Nobody wants to pay any more than they have to for anything and,unfortunately, Florida lawmakers have discovered they actually havethe ability to manipulate and control the insurance industry andits rates. Last year they gave consumers a rate reduction throughthe state-run Citizens Property Insurance Corp. This year theyraised rates, but it is an election year so they did not raise thema lot. Next year they are going to raise them more (maybe?).

Meanwhile, Nationwide decided to leave Florida; Allstate decidedto get smaller; State Farm was leaving — now they're staying — butnot totally.

We haven't had a hurricane hit Florida in over four years, yetinsurance companies are failing in frightening numbers. Pressurefrom the people may have driven political leaders to suppress ratesbut the responsibility to provide balance to what people wantversus what makes sense falls in the hands of the regulators, inthis case the Office of Insurance Regulation (OIR).

The Free Market Does Not Exist in Florida

In 2009, experts at the Competitive Enterprise Institute and theHeartland Institute said this about the regulation of insurance inFlorida: "A free market for homeowners' insurance does not exist inFlorida. Instead, a state-run agency, the Florida Citizens PropertyInsurance Corp., serves as the state's largest property insurer.Florida's rate regulatory system is one of price control.Currently, Florida limits all insurance rates to Citizens' ratesplus 15 percent. The state's burdensome prior-approval process andwholesale government interference with the rate-setting process hasled most major insurers to withdraw or cutback policy-writing inthe Florida market. States with less-regulated insurance marketsprovide more consumer choice, more predictable rates, and insurancepremiums that better reflect actual risk than do states withheavily regulated markets."

Rate suppression has gone on for so long that legislatorsfinally became worried about the ability to pay claims when the bigstorm hits. They decided to use the Florida Hurricane CatastropheFund as a safety net. Now a potential shortfall of somewherebetween $11 and $19 billion exists. Unlike the Federal Reserve, wecan't print money, so guess where it comes from? Right, assessmentson other policies.

This isn't a surprise to our legislators. They actually realizedwhat they did last year but could not figure out how to undo theirown foolishness so they decided to "gradually" reduce our exposure.Now, as long as we don't get a major hurricane in Florida for thenext 10 years, we may actually escape this problem.

I am sure someone will dispute my figures. Maybe it's notactually $11 billion or maybe it's not actually 10 years but theexposure is BIG and it is REAL and it will last for a while.

Despite the continuing desire to suppress rates in Florida, someare starting to wonder what the role of the insurance commissionerhas been.

Florida State Sen. Mike Bennett (R-Bradenton), expressed hisopinion in writing to several media outlets: "Last year, whiletestifying before the Cabinet, [Insurance Commissioner KevinMcCarty] either lied (or at least hid the truth) when he testifiedas to the health of the new companies opened in Florida. Heneglected to inform the Cabinet that several of those companies ofwhich he was so proud had already gone out of business. He has ahabit of saying whatever he thinks his boss wants to hear. Over thelast year, it has become more and more evident that CommissionerMcCarty is NOT serving the residents of Florida in any beneficialway and that the insurance markets in Florida have become weakerand more vulnerable under poor leadership and as a result of hisunsound policymaking."

Troubles Are the Result of Years of IneffectiveOversight

I am sure if we looked deeper into the finances of everyinsurance company operating in Florida we would be shocked to seehow many others are on the brink. Although it has always been theresponsibility of the OIR to monitor the financial strength ofcompanies in Florida, concerns have only recently escalated abouthow fragile so many of these companies are. We are supposed tobelieve this just happened; that it's an anomaly. It makes moresense to believe that what we are seeing today is the culminationof years of ineffective oversight.

What exactly is the role of a regulator? In its broadest senseit is to protect the interests of the citizens it represents. Forthe insurance commissioner, that role extends beyond the usual"monitoring" responsibilities and should include advice and counselon insurance matters to our political leaders. Because we almostnever see or hear any pleas from OIR to those leaders about wherethey're taking the insurance industry, we have to believe they areeither approving of that direction or, worse, even proposing whathas been done. Somebody somewhere in a position of responsibilityneeds to step up and call for an end to this madness.

It is possible we have manipulated insurance in Florida past thepoint of recovery but that should not stop us from trying.Ultimately we have to question if we even have the ability or thewill to solve this problem. The number of insurance companyfailures over the past few years is indicative of a real problemand we have been in denial for years about why virtually everymajor insurance company in the country has either walked away orseriously restricted doing business in Florida.

Time to Face Some Hard Facts

We need an insurance commissioner who understands the dangers intrying to alter the laws of probability and has the courage tostand up to his bosses and tell them when they are wrong.

We need an insurance commissioner who will openly communicate tothe public the reality of why insurance in Florida is likely tocost more and why arbitrary rate suppression doesn't work.

We need to face the fact that a free and effective insurancemarket in Florida will never exist as long as we attempt to makeCitizens an attractive alternative.

For all of those who argued against the federal government'sdesire to create a public option for health insurance, there havebeen few complaints about a public option for homeowners' insurancein Florida. Actually, we've gone a step further — we have a publicoption with no private option.

Mark O'Connell is CEO of PIA of Florida. He maybe reached at [email protected].