Florida

Dear Florida, This is why you pay too much for insurance

by Michelle Minton on May 3, 2010

in Odds & Ends

It isn’t greedy CEOs, global warming, or even a really bad, really expensive decade of hurricanes in the Gulf of Mexico that is the cause of high insurance rates in the state of Florida. The real reason is uncertainty. That insurance companies are now holding their collective breath, waiting to find out if Governor Crist will put down his scepter and pick up a pen to sign a bill allowing private insurers to raise rates–that is the reason insurance will remain more expensive than it needs to be.

On Friday state lawmakers passed reforms that would allow the struggling property insurance market to raise rates, allowing the companies to charge rates that get a little closer to reflecting actual risks. But even if Charlie does sign the bill (unlikely) it doesn’t change the fact that it would have been a hard, really hard-won victory for the private companies.

The bill, SB 2044, now goes to Gov. Charlie Crist, who can sign or veto the bill. He has said that he doesn’t support anything to allow rate increases but he hasn’t made a decision on the bill, according to his staff.

It’s another bill that Crist — who is running for the U.S. Senate — can “hit out of the park” with a veto, said Bill Newton, executive director of the Florida Consumer Action Network said, referring to the governor’s recent veto of a teachers merit-pay measure. “He probably needs money and insurance companies have a lot of money so you never know what he might do.”

Yes, location has something to do with it (living near the beach is more risky) and yes, the hurricanes of the past contribute as well, but really the higher costs can be linked to regulatory uncertainty. It takes such teeth pulling for insurers to earn the sanction of the governor in order to set rates that, of course, they are going to high-ball the estimate knowing full-well that any increase in rates will be just as hard to get, if not impossible. It is the job of an insurer to foresee the future and plan as best as he can for the worst-case scenario. When the regulators continual change the rules on a whim insurers have no choice but to assume the very worst and the very worst is the most expensive for everyone.

It will take a much bigger overhaul to improve the economy of Florida [and the rest of the country].

How Wisely Is Stimulus Money Being Spent?

by Ryan Young on April 7, 2010 · 2 comments

in Economy, Stimulus to Nowhere

Not at all, to be honest. For starters, the very notion of stimulus violates basic economics. Taking money out of the economy and then putting it back in has no net effect. But it gets worse. Much worse.

When that money is put back into the economy, it goes to the weirdest places — $3.4 million is going to Florida to build a tunnel under U.S. Highway 27, so turtles can cross safely. A fish hatchery in South Dakota is getting $20,000 for new light fixtures. $50,000 is being spent to resurface a tennis court in Bozeman, Montana.

And so on.

These boondoggles aren’t getting nearly enough press. To help fill the vacuum, the good folks at Citizens Against Government Waste have put up a new website, MyWastedTaxDollars.org. Click on over and check it out. The best feature is an interactive map that shows just how unwisely stimulus funds are being spent all over the country.

Stimulus is worse than a zero-sum game. It is actively harmful. It is government saying that it knows how to spend your money better than you do; stimulus is the ultimate act of hubris. Kudos to CAGW and MyWastedTaxDollars.org for providing hundreds of examples of why government hubris should be replaced with government humility.

An even sweeter deal for United States Sugar

by Fran Smith on March 8, 2010

in Agriculture, Environment, Politics as Usual

evergladesmangrove

Big Sugar, in the guise of United States Sugar, is featured in a New York Times investigative article today that exposes the shenanigans of the company and the state of Florida in a U.S. Sugar sale of land abutting the Everglades.  First announced almost two years ago, the deal was for Florida to pay the company $1.75 billion and the state to take over the company’s  assets and land for expansion and protection of the vast watershed.

When the sale was announced in June 2008, CEI asked in a blog posting, “Another sweet deal for Big Sugar?” And indeed it does appear to be even sweeter, according to the NYT article. It turns out that the state doesn’t have enough funds for the original deal and has downsized the offer.  Instead, the company will stay in business and sell some land, not necessarily contiguous, to the state.  But the land was valued at the height of the real estate boom and has significantly dropped in value, which would mean a boon for the sugar company, but a bane for Florida taxpayers.  As the article notes:

“In its current form, the deal’s only clear, immediate beneficiaries would be United States Sugar, a privately held company based in Clewiston, Fla., and its law firm, Gunster, which is expected to collect tens of millions of dollars in fees for its work on the sale, according to current and former United States Sugar executives.

