As Election Day 2006 nears, Florida voters are focusing on who should replace Jeb Bush as the next governor, Attorney General Charlie Crist or Congressman Jim Davis. The insurance industry should be taking a broader view and be more concerned with what the entire Florida Cabinet will look like after its first change in four years.
The cabinet is made up of the Governor, the Chief Financial Officer, the Attorney General, and the Commissioner of Agriculture and Consumer Services. All the seats are up for grabs, with varying degrees of uncertainty as to the winner.
Each cabinet member serves a four-year term with a two-term limit and is responsible for the administration of at least one state department. The 2006 election is the first since the cabinet was consolidated from six members to four.
This powerful quartet often sets insurance policy and that determines how the industry will be regulated. The four officials also comprise the Financial Services Commission and select the Insurance Commissioner and the Commissioner of the office of Financial Regulation. These two appointees control the regulation of banking, securities, and insurance.
Industry Contributes to Lee
Outgoing CFO Tom Gallagher lost his Republican gubernatorial challenge to Charlie Crist. Crist is currently the overwhelming favorite over Davis to become the next governor. The departure of Gallagher from office is especially significant because he and former deputy Kevin McCarty, Florida's insurance commissioner, have been close allies in their insurance regulation duties. Conventional wisdom in Tallahassee is that McCarty will not be around for the next administration.
Charles Bronson has a huge lead in the polls to be re-elected Commissioner of Agriculture and Consumer Services. Bronson is running against Eric Copeland, who has never been elected to public office before. The race to fill Crist's post as Attorney General pits Democrat State Senator Skip Campbell of Tamarac against former Orlando Republican Congressman Bill McCollum.
Florida's insurance industry has not endorsed any candidates officially, though campaign records show big insurers have given to the Republicans who have controlled state government for most of the decade.
State Senator Tom Lee of Valrico, a close ally of Bush, is expected to easily win election as the next CFO. The Senate president has received $300,000 in contributions from large property insurers, which accounts for about 10 percent of the money his campaign has raised. In contrast, Democratic Representative Randy Johnson has received less than $20,000 from insurers.
Familiar Faces in New Roles
The Florida Insurance Council says it is unsure how these elections will sway insurance policy in Tallahassee. "We hope there will be less politics and more policy-based decisions," said FIC spokesman Gary Landry. He said political considerations too often play a role in rate-setting.
With many familiar faces expected to be in leading roles, such as Crist and Lee, the industry expects it will take little time to get the new heads of state up to speed on insurance issues.
Jeff Grady, CEO of the Florida Association of Insurance Agents, said it's unclear what new insurance policy directions will change with the departure of Jeb Bush. He said perhaps the most significant change will be the end of the Gallagher-McCarty team on insurance issues. McCarty was appointed Commissioner of the Office of Insurance Regulation by the Financial Services Commission in 2003. His duties include activities associated with regulation and oversight of more than 3,700 insurance entities operating in Florida, including requests for rate increases or decreases, financial oversight, and approval or disapproval of policy language and terms. McCarty also establishes agency policies and provides new and existing insurance entities assistance for market development with products and lines of business.
"Those two have worked together for so long and they were always on the same page," Grady said.
Hopefuls Promise Changes
Crist has taken an aggressive stance on insurance issues and has made rising insurance costs one of his top issues.
Crist and Davis have similar positions on insurance. But in a St. Petersburg Times question-and-answer session, Davis said he supports creating a state-paid consumer advocate to challenge insurance companies' applications for rate increases. Crist opposes that.
Davis would create a Policyholder Advocate General position to be involved in the rate-setting process so policyholders have a "strong voice in rate decisions and are not being gouged by insurance executives looking to raise premiums to pad their bottom line."
Crist and Davis both want to solve the insurance crisis by pushing for a national catastrophic insurance program.
Crist also wants to make it easier for insurance companies to buy reinsurance. Additionally, he would force companies who sell homeowners' and auto insurance to offer homeowners' policies in Florida.
Crist has been a constant critic of Citizens Property Insurance Corp., the state insurer of last resort. "I think Citizens in its current form is not good for the people of our state," he said. "They have been scandal-ridden; they had to get a bailout; it is a mess."
It's an open question whether Crist will support more taxpayer bailouts for Citizens. "The fact that the legislature spent almost three-quarters of a billion dollars to bail out Citizens is unacceptable," Crist said. "As Governor, I will seek better market-based solutions."
Davis has pledged to conduct a performance review of Citizens' administrative, ethical, and actuarial policies to ensure that Citizens' customers are being charged fairly and that the taxpayers' money is being spent properly. "These annual audits will ensure that significant improvements in rate calculation, accounting practices, and prompt customer service are being implemented," he said. Davis will also add policyholder representation to Citizens' Board of Governors to minimize the influence of political considerations on management decisions.
In September, Crist and the cabinet barred Citizens from hiring outside attorneys to sue the state for higher rates under certain circumstances, unless the hiring is first approved in public meetings by the corporation's board of directors and by the governor and the cabinet.
"Citizens Property Insurance Corporation seems to have forgotten that it was created to serve people during their time of great need," Crist said. "It seems to have forgotten that the people of Florida are the boss."
Also in September, Crist proposed creating a blue ribbon task force consisting of experts from Wall Street to Main Street to consider ways to address the insurance crisis in Florida. He applauded Bush's effort to form the Property and Casualty Insurance Reform Committee. "We have learned over the past two years that Florida will be hit by hurricanes. The only question is who will pay for their destruction – the government or the insurance industry. It is my fundamental belief that the insurance industry should assume the financial risk for hurricanes," Crist said.
Davis wants to require insurance companies to give one year's notice before dropping policyholders who have paid their premiums for three consecutive years and not filed any claims. "I will crack down on multi-billion-dollar insurance companies who attempt to cherry-pick the most lucrative insurance investments and leave thousands of Florida policyholders without coverage," Davis said.
No matter who wins in November, insurance costs will continue to be a hot-button issue in Florida. The winners for Governor, CFO, Attorney General and Agriculture and Consumer Services commissioner will do everything they can to make sure they are covered.
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