The Bradenton Times recently reported that skyrocketing insurance rates may be the result of a cozy relationship between Florida’s legislators, governing officials and the insurance industry. In Which Citizens Are They Working For?, the article concluded:
Frustrated consumers are baffled by skyrocketing costs across so-called regulated industries that continue to grossly outpace flat wages and wonder how regulators can justify such massive increases for hugely profitable corporations.
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Judging from the campaign disclosures, it is clear that these industries have been supportive of government. It might be time for taxpayers to ask whether government is being too considerate of them, while forgetting who they truly work for.
While this is an insurance coverage blog, my firm is actively trying to help policyholders keep their benefits under law. That law is under attack by the insurance industry. It feeds propaganda to legislators and gives them millions of dollars in campaign contributions as an incentive to support the industry’s agenda. Over the past few years, many in the Florida Legislature and government have listened to the insurance propaganda, giving very short consideration to the people that they are supposed to serve. It has been terribly frustrating for me in Tallahassee as a consumer advocate.
I predicted the current state of affairs in Florida Legislators’ New Campaign Slogan: "I Worked Hard to Raise Your Insurance Rates and Give You Less Coverage!" I quoted the St. Petersburg Times noting that Florida’s lawmakers are in bed with the insurance industry:
The [insurance] industry wastes no opportunity to bemoan its inadequate rate increases and the next coming threat, five weeks before the start of Florida’s hurricane season. This, insurers insist, will surely be the year of the Big One, the Mother of Category 5’s.
It’s great theater. We’ve been watching the same play for decades. The show has an admiring audience in many of our lawmakers who swallow pretty much what a rich and connected insurance industry feeds them.
There’s just one problem. Insurers that cover people’s homes and property in the United States are doing quite well financially.
The industry’s own number crunchers – ISO and the Property Casualty Insurers Association of America – this month report that private U.S. property/casualty insurers netted $34.7 billion in 2010, up from $28.7 billion the year before. And that’s after paying taxes.
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Let’s recap. Insurance industry profits rose by double digits last year. Does that sound like the sky is falling?
"Property/casualty insurers’ positive results for 2010 show that insurers are well positioned to meet the needs of consumers and business owners as the economy recovers from the Great Recession." That’s what David Sampson, Property Casualty Insurers Association CEO, said when announcing his industry’s strong 2010 showing.
It is true that many insurers in Florida are small, weakly capitalized and in poor shape to sustain a major storm compared to those in other states. But that’s a result, in many cases, of big insurers applying corporate tourniquets to their businesses in Florida, all but severing the parents from little state subsidiaries. That way, if a big storm hits Florida, a parent company would be legally distant from huge claims.
Which brings us full circle to Tallahassee’s keen obsession today to let the insurance industry have its way here.
State leaders are supposed to operate for the benefit of Floridians. So it’s a bizarre argument from Tallahassee that Floridians will be saved by dissolving Citizens Property and letting rates soar.
That won’t aid struggling residents. It won’t help revive the state housing market. It might create jobs, but at the cost of others. It will make employers considering expanding here think twice if their work force faces sky-high insurance rates.
One thing for sure, it will empower insurers to keep asking for more.
I am amazed that after consumer advocates, including myself and Florida’s previous Insurance Consumer Advocate Sean Shaw, noted the lack of any concrete evidence that insurance fraud is forcing insurers to charge higher rates, lawmakers continue to parrot the insurance industry’s mantra. In essence, lawmakers are calling many of their own constituents who make insurance claims crooks, even though there is no evidence to suggest this is true.
For example, in Lawmaker: Citizens’ request for sinkhole rate increase premature, Representative John Legg was quoted as saying:
"Citizens needs to wait to see what impact these provisions have on the market, as it relates to sinkhole claims," said Legg, R-Port Richey. "I believe the legislation we passed will dramatically curtail fraudulent claims."
Do you think Representative John Legg’s unfortunate constituents who suffered a sinkhole loss would appreciate his intimating that they committed a fraud? Do you think Legg would want those unfortunate constituents to be made aware of his statement? Why should anybody make such a charge, a felony crime, against people with absolutely no proof? Many of these people have seen their largest investments-their homes-significantly damaged or effectively destroyed through no fault of their own. And, how does one create or fraudulently convince insurers of a sinkhole loss?
The truth is that there is a little, if any, evidence of insurance fraud. Premiums should have gone down because the laws Legg and other Legislators voted for took away benefits, and those Legislators changed the laws to make it much more difficult for their constituents to collect if they have a loss. As a result, all Floridians with legitimate losses will receive fewer benefits.
Legg also voted to allow Citizens to raise rates. Legg and his insurance industry friendly colleagues who voted for the anti-consumer insurance legislation that passed last session should not be surprised when voters and the media react now and next year at election time. Legg’s reasoning, that stopping fraudulent claims will reduce premiums, is essentially fraudulent.
I have visited with and supported John Legg. I plan to do so in the future because he is a dedicated public servant. I know he cares about his community. But I disagree with his view on this issue and hope he can learn from this mistake in the future.
Perhaps John Legg and his colleagues will learn not to trust the insurance industry and its lobbyists next year. Representative Robert Schenck, from Spring Hill, may be catching on. The Tampa Tribune noted in Sinkhole Coverage Bills to Soar:
But Robert Schenck, R-Spring Hill, voted for SB 408 because it was designed to cut down on fraudulent sinkhole claims, which is driving up everyone’s premium.
The bill did not authorize Citizens to seek these huge rate hikes and Schenck said he is "completely and utterly opposed" to them.
"So what Citizens is doing is trying to make sinkhole insurance unaffordable," he said. "If nobody buys it, there will be no more claims. That’s their strategy, not the Legislature’s."
Senator Mike Fasano was very critical of his colleagues on this issue:
Sen. Mike Fasano, who fought SB 408 in vain this spring, scoffed at Legg’s use of it to argue against the rate hike.
Fasano, R-New Port Richey, said his fellow lawmakers "should have realized … that the anti-consumer bill they voted for took away the (rate) cap. They should have known this was going to happen."
If lawmakers like Legg truly were focused on combating fraud, Fasano said, "they should have never taken away the cap until they knew whether the bill was going to work or not."
