Client News: Tampa Tribune Editorial

We worked with our client, Merlin Law Group , to draft and place this editorial with the Tampa Tribune.



It'll Fall Apart In A 'Katrina Minute'

By WILLIAM "CHIP" MERLIN

Published: Jan 24, 2007

So, now we have it. Property insurance legislation demonstrating how well our lawmakers can perform under pressure. Unfortunately, it resembles a Band-Aid when the job really called for stitches.

While legislators should be commended for addressing the "crisis" speedily, a closer look will reveal a crapshoot that places far too much risk on Florida's economy and residents.

It doesn't take a rocket scientist to know that reducing sinkhole or windstorm coverage will result in reduced premiums. But forget reductions. The problem with putting Floridians in the insurance business is that it pits classes of insured against each other and pure economics comes into play.

As this proposal allows those with low risk to opt out of coverage, it means higher rates, not lower, for those who need to be fully insured.

If inland dwellers opt for higher deductibles because of less wind risk in their area, the remaining coastal pool has higher losses per risk and, therefore, the coverage for wind is far more expensive. And in areas of high wind and sinkhole risk, such as here in Tampa Bay, full coverage may become unobtainable for most under this structure.

The whole concept of insurance is to spread the risk of loss among all of those insured. This legislation is the equivalent of health insurance companies allowing 20- and 30-year-olds to opt out of prescription coverage simply because they are less likely to need medication. Thus, rates increase for seniors who are far more dependent on the coverage.

History is repeating itself through such shortsighted public policy.

Legislators will remove ill-conceived laws passed last year, in part, to address this "crisis" and replace them with equally bad law in the form of capping increases and reducing coverage.

The bottom line is this new legislation allows insurance companies to get out of the business of risk while putting the state's residents into it. So while immediate pocketbook concerns have been addressed, long-term financial implications were ignored. Much of it is a gamble presented with too much special interest involvement and not enough thought to how the next "big one" would play out if and when it happens.

Higher property rates on some along with significant losses to those without coverage could turn Florida's economy upside down, create a mass exodus and everything we've worked for could be gone in a Katrina minute.

William "Chip" Merlin is managing partner of the Merlin Law Group, which specializes in insurance law and is based in Tampa.