It is a simple question: Do they know when to stop?
That is what comes to mind while watching lawmakers bob and weave through the legislative session, leaving a trail of proposed property insurance reforms as they move through the hallways and committee rooms of the capitol. Traditionally speaking, after enacting a major series of reforms, the legislature usually takes a breather and waits to see how the market responds. And the more comprehensive or radical the reforms are, the more time is needed to see just how effective they are. But when it comes to the 2007-2008 legislature, it appears that tradition is thrown out with the dishwater. Having developed a taste for bold gestures last year, the legislature seems poised to see just how far it can go to change the intricate framework of the state's market.
Take, for example, Senator Jeff Atwater's (R-North Palm Beach) call to eliminate Citizens' wind-only policies so that it could only provide multi-peril coverage regardless of whether a homeowner lives in Ocala or on Miami Beach. Atwater is pushing the idea as a means to increase competition by playing the state off the private market, while improving Citizens' financial position by allowing it to earn more on the lucrative non-wind side of the premium equation. The Florida Association of Insurance Agents rightly points out that even at the risk of losing the non-wind coverage, most private carriers would be unwilling or unable to bear the risk that would come with taking on the wind portion of a policy.
From a theoretical standpoint, one can come up with any number of rationales to support or oppose Atwater's proposal. But it begs the question of why the proposal is being considered at all. Citizens' population has remained stable, it has adequate financial resources to pay claims in the event of a major storm, and, administratively, it is geared up to handle claims from a catastrophe. Atwater's proposal, however, would place a staggering amount of pressure on the insurer. Right now, the insurer has around 34,000 multi-peril policies and more than 400,000 wind-only policies. From a sheer claim-handling perspective, the thought of turning 400,000 policies into dog-bite policies is maddening, and that is even before you get to the actuarial nightmare of trying to calculate rates on those policies. This even as Atwater and company prepare to extend the freeze on Citizens' rates into 2010.
Meanwhile, the House is trying to introduce at least a measure of restraint by looking for a way to steer around the continual reliance on assessments. In response to the decision by the legislature last year to add commercial policies to Citizens' assessment base, lawmakers are now looking to find a way to offer prospective policyholders a non-assessable policy. The move is part of a plan by some lawmakers to pivot from solely focusing on rates and reintroducing the notion of risk. Along with Chief Financial Officer Alex Sink's plan to rein in the Florida Hurricane Catastrophe Fund, the House is seeking to reassure the private market that the state has not permanently removed the "help wanted" sign posted on the beach.
A moment of pause.
It has been easy to survey the changes to Citizens, the Cat Fund, and the state's role in the market and point out the most dire of potential consequences. But in so doing, it obfuscates the more subtle implications of what the legislature is doing and the precedent it is setting. Never before has the legislature proven to be willing to make so many fundamental changes to a line of insurance absent the kind of immediate urgent crisis seen in the wake of a Hurricane Andrew or Hurricane Katrina. The question is, why? And who will be the first to stand up and say, "Enough!"
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