By DJ Menz, JMI Intern and Florida State University Senior in International Affairs
Governor Crist recently vetoed yet another bill aimed at restoring Florida’s property insurance marketplace. The bill sought to ease an increasingly precarious situation that puts homeowners and taxpayers at risk if a major storm were to hit the state. The vetoed legislation would have eased restrictions that prevent insurers from offering and pricing their services in a way that reflects Florida’s economic and natural realities.All businesses, especially insurers, need to be able to account for factors such as supply, demand, risks, diversification, and asset/liability management in order to remain effective and solvent. Unfortunately, public pressure has succeeded in systematically distorting and over-regulating Florida’s property insurance market to the point where large respectable companies such as State Farm want to leave that market altogether.Meanwhile, doubts have been raised about the financial strength of some of the “start-up” companies that have recently entered Florida’s property-insurance market. The same goes for the state-operated Citizens Property Insurance, supposedly the “insurer of last resort” for those who can’t obtain coverage anywhere else but now one of the state’s largest insurers.Shortsighted and politically expedient decisions have also created a situation in which the residents who choose to live in high-risk coastal zones are, in effect, being massively subsidized by other property owners.JMI recently published a detailed study of these issues facing Florida’s insurance market. It noted how “political decisions made over the course of several decades have artificially lowered property insurance rates for homeowners in high-risk areas while simultaneously exposing the state’s taxpayers to massive liabilities if a single major hurricane were to hit one of the state’s heavily populated areas.”Read more in JMI Backgrounder “Property Insurance Solutions to Protect Homeowners, Taxpayers, and Florida Government from Financial Devastation”.