Vol 8 No. 21 - February 13, 2008

Global warming as an excuse to raise insurance rates

By Louise Bolger
sun staff writer

I know it’s only February and no one wants to start thinking about hurricanes and their affect on property insurance, but the Florida Senate is thinking about it and making its dissatisfaction with the insurance companies known loud and clear.

Shortly after he took office, in January 2007, Gov. Charlie Christ passed a far-reaching state law that was designed to cut insurance rates. A year down the road, Florida lawmakers are attempting to determine why insurance costs have soared in the past year in view of the sweeping legislation.

In January the Senate President Ken Pruitt appointed the Senate Select Committee on Property Insurance Accountability. According to the Florida Senate’s Web site, "The purpose of the Senate Select Committee is to take testimony, under oath, from property and casualty insurance company executives about their pricing practices and their increased profits associated with escalating rates." The committee was mandated to meet on Feb. 4 and 5, which it did with some interesting if not conclusive testimony.
Executives from several insurance companies including Allstate, Florida Farm Bureau, State Farm Insurance, The Hartford Group, American Strategic Insurance and Nationwide Insurance often answered questions with ambiguous responses ranging from "I don’t want to comment," to not knowing whether their companies were making a profit. Despite grilling from the members of the committee, few of the representatives were satisfied with the answers they received.

In particular Allstate officials were very reluctant to explain why their rates needed to go up. They were recently suspended from selling any new insurance in Florida because of undocumented rate increases, however, the order was blocked pending a court decision. In fact, Florida’s second largest insurance company was accused of breaking the law by state insurance regulators because rates were not reduced. Allstate’s position is that its rate increase was based on the theory that global warming will cause ocean temperatures to rise, fueling more hurricanes.

Allstate Florida CEO, Joe Richardson, told the committee, "Prudent business judgment dictates that this increased risk of hurricane formation should be taken into consideration in determining the appropriate rate for the risk being insured."

However, state regulators do not consider rising ocean temperatures in their models assessing risk. They feel scientists are still studying what affect global warming will have on hurricanes and thus far a conclusion has not been reached. In fact, a pair of recent studies had opposite opinions, one that global warming would increase hurricanes and the other that it would reduce the number of hurricanes.

Sen. Jeff Atwater, R-Palm Beach Gardens, asked if the company had embraced such a scenario to justify higher rates. Needless to say, he wasn’t happy with the answer or lack of one to his question. In contrast to Allstate, Nationwide Insurance Co. of Florida testified it did reduce its rates by 20.4 percent saving its customers on average $448.

You’ve got to love it! Allstate increasing its insurance rates to Florida homeowners based on an unproven theory is like me asking my publisher to double my salary assuming some day I’ll write a best seller and become famous. But I guess any investigation of insurance in Florida is better than no investigation, and this one isn’t over with more meetings scheduled in mid-February. Nevertheless, Gov. Christ feels that despite the ongoing fight, rates are getting better for property owners in the state.

If and until Florida’s convoluted insurance situation is straightened out we should all be doing our anti-hurricane dance. It may only be February, but once the white pelicans fly out, the funnel clouds fly in, and even an active thunder storm could be blamed on global warming providing an excuse to raise insurance rates.


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