Insuring Florida: State subsidized insurance a bad move
A couple of decades ago, while working for a publishing firm, I relocated to Topanga, California – a spot in the Santa Monica “Mountains” between the Pacific and The Valley in LA.
After a year in New York, the sun and air and sea of the Golden State was hypnotic – and so was the ambient culture. There were aspects of California living that were pretty amazing. We could stop and surf on the way to the office - it was a kind of nirvana, but like all utopias, it came with a karmic price tag.
On the coast, karma produced earthquakes, Pacific storms, tsunamis, and mudslides, sometimes all four, in that order. The fancy, astronomically expensive beach houses down the road a mile or two, in Malibu, were famous for falling into the ocean on a regular basis. I once watched a neighbor’s entire front porch slide down Bowers Drive towards the Fernwood, narrowly missing my front yard fence and disappearing around a corner.
Insuring property in Malibu was impossible. No carrier was dumb enough to cover it at any price. It did not take an actuarial table to tell you that anything built on a mud base near the beach was going swimming. Whole goat farms in Topanga went missing in a light rain. Despite its reputation for “nanny” government, when it came to coastal insurance California was a major gamble. No-one ever labored under the idea that you had a “right” to property insurance, much less cheap insurance on multimillion-dollar homes. If you lived in Malibu, you bought your house with cash, lived there and rebuilt (with cash) when your abode slid into a kelp bed.
What Florida is experiencing in our insurance crisis is a failure to understand that insurance is not a “right.” Insurance companies are profit-making ventures, and when the profit leaves, so do they. The massive task that faces the Governor and the legislature in special session is somehow making insurance possible, especially for low to moderate income folks, while allowing the providers to make a buck. The way we have solved for this is the silliest route I think anyone has ever tried: we massively over-regulate insurance companies, allowing pretty much anyone to sue under pretty much any conditions and the state will subsidize and insure the truly scary properties.
Except it does not work that way. The state is seemingly ready to insure (and now reinsure) anyone, including the millions of folks who should be forced into the private market. And we’re going broke trying to do it.
Crying over insurance companies is not my usual métier. But they’ve got a point or two. Despite the idea that all of the state is frightening to insure, the fact is that insurance companies could insure most of it – and would if they did not find themselves paying thousands of dollars in court for every rooftile that slides off in a high wind. Why on earth the state would agree to underwrite insurance for the Malibus of Florida is inexplicable.
Enforcement of the requirements is insanely loose, which means that people who should be competing on the open market are simply pleading “Malibu” and grabbing the cheap insurance provided by the state. Which means much fewer customers for the private companies, which means they leave, with Florida holding the bag.
Unless the state is prepared to insure all property in Florida – akin to some soul-crushing, hugely expensive Soviet idiocy – state subsidized insurance needs to be dragged, kicking maybe, back to its original purpose. Rigorous qualification for “Citizens” state insurance must be enforced. Open tort season on insurance providers has to be sharply curtailed.
There are some aspects where government has only a minor regulatory role and property insurance provision is probably one of them. But if it is to be more, then it needs to be under the narrowest conditions possible.
R. Bruce Anderson (randerson2@flsouthern.edu) is the Dr. Sarah D. and L. Kirk McKay Jr. Endowed Chair in American History, Government, and Civics at Florida Southern College in Lakeland.
This article originally appeared on The Ledger: Insuring Florida: State subsidized insurance a bad move
