Ways to Fix the Florida Insurance Problem

George G. Zimmerman, past president and CEO of three reinsurance companies and a resident of Sarasota, believes he knows how to fix the high insurance rates that have grown into a bona fide crisis in Florida.

As he tells the Sarasota Herald Tribune, predicting the weather a year in advance is of little consequence to the insurance market.

If meteorologists predict 20 storms, and 19 of them are steered into the open Atlantic, causing no loss to property owners, a study becomes a moot exercise.

The only “science” that exists in the insurance sector is actuarial science, and that applies to life insurance. All other forms of underwriting are an art.

The insurance market will, however, use studies to justify rate increases to the direct writers of property insurance, who pass obscene premium increases on to the area homeowners.
There are options to lower property insurance:

1. The state could cap rate increases at 10 percent a year. If the insurers refuse to write or renew homeowners, they need to take all business out of Florida, including the profitable lines of business such as casualty, life and even auto insurance.

2. Insurers should seek new reinsurance markets on a worldwide basis and not continue to renew with reinsurers who are trying to make up for prior underwriting losses. That way, Sunshine State homeowners already reeling from higher taxes and increasing Florida mortgage costs can get some measure of relief.

3. The State Legislature should consider allowing an insurance exchange to develop new capacity to underwrite all forms of indemnity here. This would function with individual investors becoming members of different Florida underwriting syndicates. Subscriptions would be processed by stock brokers, using Securities and Exchange Commission (SEC) guidelines.

The above options are complex and have a degree of risk attached to them. However, we are facing a serious and complex problem with no easy solution. Massive home price gains growth has pushed homeownership out of the range of many, even as Florida home loan rates remain historically low. Insurance can be the straw that breaks the camel’s back, or it can be reformed. It’s up to us.