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Saturday, June 27, 2009

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Charie Crist and the Florida Insurance Crisis

This past week, Charlie Crist, governor of Florida, vetoed legislation that would have enticed some of the largest property insurance companies in Florida to remain in the state. The legislation would have allowed insurance companies to charge higher premiums to Florida homeowners that are more in line with the risk these properties face (i.e. being destroyed by hurricanes). With the veto of this legislation, State Farm will most likely continue with plans to exit the state as they can't charge premiums hat commensurate the risk they face there.

Why is this a problem? There are many, many reasons why this is a huge problem and a ticking time bomb waiting to explode. First and foremost, since many of the largest insurers are either not writing new policies or are pulling out of the state altogether , there are any smaller, newer insurance companies that are stepping in and offering residents the coverage they need for their homes. With that being said, if a large hurricane blows across the state and leaves a significant amount of damage, it is very likely that these smaller companies wouldn't be able to pay out all of the claims they would receive. So what happens when insurance companies don't have enough reserves to pay claims? In this situation, the state government is responsible for stepping in and paying the claims through state run insurance pools (funds that all insurance companies contribute money too). However, as the largest insurance companies leave the state so does the money they contribute to the state pool, which leaves the smaller, under capitalized insurance companies to foot the bill and it is very likely they can't.

The residents of Florida first faced an affordability issue, in that insurance companies were raising premiums on homeowners insurance policies, but with Charlie Crist adamantly refusing to allow companies to charge to increase premiums the residents are now facing an availability issue. Most consumers have a hard time pitying the insurance industry, but how can consumers and Charlie Crist, expect companies to agree to insure their homes when they only collect $1 in premiums for every $2 they pay out in claims (if not more)? It's a losing deal for both the insurance industry and the residents of Florida.

In my opinion, Charlie Crist would be wise to listen to the majority vote of his legislature and allow companies to start increasing premiums so they can at least breakeven on thier claims payments, otherwise I fear it will be a long, sad hurricane season for the residents of his state. If rsidents don't want to pay higher premiums, maybe they should reconsider their mansion on the beach.

Friday, June 26, 2009

The first blog of the rest of my life :)

Tadah! Here it is...my first blog ever. I've never really paid much attention to blogs, but lately (with all the crazy things going on in the world around us) I have felt compelled to share some of my thoughts, ideas, and perspectives with the world. Plus, I am pretty sure my fiance is sick of hearing me talk about the economy, politics, and other equally interesting/boring things...so I thought I would bug the online community instead and give him a little break!

Seriously though, I am excited and looking forward to having a little voice among the oceans of the world! I hope you all find something of interest here and I am looking forward to starting some good conversations!

Enjoy!