Florida continues its populist jihad against private insurance companies. On top of last year’s legislation letting the state-owned Citizens Property Insurance Corp. compete outright for private customers while freezing rates, the latest crop of legislation goes further down the path towards socialized property insurance. Citizens is already Florida’s largest insurer and will now grow even larger. The new laws also make it harder for companies operating in Florida to wall off their subsidaries and create “pup” insurance companies.
Gov. Crist, who calls himself a conservative Republican, seems to love this. “I hear some groans from insurance lobbyists,” Crist has said. “‘Tough!’ This is what’s right. We work for the people.” His web page even styles Crist “The People’s Governor.”
For all this talk, I can’t see how this benefits the people–common or otherwise. The real problem, the insurance industry’s own dirty secret, is that in the long term, it’s near impossible to make money simply writing property insurance policies. For 17 of the 20 years before Katrina struck, insurance companies lost money writing policies along the Gulf Coast. For a few years, they’ll reap record profits on underwriting but, provided states like Florida don’t continue their jihad, competition will drive these profits down to nothing. Insurance companies stay in business in the long-term by investing premium dollars in good years. Real profits come from these investments, not insurance premiums.
Citizens, because it’s a government entity, really can’t invest its premium dollars the way the private sector can. Currently it can’t really make real investments at all. But letting the company do this would also prove a tremendous problem: government would actually be picking winners in the private market. Government does a pretty bad job at this.
Without a very risky portfolio of policies and no ability to make investments, Citizens is doomed when a major storm hits Florida. Taxpayers will end up picking up the pieces and paying all the bills. Needless to say, the common people won’t benefit