Florida's property insurance market has reached a critical juncture. For the past two years, state legislators have been struggling to balance constituent demand for affordable insurance coverage with the responsibility of ensuring that private insurers and the state government can pay claims and remain financially sound after the next storm hits.
The decisions public policymakers and insurers make now will have a significant impact on Florida's economic future.
A healthy, stable and well-regulated insurance market provides the foundation for the state's "Big Three" economic engines–real estate development, tourism and agriculture. A dysfunctional market with an overreliance on government weakens all three sectors, undermines consumer confidence and acts as a drag on economic growth.
Despite the rough road that insurers and public policymakers have traveled since the unprecedented storm seasons of 2004 and 2005, there do appear to be some encouraging signs on the horizon.
First, more business, consumer and environmental groups are realizing they have a stake in the outcome of the property insurance debate. This is no longer a political fight between insurance companies and state lawmakers. This is an issue that impacts homeowners, lenders, realtors, bankers, environmentalists, local governments and all business owners.
By involving these individuals and organizations in the debate, we increase the chances of developing an innovative solution that works for all Floridians.
Second, nearly every stakeholder shares the same goal–to protect Floridians' homes and families while maintaining a stable economy that allows consumers and businesses to flourish.
This message resonated in the responses to a recent public opinion poll by the Property Casualty Insurers Association of America. We commissioned an independent pollster to gauge consumer thoughts and opinions on the homeowners insurance problem as well as several possible solutions.
Not surprisingly, we found that property insurance reform is still a top priority for Floridians. More importantly, Floridians said they wanted long-term solutions and innovative approaches to the property insurance market, instead of "quick fixes." Floridians understand that there is a delicate balance between long-term market stability and immediate rate relief.
There was broad support for market-based solutions to provide relief to consumers and begin restoring a healthy public-private partnership approach to the property insurance system in Florida. These include:
o Fostering a more robust catastrophe bond market.
o Providing guaranteed low-interest loans to policyholders who opt to buy high-deductible policies.
o Providing financial assistance to low-income consumers.
o Offering financial incentives to build safer new homes and retrofit existing homes that can withstand the brunt of hurricanes or firestorms.
At the federal level, Floridians support changes in the federal tax code to allow insurers to build catastrophe reserves on a tax-free basis, and the creation of a well-structured public/private partnership among insurers and the state and federal governments to provide liquidity in the event of catastrophic loss.
These ideas hold the promise of responsibly spreading financial risk and stabilizing markets.
I met with the state's top business leaders to review the results of the poll and discuss how we can move forward together to seek meaningful long-term solutions. I asked the business community to join insurers in making property insurance reform a top priority, as it is the backbone of our economy and will be a key component for restoring our bruised financial markets.
I am currently sharing our survey with lawmakers across the state in hopes it will serve as a road map when dealing with the upcoming session and the issue of homeowners insurance.
We do not pretend to have all the answers to address the problems in Florida's property insurance market. But our members have invested countless hours in developing a variety of innovative options for lawmakers to consider in the current session.
These approaches–some of which can be undertaken by state lawmakers, and some requiring federal intervention–are supported by a majority of Florida consumers. They can provide public policymakers with a road map to achieving the promise of making Florida stronger and Floridians safer, while restoring a viable and reliable property insurance market over the long term.
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