'We all need to pray to the hurricane gods."
Radley Balko | February 21, 2007, 10:37am
Residents of hurricane-battered Florida are facing soaring insurance premiums. Some, in fact, can't afford any insurance at all. Smart people might interpret this as the market's way of saying, "Hey, dumbass. It isn't safe to live here. Better to look elsewhere."
But not Florida lawmakers. They've just signed on to a bill that would artificially lower insurance premiums by backing coverage with guarantees from state coffers. Unfortunately, it's money the state doesn't have. The bill guarantees $32 billion in relief from the state's "catastrophe fund" should (read: when) a major hurricane again hits Florida. Currently, the fund contains . . . less than $1 billion.
Since neither the state's catastrophe fund nor the state-chartered insurance company has anywhere near enough money on hand to pay the claims they may now be required to pay after a major hurricane, the measure is considered a gamble, even by proponents.
"We all need to pray to the hurricane gods," said state Sen. Steven Geller, who represents this beachfront condo city and negotiated a portion of the bill. "Yes, we're taking a risk. But what were our options?"
Critics have decried the measure as irresponsible. Under the legislation, in the event of a major hurricane, the state will pay claims by taxing home, automobile and some other types of insurance policies sold in the state. That makes it especially unfair, critics argue, to inland and upstate Floridians, who could be asked to help pay to help bailout riskier coastal areas in South Florida.
"If I wanted to gamble -- personally, I don't even buy lottery tickets -- and I'm pulling money out of my own pocket, that's one thing. But taking money out of someone else's pocket with the force of law is just irresponsible," said state Rep. Don Brown, the chairman of the insurance committee, who cast one of only two votes in the Florida House against the measure. "It's the most irresponsible measure that I ever was asked to vote on."
Not just irresponsible. Criminal. Can you imagine if a private insurer tried something as outrageous?
Of course, this isn't really a "gamble" at all. Florida lawmakers know good and well that if a whopper were to sock the Florida coast, Congress will be all too happy to pick up the tab. Anyone who objects will be ostracized as a cold-hearted hurricane victim hater, and "objectively pro-hurricane."
Remove all market incentives to steer clear of areas prone to natural disaster. Bail out victims with taxpayer dollars when entirely foreseeable disaster inevitably hits. Lather. Rinse. Repeat.
This is how government creates catastrophe.
madpad | February 21, 2007, 11:33am | #
Smart people might interpret this as the market's way of saying, "Hey, dumbass. It isn't safe to live here. Better to look elsewhere."
I was born and raised in Florida. I still live here. And it's relatively safe. And I've been through numerous hurricanes that passed right over wherever I happened to be living at the time.
I was on the east coast for Dora in '64 (first one - I was 1 at the time), panhandle in '69 for Camille (scariest one ever), back on the east coast for Hugo in '89, Andrew in 92, Floyd in '99, Frances in '04 and numerous others throught the years.
Experienced very little property damage and no personal injury in any of them, thank God. Point is, while there are hazards to dealing with hurricanes ala living in Florida, they are not as prevalent as one might think through all the hysteria. Most people get little more than debris in their yards and occassional broken windows.
Much of the damage from the worst one, Andrew, resulted from shoddy bulding practices.
The problems come, by and large, from poor legislation, stupid citizens, venal insurance companies and a pathetic federal government...just like everywhere else.
Also, Florida isn't alone. Mississippi, Louisiana, Texas and South Carolina have all been hit pretty hard over the years.
Alabama, Georgia, North Carolina and on up to New Jersey as well, though not as bad.
There isn't a place in the country where there isn't some life or property threatening issue. Oklahoma to Wyoming have tornadoes, California has earthquakes and wildfires. And if it isn't those, some company is dumping dioxin in the drinking water or punks are sticking guns up people's asses.
So please, enough with the "why do you dumbasses live where it isn't safe" bullshit. It is safe, asshole. Probably, no more hazardous than where you live.
Stick to the politics - which is the real problem.
Bob | February 21, 2007, 12:18pm | #
As another Tampa Bay resident, I also find that my rates are not ridiculous. But much of the current crisis was CREATED by the Florida Legislature, and they have just made it worse.
First, they worked closely with the insurance lobbies to ensure that only the big six of homeowners are qualified to write coverage in Florida. They've created an oligopoly to start.
Second, they created the state run Citizens Insurance, as an insurer of last resort to pick up all of the people that the commercial carriers do not want. State law prevents Citizens from being competitive. They must charge higher rates than the commercial carriers.
So the big six have a lock on the market, and they can drop anyone they want, and the state must pick them up. When the state picks them up, their rates skyrocket. The naturally high Citizens rates give the commercial carriers room to continue to raise their rates.
Another thing I have to fault somewhat is the conversion of all of the insurance companies from mutual companies to publicly traded companies that must show a profit every quarter to keep the stock price up. As a result, they raise rates defensively, and cut out a lot of subscribers that would be higher risk. For example, they raised rates significantly after our 4 hurricane year a few years ago. Then they raised rates significantly after Katrina and Wilma. But this year, no hurricanes made landfall in Florida. Insurance companies will report higher profits because the higher rates did not correspond to higher claims.
