Web-surfing this morning, I caught sight of two editorials pertaining to the issue of windstorm coverage in Florida.
The first, from the Miami Herald asks why does a single line on a map have such an effect on the South Florida property insurance market:
If you live east of U.S. 1 you almost certainly have windstorm coverage from Citizens Property Insurance Company, the high-risk, state-developed company that, by law, charges higher premiums than anyone else. If you live west of the line, you can get windstorm insurance from commercial carriers at competitive rates.[...]
Everyone living east of this artificial line who is paying artificially higher insurance rates should contact their state representatives before the 2006 session starts and ask them to support legislation to correct this problem. The economic stability of our communities is at stake.
I’m going to withhold comment here. There’s too much I don’t know about the ins-and-outs of the homeowners insurance market in Florida to not risk sounding foolish. However, other than general interest in changes in the insurance marketplace in the wake of the past two years, the editorial caught my eye because of what’s happening with California auto insurance, where territorial rating has become an issue again.
Folks, there are some fairly sophisticated algorithms available these days to come up with efficient, statistically-justified territory definitions. Arbitrary lines, or the use of localized data while being blind to the additional credibility to be gained by looking a little further afield, should be going the way of the dinosaur.
Meanwhile, the Orlando Ledger has some opinions to vent about the upcoming assessment to Citizens’ revenue shortfall and the windfall sales tax revenue in the wake of Katrina and Wilma:
State Chief Financial Officer Tom Gallagher, who oversees insurance regulation at the state level, is proposing that the Legislature earmark windfall revenues generated from cleaning up storm damage to mitigate the rate increase assessments projected for Citizens Insurance, the state’s insurer of last resort.
Gallagher has considerable support for the idea, from both parties. But a similar plan failed to clear the Legislature last year, and its chances of passage in 2006 are doubtful at best.
The reason: Gov. Jeb Bush is opposing it. Bush says it amounts to a bailout of the insurance industry, which was rocked with claims after all the hurricanes.
“I’m opposed to using general revenue to bail them out,” Bush said at a press conference in Tallahassee last week. “To me, it doesn’t make sense.”
A noble sentiment, to be sure. But the fact is that it won’t be the insurance companies ponying up the money. They’ll simply be collecting assessments dictated by Citizens Insurance and delivering the money to Citizens.
‘Nuff said.
The people being bailed out would be the homeowners. The assessment last year was 6.8 percent, and another assessment of as much as 11 percent has been projected for 2006. Those assessments are on top of any rate increases imposed by the for-profit insurers.