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Insurance
Re-Reforming Insurance
A band of insurance reformers thinks it has found a better answer. Can it find a political sponsor to champion it?
 “The hurricane insurance issue will never be resolved with the current structure. ” — Don Crane [Photo: Mark Wemple] |
Don Crane is one of those people — and there are many — who think the state’s headline-driven property insurance “reform” was slap-dash and superficial at best. But Crane is also one of those people — and there aren’t many — who doggedly take on big, intractable problems just because they need a better answer.
Trying to induce insurance companies to lower premiums right away, the Legislature engaged in a sleight of hand last January that shifted a lot of the risk from the private companies to the people of Florida. But the insurance companies didn’t lower rates and kept dropping policies. Meanwhile, the move put the state’s citizens on the hook, in a worst-storm scenario, for as much as $200 billion in potential assessments by state-sponsored Citizens Insurance.
Unacceptable, says Crane: “The hurricane insurance issue will never be resolved with the current structure.”
Now 73, Crane is the founder and first president of the well-regarded Floridians for Better Transportation and the far-sighted crusader for what is now the Suncoast Parkway and for transportation bonds and toll roads in Pinellas County. Looking for a better insurance structure, he started soliciting ideas and reactions from people in his considerable Rolodex, which goes back to a term on the old state road board under Gov. Claude Kirk (1967-71) and two terms in the state House (1970-74).
Crane assembled a group, first enlisting his daughter-in-law, Selina Crane, a vice president at Wachovia Insurance and an underwriter. Others included retired corporate lawyer William Ballard, oil distributor Bud Risser, catastrophe claims specialist Dan Montgomery, insurance consultant Jim Marshall, and Richard Winning, whose family owns the Derby Lane dog track in St. Petersburg.
Crane says he was shocked that no one, including state regulators, seemed to know what portion of property-insurance premiums was hurricane-
related. insurance newsCommissioner Kevin McCarty didn’t respond to his letters, he says, which “hacked me off” and heightened his determination.
Eventually, Crane’s group adopted a figure of $11.2 billion in hurricane-related premiums — slightly more than half of the $21.5 billion total property premiums estimated for 2007. Using that number, his work group evolved a dramatic plan — a complete state takeover of hurricane insurance — that’s comprehensive, compelling and a little complex (as are most good solutions).
Crane’s plan takes the taxpayers off the hook for huge disaster exposure by creating a state-sponsored company tagged the Florida Reinsurance Corp. that’s properly capitalized and not stuck with just the exposure that private insurers don’t want. The corporation would receive all hurricane-related premiums from a dozen different lines of insurance, including commercial, marine and residential, and then “reinsure” private companies for everything above the property-owner deductible. It would absorb all the hurricane business from state-sponsored Citizens Insurance as well as the state’s hurricane catastrophe fund and the high-risk insurance pool.
Every property insurer would have to participate and offload its windstorm risk and its windstorm premiums (less a sales fee) to the new state corporation. Premiums after expenses would create reserves, capturing the money now going to insurers’ profits and their unregulated captive reinsurers. The reserves, supplemented by bonds, would be invested in the stock market in the same manner as state employees’ pension funds.
