Carriers and insurers look at Florida as a heavy-handed, intrusive, oppressive regulatory regime and it would require a major shift in how government and legislators approach this market to encourage companies to come into the state, Ernie Csiszar, president and CEO of the Property Casualty Insurers Assoc. of America recently told agents in Orlando, Fla.
“The heart of our industry is not the carrier, it is not the reinsurance company, it is the agency force and the loyalty and dedication of the agency force,” Csiszar explained. “This system, no matter what you hear, will survive and thrive based on trust, relationships, friendships, service and true value an agent provides to his customers.”
Csiszar took a look at Florida’s property coverage and, in particular, its catastrophe coverage, during the Florida Association of Insurance Agent’s 102nd Anniversary Convention and Education Symposium.
“I am in a state to which every tourist in Europe, North America and Canada flocks,” Csiszar said. “Tom Gallagher mentioned to me some time ago that Florida has 1,000 new residents a day. You are such an attractive state, with low taxes, value to eat and sleep, yet you are driving insurance companies away.
“It bothers me because you are the perfect example of how the capitalist system is supposed to work, except, when it comes to insurance,” Csiszar explained. “When you want to write insurance in Florida you feel like you are working and dealing with the bureaucracy in the Soviet Union, and believe me, I have vivid memories of those types of bureaucracies.”
Cutting to the quick, Csiszar said, “You are simply not a welcome state–from a regulatory standpoint Florida is one of the worst states to deal with.
“You have forgotten about the line that exists between what government does well and what the markets do well. There is a role for markets and there is a role for the government. Instead every time you have a problem in Florida do you run to the market? No, you run to the Legislature.”
Csiszar said he recently sat in Bermuda with one of Florida’s legislators. He described him as “a wonderful man, a bright man with a very appealing personality, a funny guy, we had a great time.”
But Csiszar had a problem with the man’s views. “He took great pride, and deservedly so, that last year in the 11th hour, almost the 12th hour of the session, you managed to pass a 190 page insurance bill,” Csiszar explained. “I looked at him and said, ‘You know when I hear that I wouldn’t thump my chest, I would duck.’ When I hear about 190 pages to solve a problem legislatively I say, ‘Uh-Oh,’ somebody is out there creating more problems.”
Csiszar urged lawmakers to change course. “The problem is only going to get aggravated. When is the state going to realize that the true solution to your crisis lies on the market side of things? They don’t lie with the government. Government needs to get out of the way if you are ever to find a solution for this problem—and if anything, the indicators are going the other way.”
Law of supply-and-demand
Csiszar cautioned that, even with Florida’s all-powerful legislature, no one can overrule the laws of supply-and-demand.
“There are a lot of these things that are good and make Florida a more appealing market, but they are not going to solve your problems because what you have got, even with your all-powerful Florida Legislature, can not over-rule the laws of supply and demand.”
He maintained that in the past Carl Marx, Vladimir Lenin, Stalin and others attempted to overcome the law of supply-and-demand, and failed.
“Demand is increasing not only because you have a larger population, but because you have also got bigger houses, more houses, higher-valued houses, higher construction costs and more storms,” Csiszar explained. “Come on, the demand has gone up, and by the way, the quality of your policies has gone way down.”
Csiszar told the audience to look at what kind of coverage a homeowner gets if there is a simple kitchen fire, “never mind hurricane deductibles and all the rest.”
“Quality has gone down, capacity and quantity has gone down and the demand just keeps surging,” he said.
“Until you let that little thing in the middle between supply and demand called price to arrive at the kind of balance that has to exist between supply and demand, it isn’t going to work,” Csiszar said. “Unless that price reflects the conditions as they exist on the ground, the risk that actually exists and will exist for some time to come, this is not going to solve the problem.”
Price suppression does not work, he argued. “You can write law after law, hold legislative session after legislative session, and hold special sessions one after another, but it is not going to work unless you stop suppressing the prices here in Florida,” Csiszar concluded. “Until you get away from this price suppression, and allow that price to reflect the real underlying risk, or at least come close, and allow that judgment call to be exercised by the market, and not by the Legislature, you are going to face this issue over and over for years to come with the crises just getting worse and worse.”
Topics Florida Agencies Legislation
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