Insurance rates must be affordable
By Sen. Mike Fasano
Editor’s note: This letter was sent to Bill Gunter, chairman, Florida Association of Insurance Agents, with a copy provided to the Citrus County Chronicle.
Dear Mr. Gunter,
In my capacity as a member of the Florida Legislature, I have always been intrigued by the rich history of our state. As a former elected official, I think you would agree that it is important to study and learn from the past because, as Winston Churchill said, “those who fail to learn from history are doomed to repeat it.”
It is with Churchill’s words in mind that I was surprised to read your recent piece in the Tallahassee Democrat titled “Insurance Customers Still Deserve a Choice.”
Your article, and additional comments you and your colleagues have made in the media, make the case that Floridians are suffering because of what you term, “political rate suppression.”
You further state your case for legislation that would allow insurance companies to charge an excessive rate that will in your words, “bolster the voluntary marketplace, creating competition and ultimately driving the cost of insurance premiums down.”
As you recall, in the late 1960s, the Legislature was dealing with issues strikingly similar to what you described in the Democrat. Only the issue of the day was not homeowners insurance but rather auto insurance. Rates at the time were higher than many Floridians could afford to pay. Although auto insurance was required by law, many of our residents were going without because they simply could not afford the premium. Additionally, many companies were making the business decision to leave the state because of what they deemed excessive regulation.
In response to this epidemic, the Legislature passed a bill in 1967 that implemented what was known as the “California Plan.” Essentially, the California Plan allowed auto insurers to charge excessive rates without regulatory review. The theory at the time was identical to your theory now; increased competition would yield lower rates and add more companies to the marketplace.
Not surprisingly, that theory proved to be incorrect. Shortly after the California Plan was implemented, the Legislature was forced to reverse course and recommit to regulatory oversight of insurance rates. In fact, Florida’s newly elected insurance commissioner at that time issued a report titled, “A Program to Solve the Automobile Insurance Rate Crisis,” which summarizes the issue very well.
The proposed solution to it all, in 1967, was to abolish the so-called “prior approval” system of rate regulation. If companies could set their own rates without prior approval of the state insurance commissioner, then insurance would be available to virtually everyone on the free market and the natural pressures of free enterprise competition would keep rates from becoming excessive.
Not unpredictably, rates went into a dramatic upswing as companies exercised their newfound authority to set their own rates. The public was outraged by the rapidly increasing rates and by the inability of insurance regulators to do anything about them. The public, to a great extent, had identified the California Plan as the culprit in the growing rate crisis. Its fate was sealed as well as it should have been.
At the time of this report, March of 1977, Florida’s economic condition was similar to what it is today. For many families, bills were piling up and difficult choices had to be made about how to prioritize the household budget. The insurance commissioner’s March 1977 report again provides an illustration of just how difficult the situation was:
"Since taking office as insurance commissioner of Florida, I have heard directly from no less than 18,000 Floridians who have told me in no uncertain terms that they can no longer afford automobile insurance at the presently impossible rates."
It seems that the more things change, the more they stay the same. I don’t have to tell you, Mr. Gunter, that families across our state are struggling. The unemployment rate is at record levels. We are in the midst of the greatest economic downswing since the Great Depression. Foreclosures are at an all-time high. My colleagues and I in the Legislature hear every day from our constituents who tell us they simply cannot afford to pay higher insurance premiums.
As a former elected official, I know that you understand the plight of the average Floridian who struggles to meet their daily obligations. How do I know that you understand? Because the report to the Legislature that I have referenced in this letter; the one that so keenly summarized the feelings of thousands of Floridians, the report that is overtly critical of the failed efforts to de-regulate insurance rates and offers detailed proposals on how to increase regulation and oversight of insurance companies; that report was written by you.
Floridians deserve to know that before you became an insurance agent who lobbies the Legislature to allow for unregulated insurance rates, you were once an insurance commissioner who, upon winning his first statewide election, told the Boca Raton News, “Our victory is a testimony to the fact that Floridians are ready to insist that effective action be taken to correct the upward spiral in insurance rates — a message that must be heeded and a mandate that must be obeyed.”
In your report to the Legislature, you even describe the insurance industry and its lobbyists at that time as “vested beneficiaries of the status quo” who are “highly organized” and “well-heeled.” It is appalling that someone who had the foresight to warn of special interests trying to improve their bottom line on the backs of hard-working Floridians would become one of those special interests.
A lot has changed since 1977, but many things remain the same. Florida’s families deserve to know their elected officials are listening to them. It wasn’t long ago that you told every resident of this state you would work to make sure insurance companies did not charge excessive rates. You spoke of “a mandate that must be obeyed.” Sir, that mandate is still in place, and I for one will learn from its history and will do everything in my power to make sure it is not repeated.
State Sen. Mike Fasano, R-New Port Richey, is President Pro Tempore of the Florida Senate. His district includes the western portion of Citrus County.
Copyright www.chronicleonline.com. All rights reserved.