However, for next year? Rates will not be dropping because there were no hurricanes. Instead, they will be going up, since the hurricane models call for average to slightly high activity for next year.
There was even a 'trade show' recently where the different modeling software presented to the insurers to gain them as subscribers to their models. They had incentive to present higher activity models to the insurers since the insurer is more likely to purchase a model that allows greater rate increases.
So the Florida Legislature has created a nice little insurance company haven here where they face no competition at all, and they can raise rates to their hearts content!
Andy | February 21, 2007, 12:44pm | #
Madpad,
I don't think it's linking living in Florida to being an idiot, it's linking living in Florida and not wanting to assume the risks to being an idiot. The line follows the assertion that people who can't pay the insurance to live on the coast's first reaction is "Someone else should have to pay my taxes! (assume my risk)" rather than the repeatedly quoted line regarding asses of questionable intelligence.
Furthermore, I think you actually answered your own argument in your post. Yes, Florida is gorgeous. Yes, people want to come there. This is because of the same weather that causes hurricanes. To wit, you enjoy tourism dollars because of this weather (and as such, increased risk.) So you get great weather, year-round, and increased state income. This is good. You're fine with that. But with the good comes the bad (higher risk, higher insurance). Suddenly, it's someone else's problem.
Now, this other gentleman in Idaho, he says Florida is a great place to visit, but I'm not willing to take the chance of living there due to the hurricanes. That's fine, that's his choice. He misses out on the weather and money. But then for Floridians (through their legislature) to come back and demand that the rest of the country subsidize the risk that they are taking is ridiculous. It makes no more sense than Iowa demanding that the rest of the country pay to build a giant dome to recreate Florida's weather over the state.
And, as mentioned above, if something is hazardous but worthwhile, then it should get paid that way. Oil drilling, for example, is a very hazardous profession. It comes with all sorts of risks. But it gets done, because oil companies offer salary to compensate for those conditions. Why should "running the port" or whatever the heck you can only do in Florida (none of the things you listed, of course, were even remotely exclusive to Florida) be any different?
VM | February 21, 2007, 1:26pm | #
Madpad - mellow out, dude.
You kick ass on the important parts of this sullied tale: namely the bill is idiotic, and despite the efforts of certain legislators and interest groups, the state's economy is doing quite nicely with a strong entrepreneurial spirit!
And the other parts:
If people expect that legislators can force solutions and somehow eliminate the physical risk along with the monetary one, that's crazy.
If people want to take advantage of certain economic opportunities in an environmentally-risky location and take advantage of the opportunity there, while making sure the risk they fear is covered, that's awesome. You cite exactly that entrepreneurial spirit.
Clearly there are individuals in the Gulf Coast area who choose to take advantage of this situation and profit from it greatly. Awesome, again.
Your over-the-top theatrical indignation is really too much, tho'. C'mon! I'll make the drinks, and we can laugh at the statist morons in both of our states (or in my city of Chicago).
(Fois Gras ban, anyone? And the fucktards who are in favor of it can sod off. They're morons. The Aldermen who voted for it? Morons. Etc. etc. etc)
Just point out that those who agree with the law, and potentially a great deal of the residents who applaud these measures, *are* freakin' morons.
You clearly disagree with the legislators and supporters of this bill - dare it be said that you find the bill moronic? Also, wouldn't you find the philosophical underpinnings of such a bill to be moronic, too?
Plus - FL21 had the best Libertarian Candidate running,
Frank Gonzalez: clear proof that mocking (cheap shot) headlines can safely be ignored. Frank kicks ass.
Or do you work for
The Ft. Lauderdale Chamber of Commerce?
(grin)
respectfully,
VM
R.J. Lehmann | February 22, 2007, 11:19pm | #
Well, earthquakes are more destructive, but theyre also far more rare, and the damage is generally excluded from standard homeowners policies. Typically, you have to either pay extra for an earth movement endorsement, or buy a completely separate policy, often sold only through a publicly administered pool (the biggest one being California Earthquake Authority, which derives its funding through pro rate assessments on private insurers.)
There are plenty of potential terrorism scenarios that also have price tags that dwarf any potential natural catastrophe, and in some cases, can be double or triple that total capacity of the entire global property insurance market for all risks.
But generally speaking, youre right. There is no comparison between hurricanes and, say, tornados or fires or hailstorms. All can be destructive, but hurricanes cause huge numbers of correlated losses, which is a whole different animal than the isolated damage -- however awfully destructive -- that can be done by a twister.
Someone upthread mentioned something about insurers demutualizing. That was a trend for life insurers for a while, but its not terribly relevant to the property market, and particularly not the homeowners market. Among the top homeowners insurers, Allstate, Farmers and Travelers were always public companies (Allstate was a part of Sears before it was spun off) and the other big guns -- State Farm, Nationwide, USAA, Liberty Mutual -- are still mutual insurers today.
As to the issue of insurance and global warming, here are a couple of articles for you:
http://www.earthinstitute.columbia.edu/grocc/documents/Mills_Hurricanes.pdf
http://www.tmcnet.com/usubmit/-lloyds-chairman-says-prospect-costly-storms-requires-free-/2007/01/12/2242866.htm
