What if?

When homeowners open their property insurance policy renewals and gulp at the skyrocketing premiums — if the policy wasn’t canceled altogether — they can only wonder: What if Florida’s property insurance crisis had been solved 15 years ago?

An idea was out there, and it was simple in concept. What if the state collected enough money to cover damage from hurricane winds, and left it to private insurers to cover normal perils like fire and theft? Separate out the hurricane insurance, and private rates for normal perils would stabilize because actuaries can accurately predict the annual costs of fire and theft, which affect individual homes, not entire regions like a Category 5 storm. Take away the risk of covering hurricanes and more insurers would be happy to compete in a huge and predictable Florida market. Competition would bring lower rates. The free market at work.

It is difficult for an insurance company to plan — and to fairly charge policy holders — for a year with a Category 5 hurricane vs. a year with no hurricane at all. Premiums that miscalculate the hurricane risk can make an insurance company extremely profitable in a quiet year, but bankrupt a small insurer when a major hurricane strikes. When that happens, we all pay. Literally. Just look at your insurance bill, and you can see what you’re being charged to restock the state-run Hurricane Catastrophe Fund and to cover insurance companies that have gone belly up. It’s not a free market when an insurance company pockets huge profits in a quiet year, then goes under in a bad one, sticking taxpayers with the bill. That’s reward without the risk, not a free market.

The current system is not tenable, and the problem is not new. “Despite the efforts of the Florida Legislature, the state’s property insurance system remains a mess. Private coverage remains unavailable in many areas and unaffordable most everywhere.” Those are the exact words this Editorial Board wrote 15 years ago. We repeat them today because, despite special legislative sessions devoted to this issue, too little has changed.

Florida is uniquely vulnerable to hurricanes. We all know this. Climate change and sea-level rise will only make it worse. And yet, the state has only nibbled at the problem’s edges. Because Florida is so vulnerable, no one has found a free market solution. Citizens Property Insurance Corp. — a state-backed entity with more than 1 million policyholders — certainly is not one. And the need for Florida to stockpile billions of dollars in a Hurricane Catastrophe Fund also demonstrates how little appetite the free market has to insure Florida against hurricane risks at rates that Floridians could afford.

So the question is, how to create the freest competitive market in the real world of Florida’s actuarial risk. That’s where former state Rep. Don Crane, who was a legislator from 1970 to 1974, entered the picture 15 years ago. He used to own an insurance agency and was angry when the company that insured his home cancelled his policy after two busy hurricane seasons in 2004 and 2005. There has to be a better way, he thought. So he gathered a small group of smart people and came up with one.

Fifteen years ago, his group proposed combining Citizens Insurance and the Florida Hurricane Catastrophe Fund into a kitty that would provide only hurricane coverage. The idea was to free private carriers of the burden of potential bankruptcy in a bad hurricane year. The companies would also lose the windfalls they can earn in quiet years.

An insurance expert in Crane’s group projected that, absent a major storm, the fund would be self-sustaining in a decade, netting a surplus of $82 billion. To put that in context, that would have more than enough to cover the damage from Hurricane Ian, with an estimated $13 billion in insured losses. Had Crane’s plan been adopted in 2008, things might have fallen into place. The state didn’t have a major storm until Irma hit in 2017.

The state does not leave property insurance to the free market now. So the real question is where can the free market work on its own — and where does it fail? And where it fails, how can the state leverage its power to help home owners and, by extension, the state’s real estate market and economy? One step could be to divide wind coverage from normal, predictable perils like fire, theft and general liability, as Crane’s group suggested. The state would cover the vast and unpredictable cost of insuring against hurricane winds, and the private insurance companies would make money charging reasonable rates for the other perils.

Would Crane’s plan have worked? We don’t know, and neither does the state, because it has never gotten the serious study it deserves. We do know that Florida’s property insurance market is in trouble. With the Legislature in session and hurricane season less than three months away, it is time to give a concept like Crane’s an in-depth look to weigh its merits against the state-subsidized market we have now. We can’t wait another 15 years.

Editorials are the institutional voice of the Tampa Bay Times. The members of the Editorial Board are Editor of Editorials Graham Brink, Sherri Day, Sebastian Dortch, John Hill, Jim Verhulst and Chairman and CEO Conan Gallaty. Follow @TBTimes_Opinion on Twitter for more opinion news.