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.

[Morrison]

I don't know whether to laugh or cry as I watch from afar as the FL legislature tries to fix the insurance problem in Florida. I'm sure many of the politicians mean well, but some of the proposals such as requiring companies to sell homeowners insurance are incredibly foolish and would disrupt other lines of coverage in addition to homeowners and property.

Also, their idea of having the state assume more of the hurricane risk is pretty bad too. One big hurricane could effectively double the state's debt level and result in incredibly high taxes/assessments. Really, most of these proposals to lower insurance rates are just promising rate decreases now in exchange for assessments later when the storms do hit and don't do much to lower the total cost of risk, just the timing of when it is paid for.

My opinion, they should de-regulate the pricing in the FL market. It would attract a lot more capital and competition could do it's thing.

My company is looking at exanding our list of states we do business in and FL is pretty much at the bottom of the list b/c of all the regulatory risk.

[yanz]

I wonder if the insurers could have more effect by simply getting together and signing an if-this-law-is-passed-we-will-definitely-pull-out-of-FL-and-everyone-will-have-to-pay-twice-as-much-for-citizens (or in taxes) potential boycott. Maybe if FL governing bodies were actuall faced with the consequences, they might not make stupid decisions...

[Dr. John Zoidberg]

The best way to have a fair insurance system in your state is to copy whatever LA is doing

:insert rolly eye thing here:

[MountainHawk]

Here is the fact of the matter.

Let's say the expected losses for all homeowners from all causes of loss in Homeowners for 2008 is $X.

No matter HOW you break it up between insurers, FHCF, and the state, the people of Florida are going to pay for the $X. If Florida tried to force people to look nationally at profits, I guarantee a rash of states would pass laws similar to Iowa requiring insurers to state they aren't considering other state losses in the setting of Iowa rates.

Is forcing everyone into a state run wind pool the best? It might be the cheapest, since they are not going to have the same marketing/commission/overhead costs as an insurer, but it also puts a ton of pressure on the state run fund when a big event happens, AND everyone needs help at once.

[James Joel]

Originally Posted by yanz

I wonder if the insurers could have more effect by simply getting together and signing an if-this-law-is-passed-we-will-definitely-pull-out-of-FL-and-everyone-will-have-to-pay-twice-as-much-for-citizens (or in taxes) potential boycott. Maybe if FL governing bodies were actuall faced with the consequences, they might not make stupid decisions...

I agree with the sentiment, but suspect that would be illegal and a good way to be on the losing end of a law suit.

[DeepPurple]

Originally Posted by yanz

I wonder if the insurers could have more effect by simply getting together and signing an if-this-law-is-passed-we-will-definitely-pull-out-of-FL-and-everyone-will-have-to-pay-twice-as-much-for-citizens (or in taxes) potential boycott. Maybe if FL governing bodies were actuall faced with the consequences, they might not make stupid decisions...

I see someone hasn't taken an upper exam yet on tort law and regulation.

[Levin]

Originally Posted by James Joel

I agree with the sentiment, but suspect that would be illegal and a good way to be on the losing end of a law suit.

Originally Posted by DeepPurple

I see someone hasn't taken an upper exam yet on tort law and regulation.

I wouldn't see it going well for the industry to formally do this, of course.

But folks like Bob Hartwig -- okay, maybe just him -- have made it abundantly clear to the media that the effect of requirements to write homeowners, or to consider companywide profits in FL rates, would be market exit by many firms.

The point is that a mass exit from the Florida market could be triggered by something much less nasty than collusion and boycott. The economics would take care of it, and if this is truly the case, I think the FL govt. has been duly warned of the possibility.

[silverfox]

The best way to view new legislation is to completely ignore it until they finally sign it into effect.

[Falco]

Ugh - my company writes a small quantity of auto insurance in FL and no homeowners, and I'll need to make a case for either writing home or not writing auto. Certainly one of those options is much more appealing than the other.