National Insurance Crisis Threatens the Economy of Florida
By Congresswoman Debbie Wasserman Schultz
Every year, Floridians must endure the financial and emotional distress that arises from each hurricane season. We are accustomed to dealing with natural disasters, but now we must battle a different kind of disaster: the private insurance market.
Whether you are a private homeowner or own your own business, the crisis in the insurance industry is nothing short of catastrophic. As the threat of more natural disasters mounts, insurance companies have been forced to raise their premiums at alarming rates or withdraw from markets completely. This leaves many South Floridians in a situation where either they cannot afford the increased insurance costs or worse yet; have their plans cancelled altogether. This is unacceptable. Without a comprehensive solution, we risk the possibility of the insurance crisis completely destabilizing South Florida's economy.
Recently, Florida homeowners have been hit hard as carriers throughout the state continue to increase their rates and drop consumers from coverage. State Farm, Florida's largest insurer, is seeking an average increase of over 52 percent statewide. In South Florida, the increases will be even steeper. Broward residents are projected to receive a 79-percent increase, while those in Miami-Dade will see their rates rise as high as 105 percent. Nationwide Insurance is proposing a statewide increase of 71 percent on average. Despite the fact that they have made over $6 billion in profits in Florida since the mid 1990s, Allstate has dropped over 174,000 of its policy owners with more on the way. Even Citizens Property Insurance, the state-run insurer whose sole purpose is to insure those who cannot find affordable coverage elsewhere, is seeking a 42 percent increase. With prices for everyday necessities like gas rising every day, South Floridians just cannot afford these massive rate hikes.
The stories I've heard about what the insurance industry is doing to our businesses are just as alarming. I recently met with local community bankers who discussed the insurance crisis with me. They relayed the story of how one firm bought commercial space near the Miami Airport with the understanding that the previous owner had paid $300,000 for their insurance. The only insurance carrier who offered a policy to the new owner quoted the astronomical rate of $1.1 million for just a year of coverage. That amounts to nearly a 370 percent increase from the previous year!
Local business owners in our community are being hurt as they continue to see their policies expire. Landlords that own multi-family buildings, for example, cannot find the affordable insurance they need to operate. These aren't large development firms selling fancy, million-dollar high-rises. These are affordable housing units.
If the insurance problem is left unresolved, our entire economy could unravel. Small businesses will not be able to operate, the consumer costs will spiral out of control, and finding affordable housing will become even more difficult. With the median home price in Broward County already at $380,000, it is clear to me that South Floridians cannot take this much longer.
What we need is a comprehensive solution to a problem that is affecting people here in Florida and across the country. I believe we need a national catastrophe fund to keep costs down and help manage risk. Last week, I filed a bill to establish a national commission to examine and make recommendations that will retain and attract insurance markets, in order to serve consumers and protect taxpayers.
The commission created by my legislation would be tasked to help the federal government prepare for and manage disaster response, mitigate future costs, reduce the likelihood of fraud and abuse in the federal repayment program, and hedge any risk exposure assumed by the federal government in the adoption of a national catastrophe program. It builds upon some of our best practices in Florida, and pulls together a number of bipartisan individuals in the public and private sectors who have an understanding of natural disasters and the insurance market.
The time to attack the insurance crisis is now. If we act quickly, I am confident we can fix the problem before it spirals out of control.