One of the arguments made in the national healthcare legislation debate is that all health insurers do is take profits that could be dedicated to care under a single-payer system. Analogous arguments have been made against P&C insurers operating in the State of Florida, where they have been accused of profiteering. Better just to take the profiteers out of the market then and dedicate all resources to paying claims, no?Well, that approach doesn't seem to be working out for Florida. This morning the Florida Office of Insurance Regulation issued a press release saying that commissioner Kevin McCarty had issued a consent order resolving pending litigation between State Farm and the Florida regulator over the carrier's decision to depart the state.
Under the terms of this deal, State Farm will be able to walk away from "no more than" 125,000 of its homeowners' policies currently in-force. With that reduction, State Farm will remain the largest private property insurer in the state.
As an Insurance Journal story suggests, this deal is more congenial to the State of Florida than to have State Farm walk out on over 810,000 policies, which would have to be taken up by Citizens Property Insurance, the troubled state-operated, not-for-profit carrier.
This news comes as I have just cracked a complimentary copy of a new book, "Delay, Deny, Defend: Why Insurance Companies Don't Pay Claims, and What You Can Do About It," by Jay M. Feinman, (Portfolio/Penguin Group, USA). Whatever legitimately can be said against insurers' pricing strategies and claims practices - and no doubt much can, especially in Florida - much public rhetoric is based on fanciful thinking. Politicians pander to the public's bottomless sense of entitlement. Living in a catastrophe-prone area is inherently more risky than living elsewhere. In an ideal world, Florida homeowners' insurance wouldn't be so expensive. And money would grow on trees.
Again, one can argue about the particulars of pricing in relationship to changing hurricane activity or about the inefficiency and corruption affecting claims processing in the field. However, Florida seems now to be acknowledging that the insurance carriers do a vital service and that Citizens was given an impossible task, justified more on wishful thinking than sound business considerations. State Farm has had to compromise, according to the article cited above: for example, it had to cave on its demand that its agents not have to sell insurance from other carriers. However, the Florida Office's statement admits that it had been asking the unreasonable by saying that the deal will allow "State Farm Florida to remain a viable insurer in the Florida market."The Florida Office's statement admits that it had been asking the unreasonable by saying that the deal will allow "State Farm Florida to remain a viable insurer in the Florida market."