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Insurance Woes — Why Now?
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Insurance Woes

People are generally unaware of how bad things can get if the insurance companies decide to play games with your life. You buy a house and you automatically buy insurance. You may not even notice that you are required to have insurance if you have a mortgage, just like getting a car loan. If you can’t get insurance, you can’t have a house with a mortgage.

If you have a business you need insurance. Many jurisdictions require proof of insurance to get a business license. Again, if there’s a bank involved, they want insurance.

Even though they have been making record profits, insurance companies are looking at global warming and the probability of another 2005 hurricane season and deciding that they don’t want to be in the home insurance market in coastal zones. Apparently insurance companies are no longer interested in risk.

Florida is caught in a bind, and the politicians are not willing to come to grips with the problem.

The Pensacola Beach Blogger has a series of posts up about the situation and some good coverage of it by the Gannett Corporation newspapers. Jeb’s Hooverville Insurance Proposal, Mierzwa Doctrine Reaffirmed for Milton Couple, and Tallahassee Paralysis deal with the mess in Florida and the failure of the state to deal with it.

The Republicans are faced with the problem that private companies don’t want to compete for homeowners insurance in Florida. It has been obvious for some time that we are going to have to provide insurance through the state-owned Citizens Property Insurance Company, but they have to re-write the rules so that Citizens can provide insurance at a reasonable price. Currently, Citizens is required by law to be more expensive that private companies.

Without reasonable insurance rates the only people living on the coast will be those wealthy enough or desperate enough to do it on an uninsured basis. Small businesses will have to leave.


1 Steve Bates { 10.29.06 at 4:37 am }

These days, I think we need a new definition.

Insurance is the assumption of a risk for a fee…
… except for the part about the assumption of a risk.

2 Bryan { 10.29.06 at 8:29 am }

It will get to Texas in short order, as they are canceling policies in all coastal areas. They want to make money risk-free and the Republicans encourage this thinking.

3 Alice { 10.29.06 at 8:36 am }

My mom (retired) lives in Seminole on the inland waterway. I was down there recently chit-chatting with her neighbors (all retired) and discovered a number of them have dropped their homeowners insurance. Their thinking is based on how the insurance companies are handling damage claims in Florida. To them, it makes no sense to pay out an annual premium and not have the insurance company live up to the contract. If a hurricane flattens or extensively damages their property, they’ll take out a mortgage and use the land as collateral and worry about insurance at that time. Until then, to them there’s no point in paying for insurance that in effect doesn’t protect you.

4 Bryan { 10.29.06 at 9:19 am }

That’s the reality, Alice. The recent changes the legislature has made make it even less likely that the insurance companies will pay in the future. Only the Federal flood insurance program and FEMA loans have been forthcoming and the FEMA loans aren’t as certain as before the Republicans took over.