On Insurance, Will State Get Fooled Again?
Palm Beach Post
October 10, 2006

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For nearly 60 years, Congress has left insurance regulation to states, which enables the industry to set rates state-by-state and work the system to its advantage. That's how the property insurers made record profits in 2005 despite Hurricane Katrina and two bad storm seasons in Florida .
 
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There's a case to be made that the solution for Florida is to leave the private market out of any solution, since the private market has brought about the crisis. Making that case is Americans for Insurance Reform, which proposes "a privately run state insurer for the hurricane wind portion of homeowners' insurance coverage." Private companies would continue to write non-wind coverage, covering fire, theft and liability. Democrats in the Legislature supported this approach, but they didn't get a serious hearing.
 
The key to any such plan would be how much to charge. That, in turn, would depend on who decides what the risk is. Americans for Insurance Reform suggests using models that are developed by state government and run by state government. As the group notes, Florida insurance regulators now have to rely on the industry's computer-generated risk models. One of those private models, Risk Management Solutions, said this year that projections now will be based on five-year periods. That means Floridians are paying property insurance based primarily on 2004 and 2005. Is that spreading risk?
 
On this one, really, get past politics
 
Politics may keep some Republicans from taking Americans for Insurance Reform seriously. The group is part of the Center for Justice & Democracy, which gets money from those dreaded plaintiffs' lawyers Republicans like to criticize unless one of them - Sen. Mel Martinez, for example - is running as a Republican. Also, Michael "Fahrenheit 9/11" Moore sits on the Center for Justice & Democracy's board.
 
But if there ever was an issue that demanded politicians to look beyond politics - and campaign contributions - Florida 's insurance crisis is that issue.
 
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For a copy of the complete article, contact AIR.