Ever since Florida Gov. Charles Crist signed legislation early thisyear to vastly expand the public catastrophe funds capacity, whileallowing primary insurers to buy discount reinsurance from thestate, Tallahassee has been on the industry's case, pushing foranticipated rate reductions they believe is due to homeowners. Thefight is getting ugly, and it could get a lot worse before long,with vague charges of collusion in the air.

The law's champion, Republican Gov. Crist, hammered away at theindustry over the summer, accusing insurers of breaking theirpromise to cut homeowners insurance rates to Florida residents byat least 24 percent to reflect their savings in reinsurancecosts.

Carriers were quick to lash right back, insisting that a 24percent cut was never promised by the industry, and instead wasnothing more than an estimate from state officials and regulatorswearing rose-colored glasses–indeed, more of a fantasy of thebest-case scenario, rather than an actuarially-soundprediction.

There has been much posturing back and forth since then, withvarious requests for stiff rate hikes rejected, but more recently,as NU reported on Oct. 2, “State Farm has agreed to reduce homeowner rates 9percent, as well as pay almost $23.3 million in customer refundsand $1.5 million in legal costs to the state of Florida.”

More ominously, however, the Florida Office of InsuranceRegulation and state attorney general's office said State Farmagreed to cooperate on further investigations related to potentialcollusion between insurers, trade associations and ratingorganizations.

The industry's reaction to the implications of this latestsuggestion of not just bad faith, but outright wrongdoing, reallysparked an angry reaction.

Sam Miller, executive vice president of the Florida InsuranceCouncil, told NU in an article last week that an ongoing probe of potentialcollusion over rates charged by Florida property insurers is theresult of a warlike political atmosphere pitting state publicofficials against carriers.

State Farm insists that whatever Florida officials say, thecompany is not involved in anything like that and referredquestions to the OIR. But then who is the state governmenttargeting in this probe, and what does State Farm know about it? Oris the state just off on a fishing expedition, trying to intimidatemore carriers into settling by offering refunds and lowerrates?

As reported by NU's Dan Hays, Mr. Miller does not believer therehas been any collusion on the part of his industry. The companieshave always been very aware what they can and cant do, he said,adding that its ridiculous to think insurers get together in a roomand conspire on rates. We cant even get them in a room to agree onlegislation.

He went on to state unequivocally that there is no collusion.This is an incredibly political, warlike situation, and its aboutrate struggles between public policy officials and insurers.

Mr. Miller said some 300 companies had made rate filings withthe OIR, and that most have been trashed because we cant magicallyproduce the rate savings they want.

Is this a simple matter of scapegoating because Florida'scontroversial legislative “solution” is failing to deliver thepromised rate cuts? Or are insurers reaping the benefits of cheaperreinsurance, but pocketing additional profits, rather than passingalong savings, at the expense of policyholders?

I tend to agree with Mr. Miller. Getting insurers to agree onany substantial matter is like herding cats. Their tradeassociations in Washington can't even convince the industry toagree on whether the federal government should be involved withregulating the industry, and if so, then how? The idea thatinsurers are secretly fixing prices sounds crazy.

But then again, it sounded crazy to me when I heard that majorcommercial insurers and mega-brokers were conspiring to stageelaborate role-playing stings to rig bids and fix prices under thenoses of risk managers and regulators. Who could have imaginedthat–until the smoking-gun e-mails were released by New York's thenattorney general, Eliot Spitzer?

I have a bad feeling Florida regulators are onto something big.If they're bluffing, don't play poker with them, or you might loseyour shirt.

Stay tuned!