Insurance industry report refutes Crist

May 16, 2007

Spokespeople claim that governor has downplayed risks of reform plan

By Paige St. John
FLORIDA CAPITAL BUREAU

Mounting a campaign to erode public support for Gov. Charlie Crist's reforms, the Florida insurance industry claims he has overstated the rewards, and underplayed the risks.

A report produced Tuesday by the Property Casualty Insurers Association contends Floridians will see only an average 12 percent drop in home insurance rates by doubling of the state's catastrophe funds. Regulators originally forecast a 24 percent savings.

The flip side of that, according to PCI's analysis by Milliman consultant Nancy Watkins, are the potential of increased home and car insurance bills statewide if hurricanes wipe out those funds.

The bottom line: coastal residents save the most, everyone else faces the prospect of paying.

For example, the owner of a $150,000 home in Tallahassee can expect a $43 cut in property insurance but would pay $180 a year more to insure two cars if a $56 billion hurricane hit the state this year.

But a Key West resident would save $1,956 a year in home insurance and face the risk of only $188 more in car insurance if the winds blow.

''This amounts to a regressive tax,'' said Greg Heidrich, senior vice president of the national insurance lobby, after Watkins' presentation of modeled hurricane losses, deficits at state funds, and the extra charges on home and auto policies that would follow to pay them off.

PCI plans to take the thick report on the road - starting with Tallahassee's main business lobbyists, and then newspaper editorial boards across the state.

Crist retorted Tuesday, ''I don't put a whole lot of stock in what they have to say.''

''This industry, in my humble opinion, has taken advantage of people and needlessly taken out of their pockets enormous profits,'' Crist said.

''They are greedy, let's face it. How can we reach a different conclusion when they made over $63 billion in profit last year, $3 billion of that on the backs of my people here in Florida?''

The PCI study is part of a larger press by the industry, which has opposed Crist's campaign to unleash the state-run company, Citizens Property Insurance, to compete with private companies.

In forecasting the consumer bail-out required if a major hurricane hits Florida this summer, the study assumes Citizens state-frozen rates will make it so attractive it will have swelled to 1.8 million policies by August. The company now has 1.2 million policyholders.

The Milliman study also bases its storm projections on a controversial computer model that last week was withdrawn from use in Florida. State reviewers said the model by RMS - based on elevated, short-term forecasts - failed to meet their requirements.

THE STUDY:

Here are estimated savings and costs contained in an industry-backed study by Milliman. It assumes a catastrophic, $57 billion hurricane, that Citizens Property Insurance will grow to 1.8 million policies and that consumers will be required to pay off deficits at the maximum rate:

County: Monroe

Home premium savings: $1,956

Auto assessment from major hurricane: $188

County: Hillsborough

Home premium savings: $225

Auto assessment from major hurricane: $238

County: Orange

Home premium savings: $69

Auto assessment from major hurricane: $202

County: Leon

Home premium savings: $43

Auto assessment from major hurricane: $180

Here are estimated savings and costs contained in an industry-backed study by Milliman. It assumes a catastrophic, $57 billion hurricane, that Citizens Property Insurance will grow to 1.8 million policies and that consumers will be required to pay off deficits at the maximum rate:

County: Monroe
Home premium savings: $1,956
Auto assessment from major hurricane: $188

County: Hillsborough
Home premium savings: $225
Auto assessment from major hurricane: $238

County: Orange
Home premium savings: $69
Auto assessment from major hurricane: $202

County: Leon
Home premium savings: $43
Auto assessment from major hurricane: $180