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Florida's insurance woes demand a radical solution

State Farm is dropping 50,000 homeowners policies. Nationwide is cutting 39,000. More insurers than not have made filings with the Office of Insurance Regulations wanting to raise rates rather than reduce rates. And those that are cutting rates, are cutting less deeply than anticipated.

By any measure, the package of insurance reform measures that lawmakers enacted back in January with an eye toward stabilizing the insurance market and reducing the cost of insurance has failed miserably.

Insurance — not property taxes — remains the biggest problem facing Florida homeowners today as it was a year ago.

Gov. Charlie Crist has called for an investigation of the industry to find out what’s gone wrong. Insurance Commissioner Kevin McCarty has asked insurers to “do the right thing.”

Problem is insurers aren’t in the business to do the right thing. They’re in the business to make money for their investors.  If, at the end of the day, they aren’t making money, they aren’t going to be writing insurance much longer.

“Getting tough” on the industry might seem to be the way to get rates down, but that’s likely to make matters worse. 

On the other hand, we don’t agree with those in the industry who say the best way to solve Florida’s insurance woes is deregulate the industry, to give companies virtually a free hand to set rates as they please.

The ultimate solution is to create a national disaster insurance system similar to the National Flood Insurance Program now in place.  There are proposals out there that would move us toward such a system — the Ron Klein-Tim Mahoney bill, for one. And Robert Wexler has one of his own. They make good politics for the home folks in Florida, and they’ll certainly have some allies from the Gulf Coast states and other coastal areas.

However, politically, the odds are stacked against them. Convincing a congressman from Iowa that his constituents should bear some of the risk for homeowners in Boca Raton is almost impossible (although the Klein-Mahoney bill skirts the problem by making participation voluntary).

The Bush administration already has thrown out the “market” argument, that greater governmental involvement will come at the expense of private insurers. Fact is, the market is falling apart. Fact is, insurers want out. The administration makes one legitimate point — that a national insurance system could lead to greater development and more risk in hurricane-prone areas. That is a legitimate fear, but one that can be addressed. Still, don’t hold your breath. It ain’t going to happen anytime soon.

That puts the matter back in the hands of the Legislature. If Congress can’t create a national disaster program, Florida’s lawmakers must create a system that takes the insurers out of the hurricane equation as much as possible.