The sale, scheduled to close March 31, amounts to a lifeline for the company, which entered negotiations at a time of profound weakness; it was facing a costly shareholder lawsuit, sinking profit margins and increased foreign competition. The deal would enable it to wipe nearly all the debt from its books. “

The article also raises questions about the appraisers of the land, connections between some of the politicians and the firm brokering the deal, political contributions, and the shutting out of a competitor from the deal.

Now Crist Goes after Utilities

by Ivan Osorio on October 6, 2009

in Deregulate to Stimulate, Economy, Energy, Regulation

Not content with exposing Florida to financial catastrophe by taking on responsibility for insuring coastal properties, Florida Governor Charlie Crist (R) continues his assault on his state’s fiscal health, this time by imposing nonsensical populist measures on utilities. As Seeking Alpha’s Roger Conrad observes:

Florida Governor Charlie Crist is running for US Senate in 2010–and darned if he’s going to let power utilities’ need for capital during a recession stand in his way.On Thursday, Crist effectively fired two long-standing members of the Sunshine State’s Public Service Commission, replacing them with wholly inexperienced former editorial page editor David Klement and Benjamin Stevens, the chief financial officer for the Pensacola Sheriffs’ Office.

It doesn’t take PhD in political science to get the message here: Florida utility regulators will, in Crist’s words, “put consumers first”–i.e., reject the pending rate hike requests from FPL Group (NYSE: FPL) for $1.3 billion and Progress Energy (NYSE: PGN) for $500 million or else.

[...]

Crist’s move will almost certainly make rate cases more contentious in Florida, and by extension make it more difficult for companies to recover regulated utility investment.

[...]

Ultimately, Florida consumers will suffer most if Crist’s moves really signal a shift to so-called pro-consumer regulation in what’s historically been a model state for utility/regulator relations. Long-term planning for power needs will become problematic, and utilities will pull back capital spending rather than see their balance sheets weakened.

What is surprising is that this upheaval isn’t taking place in an historically contentious state like Missouri or New York. Rather, this is happening in Florida, heretofore a state with very constructive utility/regulator relations.

Crist’s moves are indeed galling in light of Florida’s past history of relatively sound governance at the state level. Now the state’s residents will need to worry about blackouts — in addition to the state being able to shoulder insurance payments — the next time a large storm hits. (Thanks to Margaret Griffis for the Seeking Alpha link.)

CEI’s RRM Suggests Additional Questions for Florida Insurance Commissioner

by Kevin Hilferty on August 26, 2009

in Insurance, Odds & Ends, Precaution & Risk, Regulation

Yesterday in a press release from CEI’s Center for Risk, Regulation, and Markets, the Center raised many questions that should be brought to Florida Insurance Commissioner Kevin McCarty’s attention. The questions mainly surrounded doubt over whether or not Florida has enough capital to pay out insurance claims in the event of a catastrophic hurricane.

As Christian Cámara, director of CEI’s Florida Insurance Project, said in the release, “There are a lot of very serious unanswered questions.”

There was one question that was unfortunately left out of the release. Since this is indeed hurricane season and of course a timely issue, the RRM team would like to pose the question here:

Gov. Crist recently claimed that divine intervention has kept hurricanes away from Florida. If this is the case, is the State of Florida taking proper action to appease the various storm gods? What types of sacrifices are being offered to these deities? Are OIR high priests following proper sacrificial rites? What types of objects or animals are being used and what is the cost of these sacrifices to Florida taxpayers? Would you be amenable to privatizing these sacrificial rites?

These are important questions that need to be answered for the sake of the safety of Floridians. These issues may actually be important to those who aren’t Florida homeowners, though, as the horses of Florida may in fact be in danger due to possible sacrifices to the storm gods. Could there be a connection between the recent horse poaching in Florida and these offerings to the storm deities? Could privatization of the insurance market and legalization of the sale of horse meat solve both of these issues?

The Center for Risk, Regulation, and Markets and all those concerned about the citizens and horses of Florida are waiting for your answer, Mr. McCarty.

Health Insurance Reform: look at what does and doesn’t work already

by Michelle Minton on July 27, 2009

in Deregulate to Stimulate, Healthcare, Insurance

“One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary.” ~Ayn Rand

Most agree that the US health insurance market is in need of reform. However, there is a wide spectrum of beliefs about what the problems in the market are and the best way to confront them.

