scores with number of auto claims filed.

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One Response to Gov. Crist threatens adjustments in Florida CAT fund if insurers ask for higher rates

  1. Judith Penning

    My family has been with State Farm Ins. for 43 years. All our Insurance, cars, personal items, homeowners. Having lived in Florida the past 18 years, we understand the situation concerning hurricanes, however our homeowners Ins. has gone up so much the past 2 years, we are being forced to look at other options.
    We recently moved to Hernando Cty. and own a maintaince free home. Two years ago at the closing of our home our Ins. with St. Farm was approx. $1,800.00. Last year St. Farm increased our Ins. to:
    $2,900.00. This week we received notice from St. Farm that our Ins. will now come to: $3,900.00. We visited St. Farms
    office today and one of the questions I asked was when would we receive the drop in our insurance that we were promised by our State Gov. I
    received no answer.
    We are retired and on a fixed income. Beside the fact that we are forced to look for a more affordable rate, the state and all those promises have just become more empty words.
    Judith Penning & Thomas Penning
    4387 Caliquen Dr.
    Brooksville, Fl 34604