Dear Florida, This is why you pay too much for insurance

It isn’t greedy CEOs, global warming, or even a really bad, really expensive decade of hurricanes in the Gulf of Mexico that is the cause of high insurance rates in the state of Florida. The real reason is uncertainty. That insurance companies are now holding their collective breath, waiting to find out if Governor Crist will put down his scepter and pick up a pen to sign a bill allowing private insurers to raise rates–that is the reason insurance will remain more expensive than it needs to be.

On Friday state lawmakers passed reforms that would allow the struggling property insurance market to raise rates, allowing the companies to charge rates that get a little closer to reflecting actual risks. But even if Charlie does sign the bill (unlikely) it doesn’t change the fact that it would have been a hard, really hard-won victory for the private companies.

The bill, SB 2044, now goes to Gov. Charlie Crist, who can sign or veto the bill. He has said that he doesn’t support anything to allow rate increases but he hasn’t made a decision on the bill, according to his staff.

It’s another bill that Crist — who is running for the U.S. Senate — can “hit out of the park” with a veto, said Bill Newton, executive director of the Florida Consumer Action Network said, referring to the governor’s recent veto of a teachers merit-pay measure. “He probably needs money and insurance companies have a lot of money so you never know what he might do.”

Yes, location has something to do with it (living near the beach is more risky) and yes, the hurricanes of the past contribute as well, but really the higher costs can be linked to regulatory uncertainty. It takes such teeth pulling for insurers to earn the sanction of the governor in order to set rates that, of course, they are going to high-ball the estimate knowing full-well that any increase in rates will be just as hard to get, if not impossible. It is the job of an insurer to foresee the future and plan as best as he can for the worst-case scenario. When the regulators continual change the rules on a whim insurers have no choice but to assume the very worst and the very worst is the most expensive for everyone.

It will take a much bigger overhaul to improve the economy of Florida [and the rest of the country].