Must Write Homeowners in FL to Sell Other Products?

[Frenchie]

From Tampa Tribune

Insurance Remedies May Have Unintended Results
By KEVIN BEGOS The Tampa Tribune

Published: Jan 18, 2007

TALLAHASSEE - Florida politicians are considering radical changes to the property insurance business. Whether the fixes will work - and whether they're even legal - is another matter.

"I think it's excellent what Florida is trying to do; I think it will be unsuccessful," said Tom Baker, director of the Insurance Law Center at the University of Connecticut.

He was referring to legislation that would put pressure on companies that refuse to write homeowners policies in Florida, as well as allow regulators to consider the profits of national parent companies when setting rates. Those moves could ease the crisis in homeowners insurance, lawmakers say.

"There would be no legal reason why the Florida insurance department couldn't do that," said Baker, noting a long history of other states looking at the market in a broad way.

However, the effect might not be what politicians intend, he said. For although the state could compel insurers to offer homeowners insurance when it is equipped to do so, a company could decide to pull out of the state entirely rather than comply with the new rules.

That's just one of many potential problems, said Robert Hartwig, president of the industry-sponsored Insurance Information Institute.

"Some of these provisions threaten to legislate insurers out of existence in Florida. They are anticompetitive. They will drive capital away from the state," he said.

Hartwig also thinks that forcing insurers to write multiple lines and considering the profits of national affiliates is flat-out illegal. That interferes with interstate commerce, he said, suggesting that a federal court would strike down such laws.

"You cannot compel an insurer to sell any particular type of insurance," he said.

Some past disputes on insurance issues have gone all the way to the U.S. Supreme Court and Congress, Baker said.

The battle over hurricane insurance also has parallels with the way fire insurance evolved.

The U.S. Government Accountability Office noted in a report that "as the 19th century progressed, and the power and profitability of the fire insurance industry grew, state governments began taxing fire insurance companies, as a means of obtaining revenue, and enacting laws requiring deposits from out-of-state insurers and imposing heavy taxes on their local operations, as a means of protecting local insurers."

Partly as a result of such disputes, Congress exempted the insurance industry from interstate commerce laws and allowed states to handle regulation.

"The insurance industry is really the last big industry that is primarily regulated by the states," said Robert Jerry, dean of the University of Florida Law School and an expert on insurance law.

During the past decade, though, there have been increasing calls to federalize parts of insurance regulation, he said, noting "that discussion has probably been as intense as any time in the last 30 years."

At a meeting of the U.S. Senate Committee on Banking, Housing and Urban Affairs in the summer, representatives of state insurance commissioners called for keeping the current system, but some leading industry voices supported a move toward national regulation.

Some are waiting to see the final legislation in Florida before passing judgment.

Adam Shores, a spokesman for Allstate Floridian in St. Petersburg, said the process of refining legislation could take months, even if the main bills are passed this week.

"We're talking about a fundamental restructuring of how insurance operates in this state," he said.

Shores praised the concept of the state providing reinsurance to companies such as Allstate. That could be "a strong step in the right direction" that lowers rates for consumers, he said, although Allstate is concerned about other attempts to punish the industry.