WHITE SULPHUR SPRINGS, W.Va.–Legislative changes to lower the rate structure of Florida's state-backed insurer of last resort have hurt business at Brown & Brown brokerage, the firm's president said.
J. Powell Brown, president of the Daytona Beach, Fla.-based insurance brokerage firm, in an interview said Florida's Citizens Property Insurance Corp. has cut into the firm's wholesale business.
He said in the company's last financial report, the drop-off in its Florida business this year resulted in negative organic growth. However, he said, if "government intervention" were removed, the firm would have reported organic growth of 5 percent.
Earlier this year, facing spiraling property insurance prices, Florida's Republican Gov. Charlie Crist pushed through legislative changes for Citizens that essentially made it the state's primary insurer.
The measures that were approved made Citizens' coverage cheaper than standard insurers and expanded coverage to commercial accounts in addition to providing homeowners coverage.
Mr. Brown noted one major obstacle insurers face in dealing with Citizens is its inconsistency in pricing. The rules that are being implemented have resulted in a pricing structure that is not predictable, he said. Despite the inconsistencies, Brown & Brown is dealing with the reality of Citizen by using it as a market to service its clients, he said.
"The system as it is currently designed cannot continue forever," he remarked. However, Mr. Brown said, he believes any effort to find a solution by the state legislature will probably wait until sometime next year.
His observations came yesterday during an interview at the 94th annual Insurance Leadership Forum of the Council of Insurance Agents & Brokers held here.
Several critics of the state insurance program, he noted, have said that should the state suffer a natural catastrophe, every resident of the state would be responsible for paying assessments to cover Citizens losses.
Mr. Brown said he did not have an answer for how the state will go about fixing the current situation. He said one suggestion floated by a consumer advocate calls for privatizing Citizens and allowing the free market to once again assume risks. It could be a solution, he said, but he was not endorsing any plan.
The current program, guaranteeing rates at Citizens, is set to expire at the beginning of 2009. Currently, the state legislature is concerned with other budgetary matters and addressing the insurance issue does not appear to be on the agenda at this time, he pointed out.
Mr. Powell suggested that if the legislature had not taken action at the time it did, free market mechanisms would have found a solution. Capacity was already growing in the state at the time the governor took action, he said, and appeared to be on course to relieving upward pricing.
"I contend that would have addressed many or most concerns," he said.
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