Those who believe that the reason premiums are high and insurance is less available than it ought to be due to rampant market freedom, believe that the solution is to create a government insurer that can pick up the slack of the private market. These folks would be wise to examine other insurance markets that have tried similar approaches to insurance “reform.”

Florida’s property insurance market, though they are not exactly comparable, provides a good example of what increased controls and the presence of a government funded entity can do to the insurance market.

Before the 2004/2005 hurricane season Floridians could find relatively affordable property insurance without much effort. Of course, there were a number of residents who could not find insurance or who could not afford the premiums (the cost of living in a region rife with environmental instability). After several large hurricanes, and paying out billions of dollars in claims to Floridian homeowners, insurers tried to raise rates to recover their losses. When they were denied the ability to raise rates as high as they wanted by the FL insurance department insurers began dropping or refused to renew hundreds of thousands of policy holders—leaving them without insurance at all. On top of that, in 2007 FL Governor Charlie Crist froze the rates that Citizens Insurance Co. could charge and set up a state Catastrophe fund (a taxpayer-funded nest-egg) that would bailout the state run insurance company if a bad season exhausted it’s funds—something that became increasingly likely as the rates it charged fell far short of the amount it needed to charge for the risk it was taking on. The fund was also no more than political smoke and mirrors since, like the state run insurance company, it drew money from taxes on the same limited pool—namely the residents of Florida.

After only 5 years in existence in its current form, Citizens Property Insurance, which was originally setup to serve only those residents who could not find or afford insurance in the private market, (much as Obamacare proposes to deal with the millions of uninsured Americans) it has become the largest single insurer in the state. By charging less than the private market and accepting people who could find private insurance, albeit at higher prices, private companies found it increasingly difficult to compete and some chose to leave the state all together. Fewer private companies forced more residents into the under-funded state-run insurance program and increasing the enormous potential liability that now threatens to bankrupt Florida.

Much like Floridian politicians, current proponents of state-run health insurance claim that it will not interfere with the private market; that it will only accept those millions of citizens who cannot find or afford insurance anywhere else. Not only is this assertion untrustworthy (every government program from the Department of Agriculture to the National Flood Insurance Program started small) but it also obscures the real causes of trouble in the  health insurance market. It isn’t because of too much market freedom, but too little. If we really want to solve the “crisis,” to whatever extent there is a crisis, we need to free the market and increase private competition (look to Massachusetts auto insurance market for an example of liberalization increasing availability and decreasing premiums), not undercut it by adding a taxpayer backed government insurer.

“It would be hard to devise a surer formula for economic catastrophe.”

by Ivan Osorio on July 12, 2009

in Insurance, Regulation

It may not be in a debacle like California’s, but I still find it galling to see my home state of Florida go from being one of the best governed states in the country to leading the nation in a particularly destructive sort of fiscal insanity. But if the first step toward a cure is an accurate diagnosis, The Economist is helping on that count. As the current issue notes:

Two years ago, after homeowners complained about rising insurance premiums, the governor, Charlie Crist, leaned on firms to cut prices and offered Floridians state-subsidised policies. Private insurers curtailed their operations or pulled out. When the next hurricane hits, the repair bill will land squarely on Floridian taxpayers, rather than being spread among global insurers. It would be hard to devise a surer formula for economic catastrophe.

By the time such a storm hits, Crist may be in the Senate. Expect him then to try to steer federal dollars to clean up the mess he helped create.

For more on state-subsidized insurane, see here.

Put Rocket Fuel, Not Corn in Your Tank

by Ivan Osorio on July 2, 2009 · 1 comment

in Energy, Ethanol

As the ethanol industry sees its prospects flounder, it has sought the help of an actual general to stem the public backlash against its uneconomic, environmentally harmful product. Reports Fortune:

Reporting for duty in ethanol’s counterattack: Wesley Clark, the retired four-star general and former NATO commander, who signed on in February as co-chairman of an upstart ethanol trade group called Growth Energy. Clark, 64, has fully embraced the private sector since ending his run for the Democratic presidential nomination in 2004. In addition to co-chairing Growth Energy, Clark is on the board of Dutch wind-turbine maker Juhl Wind and serves as chairman of the New York investment bank Rodman & Renshaw (RODM). At Growth Energy, Clark has lobbied against efforts in California to hold ethanol accountable for deforestation in Brazil, he’s pushed back against claims that diverting corn to ethanol drives up food prices, and he’s spoken out in favor of a Growth Energy proposal to increase the maximum allowable ethanol blend in conventional gasoline to 15% from 10%.

