Florida Homeowners Insurance Thought of the Day

This editorial at Florida Today got me thinking.

The editorial itself is what you’d expect to see in a newspaper whose readers are being impacted by massive increases in their homeowners insurance rates — anecdotal stories of individuals being whacked with huge increases, reports of insurers making record profits (in 2004, which was a very quiet year outside Florida), and calls for changes beyond tougher review of rate filings.

I can’t help but notice that none of the editorials I’ve read have actually looked at any of the rate filings coming through Tallahassee now. I’d think it would be educational, and potentially more constructive, for media pundits to check out what insurers are saying about their rate needs. That’s a remarkably easy thing to do in Florida, where rate filings are online, available for review by anyone with a web browser and a pdf reader.

While it wouldn’t surprise me if there is an element of overreaction in insurers’ rate filings, or an element of panic as management actually realizes what the AAL, PML, and standard deviation figures flowing out of the cat models really imply, somewhere, buried in the data filed with the state, is information on how expensive it is to insure properties from the peril of tropical weather.

Creativity is going to be required to fix the mess. Examining the expense loadings that go into hurricane premiums, considering appropriate risk loads, perhaps finding fairer ways to allocate costs, and maybe even finding more efficient ways to find capital to support the risk are more likely to provide acceptable results than simply throwing temper-tantrums over renewal premium bills.

And well, if public will trumps statistics in reforming the situation… you might want to ask Massachusetts about the health of their personal insurance market.