While deregulation is always a good thing, we shouldn’t be fooled into believing that the recent news that Florida’s office of insurance regulation has “relaxed their standards of solvency” is anything akin to deregulation or reform. Insurance companies, property owners, and taxpayers remain in a situation as precarious as a beachfront home in the middle of hurricane season.
Insurance companies in the state of Florida will now be allowed to continue operating despite having a level of funds that previously would have had their license to operate revoked. What this means is an insurance company that by industry standards (you know, the standards that actually reflect the reality of a situation) doesn’t have enough money to pay their customers in the event of a reasonably likely hurricane season, is perfectly fine by the new standards of the Floridian government.
This news comes on the heels of a veto vote by governor, Charlie Crist on a measure that would have allowed insurers to charge higher rates (a measure he worked on and supported prior to his separation with the Republican party). Allowing insurance companies to charge the rates they want would have allowed them to rebuild their underfunded coffers–the one thing that would actually represent a real step toward reforming Florida’s insurance market.
So, while it is great that the state won’t step in and shut down companies, insurers in Florida are no less prepared to weather a bad hurricane season and just as likely to find themselves needing state assistance to pay claims after a storm. And because the state has an underfunded catastrophe fund the very likely event of a bad hurricane season could send the state of Florida begging for money from the federal government and every taxpayer in the country to pay for beach homeowners who have been paying too little for insurance for too many years.