Without support for corn ethanol now, Clark says, the industry won’t be able to fund advances in second-generation cellulosic ethanol made from nonfood inputs such as switchgrass. [Emphasis added]

Such brazenness in rent seeking should not be surprising in an industry that’s running out of arguments for why it should receive public subsidies.

But try as they will, ethanol’s champions don’t seem to be doing a very good job of convincing the public, as some consumers’ reaction to the availability of ethanol-free gas attests. Reports Florida Today:

Gasoline without ethanol has become a hot commodity for the only two vendors who sell it in Brevard County.

“We just recently started bringing it in because there’s been such a hue and cry for it from the marinas,” Ken Marshall, vice president of Glover Oil in Melbourne, said Thursday.

Favored by boaters and motorcyclists, the fuel — known as recreational gasoline — was put on sale to the public last month by Glover Oil.

“It’s a more rare product,” Marshall said. “A year ago, everything started going to ethanol.”

There’s good reason to avoid ethanol.

Ethanol absorbs water and can degrade rubber seals and gaskets. Boat engines, weed trimmers, lawn blowers, generators, motorcycles and older auto engines are most affected. Ethanol contains one-third less energy than gasoline. And many makers of lawn care machinery, marine engines, motorcycles and high-performance autos recommend avoiding gasoline with ethanol.

However, by 2011 all gasoline sold in Florida must contain ethanol, with the exception of fuel sold for boats, collector cars and small engines. Federal law requires that 36 billion gallons of ethanol a year be blended with U.S. gasoline by 2022.

“You don’t get as much gas mileage with the ethanol in it and it clogs up your catalytic converter in your car and it ruins your boats,” James Blizzard, 75, of Cape Canaveral said as he filled up his SUV at Neil’s Riverside BP station in Melbourne, the other public source of non-ethanol gasoline in Brevard. “I get two or three miles per gallon more out of the ethanol-free gasoline.”

Considering that Brevard County is near Cape Canaveral (the region known as the Space Coast), consumers of the ethanol-free should start calling it “rocket fuel.” (Thanks to Margaret Griffis for the Florida Today link.)

For more on ethanol, see here.

No Florida Insurance Bailout

by Richard Morrison on February 10, 2009

in Bailout Watch, Economy, Insurance, Regulation

It seems that the state of Florida has overpromised insurance coverage to its citizens in the case of a catastrophic storm, and now is coming to Congress for a bailout, lest a major storm bankrupt the state. Naturally, we had something to say about this in a press release today. The director of CEI’s Florida office, Christian Cámara:

Reliance on a Federal bailout as official state policy is reckless at best. Instead of lobbying Washington politicians for money, Commissioner [Kevin] McCarty and Governor Charlie Crist should return to Tallahassee and work together with the legislature to restore a healthy, competitive insurance environment to ensure that Florida is able to weather the aftermath of a storm. Taxpayers should not be forced to bailout neither Florida nor the politicians that have placed the state one storm away from economic meltdown.

Wise words if I do say so myself. Chief insurance guru and Senior Fellow Eli Lehrer also chimed in:

This is a really, really bad idea. We’ve already done far too many bailouts of private companies. State governments – particularly ones that make bad decisions – don’t need bailouts as well. Congress should say “No” to Kevin McCarty.

Here’s to hoping there’s at least one bailout that fails to get funding this session.

Billy Powell, RIP

by Ivan Osorio on January 28, 2009

in Culture

So they’re down to one — original member, that is. Lynyrd Skynyrd keyboardist Billy Powell, one of the last two surviving founders of the seven-piece band that arguably defined Southern rock, died in his home in Florida today.

Skynyrd was so big that a plane crash couldn’t kill them all — and the surviving members carried on for years, even as others passed away after the crash. They spawned dozens of mediocre imitators, but Skynyrd themselves remain as fun to listen to as ever — and not even living in northern Florida would I ever tire of them. As for Billy, if anything’s for certain, he’ll be remembered for one of the most recognizable piano parts in all of rock:

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