Spreading the risk — will it help homeowners?

Re the May 23 story “Florida legislators face big issues on property insurance:” Florida should require all insurers selling auto and other coverage in the state to also offer property insurance (provided they sell such insurance elsewhere in the United States). To sell auto coverage in Florida, an insurer must also offer homeowner’s insurance.

Florida should not allow national insurers to create Florida-only sub-companies. National insurers should be required to spread risk across all of their policies nationally and all of their insurance products. Mandating these two steps should increase competition, reduce premiums and minimize insolvencies.

Losses from Hurricane Andrew led national and international insurers to create Florida-only companies like State Farm Florida and Allstate Floridian. Insurers no longer had to pay the claims, but their sub-companies did. And should these go out of business or into receivership, who would care?

Every insurer playing this game lived on, leaving Floridians to pay for the damage via special assessments added to every policy premium (even, ironically, auto policies), Citizens Insurance, and the Florida Insurance Guarantee Association, which picks up the tab when an insurer goes belly up.

Had Florida not allowed insurers to limit product offerings or Florida-specific insurers, we would not be in our current situation. Premiums would be lower because the pool of risk would be larger and insolvencies would decline because a national insurer would have ample assets and access to less-costly reinsurance.

For decades our elected officials allowed insurers to create many of today’s problems. Unfortunately, the solutions being offered are just more of the same and will not benefit most Floridians.