Ghost of Charlie Crist haunts insurance reform

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It has been more than two years since the adults regained control of Florida, yet the specter of the Charlie Crist days of demagoguery, populism-at-any-cost and overall political buffoonery looms heavy over the state Capitol.

The idea that Charlie Crist wants to make a political comeback and pursue the office he once held and neglected —then abandoned in order to run for two other offices—has become common knowledge throughout Tallahassee.

The trial lawyer firm he works for does everything it can to promote him, including feature him in television ads and on countless billboards across the state. He continues to chase photo-ops, pen op-eds and do anything else he can to offer unsolicited pontifications on any political issue.

If there is an accelerated program that confers Democratic bona fides on someone, Charlie Crist has graduated from it with honors. As a newly-minted independent, he formally supported several Democratic office-seekers in 2012 (including against former allies), endorsed Barack Obama, was featured as an “independent” speaker at the Democratic National Convention, switched his party affiliation after fulfilling the token “independent for Obama” role and, immediately following the massacre in Newtown, Conn., joined the chorus of Democrats calling for gun control, which is a far cry from his strong pro-Second Amendment record that earned him an “A” rating with the National Rifle Association.

This appears to complete his two-year political metamorphosis, which makes him ripe for a possible comeback as a Democrat.

And legislators are aware of this.

But concern over a Crist comeback reached fever pitch this week when Jim Greer–his hand-picked former chairman of the state’s Republican Party–pleaded guilty to five felony counts after long maintaining his innocence.  His guilty plea spared Crist the indignity and embarrassment of having  to testify as a key witness in the case that would have focused on his knowledge of Greer’s illegal shenanigans as chairman.  This has sparked rumors of what compelled Greer to plead guilty and who paid for the attorney who “parachuted in at the last minute” to negotiate the plea.

Political observers viewed the Greer trial and the embarrassing evidence it would have revealed as something that could have derailed Crist’s hopes of a comeback.  That is no longer the case, and legislators are aware of this.

Florida’s 2013 Election Year?

It has long been the case in just about every state that governors are rendered lame ducks during their last year in office. After leaving, they are not even an afterthought for the remaining lawmakers, much less even a remote factor in subsequent policy decisions. But two years after his exit, Charlie Crist is in some ways more of a factor in some issues before Florida’s upcoming legislative session than he was while he was governor.

It is no surprise that legislatures historically pursue bolder agendas during non-election years.  The medicine-may-be-harsh-but-the-patient-requires-it types of policies that lawmakers hate to enact, but must for the good of the state, are usually pursued during odd-numbered years to allow enough time for short-term public anger to fizzle and fickle public opinion to improve before next year’s election. However, Florida legislators appear to be treating 2013 as an election year.

Take the property insurance issue, for example.  Even opponents of reform concede that Florida’s property insurance system is shaky at best. Florida’s state-run insurance mechanisms—Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund—are too big and  largely underfunded.  Both have the potential of levying enormous assessments on every auto, renters, boaters and property insurance policy issued in Florida, thus dramatically increasing every Floridian’s overall cost of insurance for several years after a sufficiently bad hurricane season.  Or worse, Citizens and/or the Cat Fund may simply fall short on their ability to meet their claims obligations, leaving thousands of families and businesses unable to rebuild in a timely manner.

In short, this is a big deal.

Unfortunately, part of the solution to the looming crisis must involve raising insurance rates on some, especially those covered by Citizens who live in the highest risk coastal areas of the state.  If not, the rest of us — whether directly impacted by a storm or not — could face paralyzing increases in our overall cost of insurance to bail out Citizens and the Cat Fund.

Legislators know this and many are examining measured ways to address these issues.  However, there is growing concern among some lawmakers, including solid free-market types, that pursuing the right policies will open the door to Charlie Crist demagoguing the issue, as he did in 2006 and 2007.

However, there are many reform ideas that would largely address the Citizens/Cat Fund issues that do not have an impact on insurance rates, and those that do affect a minority of Floridians. Such increases would be smaller and more methodically applied than the big, uncontained increase that would affect every Floridian for many years after a bad hurricane season.  In other words, it’s a “fewer people paying a little more now” vs. “everybody paying a lot more later” situation.

Nevertheless, most lawmakers know Charlie Crist’s modus operandi, and know that he and a few remaining crypto-supporters in the Legislature will use any rate impact—regardless of how small—as a call to condemn the governor for “increasing rates on consumers.”

Good politics does not always equal politically good policy.  Regardless, lawmakers must take steps to decrease the likelihood or severity of post-hurricane assessments if they do not want an economic cataclysm after a bad hurricane season.  Doing nothing amounts to political malpractice.

That being said, those of us who advocate market-freeing reforms to the state’s insurance system accept political realities and acknowledge that Charlie Crist cannot be permitted to return to the Governor’s Mansion, as he is the architect of most of the state’s current problems.

Here is the given: Charlie Crist will take any opportunity to demagogue any issue.  If reforms that increase rates are enacted, he will demagogue the increase in rates.  Conversely, if nothing is done and a hurricane strikes, he will demagogue and blame the ensuing failures of Citizens, the Cat Fund and the state’s overall insurance system on Gov. Rick Scott and the current Legislature, even though it was Crist himself who triggered the time bomb years prior.

As such, lawmakers should consider enacting solutions that address the overexposure of Citizens and the Cat Fund that don’t needlessly increase rates on Floridians; those that do impact insurance rates should be measured and their rationale clearly articulated.

For example, according to a recent study, there are potentially thousands of vacation homes owned by non-Floridians that are covered by Citizens at below-market rates, and thus, subsidized by Florida taxpayers.  These out-of-state owners should not be paying anything less than full insurance premium sufficient to cover their risk.  This would obviously be an increase in rates for them, but it would be difficult to find any Florida voter outraged with doing so on this category of policies.

Another example is a proposal to right-size the Cat Fund.  Currently, the Cat Fund promises more than its own managers estimate it can pay out.  That is not acceptable.  If the Cat Fund—a state-run reinsurance company that provides coverage to the state’s private insurance companies, as well as to Citizens—cannot meet all of its obligations after a bad hurricane, Citizens may not be able to pay all of its claims, several of the state’s private insurance companies likely would be insolvent, and thousands of residents and businesses may be left without their claims fully paid, which could obliterate Florida’s economy.

This is totally unacceptable, and the only way to remedy it is to reduce the size of the Cat Fund and the amount of coverage it can sell.  Insurers would have to go to the private market for that coverage, which could increase overall insurance rates by approximately 3% over three years (if a current proposal under consideration is adopted).  That, by any measure, is a small price to pay to immunize the state from an economic catastrophe, and this must be clearly explained to Floridians.

Another way to prospectively protect Florida taxpayers is to eliminate the government incentive to build along the state’s highest risk coastal areas by making Citizens coverage unavailable for new beachfront construction.  This would not only save lives and property, but also protect ecologically valuable areas, wildlife habitats, and the natural barriers (sand dunes, wetlands, etc.) that protect inland areas from wind and storm surge.  This would have zero insurance rate impact, and it has the potential to bring fiscal conservatives and environmentalists together to support good policy.  More on that here.

These are just a sampling of possible meaningful reforms that can be pursued without giving demagogues like Charlie Crist fodder.  But there are more ideas that deserve examination. They just need to be properly executed and articulated to Florida residents who deserve to know that they stand to lose a lot more if nothing is done.

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