PROPERTY INSURANCE

We still face significant challenges in Florida’s property insurance market. Right now the State of Florida is the largest insurer in the State—a situation we are working hard to change by attracting new insurance companies into the Florida market. Under legislation passed in early 2007, we provided a number of incentives for new insurance companies to come to Florida and increase the competition in the market to drive down rates. Citizens was given a mandate to reduce the number of policies it held as these new companies were approved to operate in Florida by the Office of Insurance Regulation. Since the passage of that bill over 18 new companies have applied for or have already been approved to operate in Florida. To help Floridians make more informed choices about what property insurance coverage was available and how much the different policies cost, Governor Crist launched the web site: ShopandCompareRates.com to allow consumers to have a source for one-stop shopping to compare their property insurance rates for homes located anywhere in Florida.

I also know that Florida’s homeowners face a difficult challenge in choosing their homeowners’ insurance policy since a number of the long-term major property insurance companies decided to stop issuing policies in Florida. Too often, Floridians are left with few choices to insure the largest investment they will make in their lives. That’s why I supported legislation this year to put the power to make insurance choices back into the hands of the consumer. While providing for necessary consumer protections, the measure allows the consumer to make insurance choices and encourages a sustainable and competitive private insurance market. I trust Floridians, armed with all of the relevant information, can make the best decision for their residential property insurance policy and company.

But more work still must be done to help lower rates. We have already done much to improve competition by attracting new insurance companies to offer property insurance policies in Florida; however, the other major factor that must be addressed is challenging the industry’s underlying assumptions upon which they base their rates for insurance coverage. Until 2006, these prices were set using risk adjusted models that were based on the probable maximum loss in a 100-year storm. After 2006, these risk models were replaced with new models that looked at a 5-year average loss that included the three worst years for storms in Florida history – 2004, 2005, and 2006. The change in approach to storm modeling and the actuarial analysis for the cost of the risk associated with the projected maximum probable loss predictably skyrocketed and has served as the basis for the rate increases that Floridians have experienced in their premium notices ever since. As your new Republican State Senator, I will pursue establishing an independent commission of scientific experts that will be able to evaluate these newly revised storm loss models paid for by the insurance industry and I will provide the commission with the resources to establish a public alternative model that will be actuarially sound but more reasonable in its pricing formula for assessing the risk of loss. Through this effort we can push for legislation that will provide significant incentives and competitive advantages for insurance companies that charge premium rates to Florida customers using the public storm loss models developed by the State – these policies predictably will likely cost much less than the policies based on rates that come from the proprietary storm models paid for by the insurance industry.