There is no denying that the U.S. is currently in a recession. Jobs are fleeting, layoffs are increasing and panic has begun to rise. So in the midst of an economic crisis, it seems the last thing anyone needs is home insurance rates
to rise. Yet, that’s exactly what Florida homeowners may be facing under a new legislation. In fact, regulators predict that Florida legislation may allow homeowners insurance rates to rise substantially due to deregulation of insurers. So what exactly will cause rising insurance rates? Well, the pending deregulation legislation would essentially enable large insurers to sell unregulated home, condo and other property insurance policies at any price they deem appropriate. While the House of Representative passed its bill recently, the Senate’s version of the bill is still underway.
Advantages vs. Disadvantages
It’s important to understand some of the advantages and disadvantages associated with the Florida homeowners insurance
legislation. Under both bills, the state would have the right to reject a rate request if the premium is too low, thereby undercutting regulated rates. The House bill would also require insurers that are selling unregulated policies to provide homeowners with estimates for similar policies from at least one other insurance company.
The purpose of both bills is also to restrict government involvement in a market that is still recovering from the destructive 2004-05 hurricane seasons. The legislation has many supporters and opponents with valid arguments towards their preference. Advocates feel that eliminating excessive government regulation will allow the state to better cope with the aftermath of future natural disasters. Naysayers on the other hand, believe the bills will further bog down consumers that have already been hard hit by the recession with higher premiums.
Competition among Insurers
A great deal of support for the legislation has been fueled by State Farm’s decision to leave Florida’s property insurance market early on this year. The insurance company announced their departure after Florida Insurance Commissioner
Kevin McCarty and a state judge denied their request for a percentage rate increase. According to lawmakers, many State Farm policyholders would agree to pay more if they could retain their policies.
Over the past few years, McCarty’s office and the Legislature have worked towards supporting up and coming insurers that have emerged in the market through the help of low interest state loans and other types of similar programs. Therefore, McCarty’s concern with the deregulation bills is associated with smaller Florida insurers, whom he feels would be at a significant competitive disadvantage. Because rate deregulation failed a few years ago, McCarty feels he has no reason to believe differently about this legislation. He is however confident, that it will serve to boost homeowners insurance rates.
House lawmakers who voted in favor of the legislation did so in hopes of luring insurers to the sunshine state, while allowing people the freedom to choose a pricier policy from more experienced insurers. Many insurance industry representatives have expressed their views on Florida’s aggressive insurance rates regulation, which they feel has prevented some insurance companies from flourishing. Therefore, doing away with some regulation would serve to achieve growth and expansion for these insurers. As for homeowners in Florida, rising insurance rates could certainly be an issue, if it isn’t already!