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Heed Churchill in insurance rate debate

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By MIKE FASANO

Special To The Tampa Tribune

Published: February 7, 2010

In my capacity as a member of the Florida Legislature, I have always been intrigued by the rich history of our state. I think Bill Gunter, as a former elected official, would agree that it is important to study and learn from the past because, as Winston Churchill said, "Those who fail to learn from history are doomed to repeat it."

It is with Churchill's words in mind that I was surprised to read Gunter's piece, "Real choice for a change" (Other Views, Jan. 28). The article, and additional comments he and his colleagues have made in the media, make the case that Floridians are suffering because of what he terms "political rate suppression." He further states his case for legislation that would allow insurance companies to charge an excessive rate that will, in his words, "bolster the voluntary marketplace, creating competition and ultimately driving the cost of insurance premiums down."

In the late 1960s the Legislature was dealing with issues strikingly similar to what he described in the Tribune. Only the issue of the day was not homeowners insurance but rather auto insurance. Rates at the time were higher than many Floridians could afford. Although auto insurance was required by law, many residents were going without because they simply could not afford the premium.

Additionally, many companies were making the business decision to leave the state because of what they deemed excessive regulation.

In response to this epidemic, the Legislature passed a bill in 1967 that implemented what was known as the "California Plan," which essentially allowed auto insurers to charge excessive rates without regulatory review. The theory at the time was identical to Gunter's theory now: Increased competition would yield lower rates and add more companies to the marketplace.

Not surprisingly, that theory proved to be incorrect. Shortly after the California Plan was implemented, the Legislature was forced to reverse course and recommit to regulatory oversight of insurance rates. In fact, Florida's newly elected insurance commissioner at that time issued a report, "A Program to Solve the Automobile Insurance Rate Crisis," that summarizes the issue very well:

"The proposed solution to it all, in 1967, was to abolish the so called 'prior approval' system of rate regulation. If companies could set their own rates without prior approval of the State insurance Commissioner, then insurance would be available to virtually everyone on the free market and the natural pressures of free enterprise competition would keep rates from becoming excessive ... Not unpredictably, rates went into a dramatic upswing as companies exercised their new found authority to set their own rates ...The public was outraged by the rapidly increasing rates and by the inability of insurance regulators to do anything about them ... The public, to a great extent, had identified the "California Plan" as the culprit in the growing rate crisis. Its fate was sealed as well as it should have been."

At the time of this report, March 1977, Florida's economic condition was similar to what it is today. For many families, bills were piling up, and difficult choices had to be made about how to prioritize the household budget. The insurance commissioner's report again provides an illustration of just how difficult the situation was:

"Since taking office as Insurance Commissioner of Florida, I have heard directly from no less than 18,000 Floridians who have told me in no uncertain terms that they can no longer afford automobile insurance at the presently impossible rates."

It seems that the more things change, the more they stay the same. I don't have to tell Gunter that families across our state are struggling. My colleagues and I in the Legislature hear every day from our constituents who tell us they simply cannot afford higher insurance premiums.

I know that Gunter, as a former elected official, understands the plight of the average Floridian. How do I know? Because the report to the Legislature that I have referenced was written by him.
Floridians deserve to know that before he became an insurance agent who lobbies the Legislature to allow for unregulated insurance rates, he was once an insurance commissioner who, upon winning his first statewide election, told The Boca Raton News: "Our victory is a testimony to the fact that Floridians are ready to insist that effective action be taken to correct the upward spiral in insurance rates - a message that must be heeded and a mandate that must be obeyed."

It is appalling that someone who had the foresight to warn of special interests trying to improve their bottom line on the backs of hardworking Floridians would himself become one of those special interests.

A lot has changed since 1977. But many things remain the same. Florida's families deserve to know that their elected officials are listening to them. Gunter once told every resident of this state that he would work to make sure insurance companies did not charge excessive rates. He spoke of "a mandate that must be obeyed."

That mandate is still in place, and I for one will learn from its history and do everything in my power to make sure it is not repeated.

Mike Fasano, R-New Port Richey, is president pro tempore of the Florida Senate.

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