Florida Repeals The Laws Of Economicsby Kevin Boyd
The Florida legislature overwhelmingly passed a bill today that supposedlyaddresses Florida’s insurance crisis. The solutions these Solons came up with are:
The biggest savings are expected to come from expanding insurers’ access to the state’s Hurricane Catastrophe Fund, which pays claims when insurers can’t. Insurance companies pay into the fund, but the coverage is cheaper than the private backup insurance most companies carry.
Why should the state be in the reinsurance business? The reason why insurance companies do not have enough money to pay out claims for hurricane damages along the coast is because too many damn people are living on the coast. Instead, the Florida legislature should pass a law telling insurance companies there are not forced to write homeowners policies in coastal areas. Hopefully, the insurance companies will drastically raise rates along coastal areas to cover the extra risk or mortage companies will stop writing mortgages for homes along the coast since they won’t get insurance.
The bill requires insurers to determine if they could save by purchasing more coverage from the fund – and if they do, to pass the savings on to consumers.
Not content with merely subsidizing the bad decisions of Floridians, the Florida legislature has enough hubris to make the financial decisions of insurance companies. The insurance companies have the right to set whatever rates the public is willing to pay.
The measure also has a mandatory rate rollback for customers of the state-created Citizens Property Insurance, Florida’s largest insurer.
Again, Citizens Property Insurance serves to subsidize the bad decisions of Floridians. When Citizens cannot payout its claims, Floridian and American taxpayers will be on the hook to make up the difference.
It also requires regulators to deny rate increases if they would lead to “excess profits,”
Who’s going to determine the defiinition of “excess profits”, a committee made up of Keith Olbermann, Alcee Hastings, Barney Frank, Ted Kennedy, and John Edwards? Maybe Hugo Chavez, Kim Jong Il, and Fidel Castro are available as advisors. Government has no business determining “excess profits” for any business in a capitalist system.
and allows consumers to choose much higher deductibles, or to go without wind coverage, as a way to reduce their premiums.
Wow, instead of repealing the price controls on deductibles that Florida has apparently imposed, the Florida Politburo is going to graciously allow you to choose to carry higher deductibles. How nice of them. How about making the determination of deductibles the sole concern of the insurance company, the policyholder, and the mortgage company or is that too much to ask?
Another section aims at trying to prevent insurance companies from dropping policies or leaving the state. It requires auto insurers to sell homeowners coverage in Florida if they cover property in any other state.
My guess is, many auto insurance companies are going to say adios.
If the Florida Politburo wanted to really lower homeowners insurance rates, they should have done the following:
1) Make it clear that insurance companies are not required to write homeowners policies along the coast. This, hopefully, will price out from living along the coast.
2) Abolish the Hurricane Catastrophe Fund and the Citizens Property Insurance company. These two entities also seek to subsidize the bad decision of living along the coast in a hurricane prone state.
3) Abolish all rate caps and government approval for rate increases. This will allow insurance companies to price policies according to the risk.
4) Tighten all statewide hurricane building codes to the Miami-Dade county standard. This will actually serve to decrease risk and again, make it more expensive to live along the coast.
Florida’s insurance crisis is the result of government subsidizing living along the coast in hurricane prone areas. Similiar crisises are developing in every East Coast and Gulf Coast state for the same reasons. Maybe we should try something like using the free market to limit coastal development in hurricane prone areas and using science and engineering to reduce the risk of hurricane and flood damage in areas already developed, instead of using the American taxpayer as a never ending ATM card for bailing out the bad decisions of others.