Governor Crist has already been sending signals that he may veto the State Farm bailout bill saying the bill “gives me some pause.” Now the Palm Beach Post weighs in on the State Farm rate saga:
Letting insurance costs in Florida rise out of sight makes as much sense as letting house prices drop out of sight. But that’s what will happen unless Gov. Crist vetoes HB 1171.
Call it The State Farm Bailout Bill. Last year, the company – which, with 1 million policies, is Florida’s largest private insurer – asked for a 47 percent statewide increase just two years after getting a post-Wilma 52 percent increase. The Office of Insurance Regulation said no. A judge said no. So the company threatened to drop every policy in the state.
Was it a bluff? Who knows, but it worked on the Legislature. HB 1171 would allow the state’s largest private insurers to raise rates for property coverage as much as they want. Supporters claim that this free-market approach would stimulate competition and, over time, actually drive down rates and cause companies to take policies out of state-run Citizens.
The free market, though, got Florida into this problem. Companies wanted to dump riskier homeowner policies and keep the safe ones. That’s how Citizens got its 1 million policies. Private companies continue to shed policies in other coastal states. There’s no guarantee that this bill would increase competition. The only guarantee is that large insurers would make more money.
Sen. Ted Deutch, D-Boca Raton, defended his vote for the bill by saying that “this is just a short-term thing.” Sen. Dave Aronberg, D-Greenacres, mounted the same weak defense for his yes vote, saying that the Banking and Insurance Committee chairman had promised a staff review after a year. But the Senate rejected an amendment by Sen. Deutch for a review after two years by the chief financial officer. The Senate rejected an amendment that companies keep all existing policies.
Senate President Jeff Atwater, R-North Palm Beach, voted against HB 1171. He is rumored to be a candidate for chief financial officer in 2010. So he saw HB 1171 as a potential political liability or a bad deal for consumers or both. Gov. Crist has his own political plans for 2010. Similarly, for reasons that make sense for the state and for him, he should veto this bill.