The property insurance issues in the state of Florida are one of the largest concerns I hear about when speaking with people.

From my research, it appears that we have seen too little in terms of help from our legislators because our legislators may not fully

understand the problems and how to solve them. In capitalist societies and capitalist economic systems, legislators are faced with

providing motivation for private businesses to do business in their area, whether it be a city, county, state or country. Often times, these

motivations are provided through incentives. These incentives range from tax breaks for the business to grants to insuring or subsidizing

the business.

It is a very simple case of public vs. private or actually cooperation and teamwork between the public and private entities. The

issue here is insurance companies, except for Citizens, are private companies and do not have to do business in the state of Florida, if

they so choose. Different methods can be leveraged to try to get private insurance companies to insure Floridians. Some methods that

have been tried and/or proposed are:

• Requiring that all insurance companies that sell any kind of insurance in Florida must provide property insurance to Floridians.
  
  
• Creating a Florida Property Insurance public entity and having all Florida property insured through it.
  
  
• Providing of a state backed lending fund where an insurance company can borrow money from to pay claims. The insurance

company must pay the money back. This is currently what is being done.

The primary issue here is risk. Private insurance companies have found the risk to insure property in Florida to be too great. Private

insurance companies have stockholders that they must account to. Taking on high risk is generally seen as a bad business practice from

potential and existing investor perspectives. Therefore, insurance companies are not as inclined to take on high risk for fear of losing

investors and/or opportunity for receiving additional investors. Put simply, most people would not invest in a company that takes on high

risk and therefore, insurance companies should not be expected to put themselves in such a situation that they are seen as a poor

investment.

The State of Florida has tried to help by creating a fund to which insurance companies can borrow monies from to pay claims. The key

word here is "borrow". The insurance companies are expected to pay these loans back. Therefore, the insurance risk is not reduced at all.

The only thing the loans provide is for insurance companies to remain in business in case of a disaster and able to pay out on claims.

Some will claim that this reduces risk, but the only risk reduces is the solvency of the insurance companies in a time when a disaster

sstrikes ... the insurance risk is still the same and is not reduced.

It is clearly seen that the reduction of insurance risk is the primary objective that will bring back insurance companies' willingness to insure

property in Florida at reasonable rates to property owners. By reducing the risk, private insurance companies will provide property

insurance at reasonable rates. With the risk reduced, more and more insurance companies will provide property insurance to Floridians at

reasonable rates. Having many insurance companies providing property insurance in the state, competition will increase among insurance

companies. With competition, rates should go down, which will provide property insurance cost relief for Floridians. So, how do we reduce

this risk? The question here is actually: "How does government reduce the insurability risk of property in the state of Florida to the point

that private insurance companies will see providing of insurance coverage to property in Florida as similar risk to insuring property outside

tthe state?"

There is actually a model already existing where government reduces risk so that private companies can provide their product to

consumers where without the backing received by this government agency these companies would see providing their product to

consumers as too high of a risk. This model is with mortgages and FHA. Through FHA, private companies provide mortgages to

consumers who would otherwise be turned down as a result of high risk. The mortgages are FHA insured loans, meaning that in case of

ddefault of the consumer, FHA will cover the loss incurred by the financial institution.

To accomplish REAL relief and reduction of insurability risk of property in the state of Florida, a state agency called Florida Property

Insurance Authority (FPIA) should be created. This agency would be responsible for backing insurance companies' policies, which will

provide for insurance companies to write policies with more reasonable rates. The current fund would be transferred under FPIA and be

called the FPIA Fund. It would be from this fund that insurance companies would receive the assistance needed to process claims. There

would be a formula employed as to when an insurance company would start receiving assistance from the fund. As such by having this

government backing, private insurance companies would be assured that their risk would be reduced. Therefore, private insurance

ccompanies would be more willing to provide property insurance to Floridians at reasonable rates.

How do we pay for the FPIA fund? The FPIA fund would be funded by surcharges charged to higher risk property in the state. This

surcharge would not be based on home value but would be based on ACTUAL risk calculated from many factors including proximity to the

coast, proximity to rivers, elevation, hurricane preparedness of the dwelling, among other factors. Therefore, a house that is not near a

coast or river that is not in a flood plane and is up to the latest hurricane structural standards would most likely not have a surcharge. The

surcharge would be based on risk calculations using strict and fair guidelines. Basically, those that want to live in an area of higher risk

aand those who do not update their dwellings to hurricane standards would pay surcharges.

How a surcharge is calculated would be a result of many investigations and analysis. The idea here is that through upfront research and

analysis, a simple surcharge calculation mechanism can be created that would be fair to all Floridians. FPIA certified inspectors would

inspect a property when a property insurance application is processed. The insured would receive a copy of the inspection report and

have 90 days to complete items identified in the report to reduce their surcharge. The insured would be required to pay their initial

surcharge, if any, prorated for the current year after 90 days and then each year after as part of their property taxes. Upon completing

improvements identified in the inspection report, an inspector will verify and the surcharge will be reduced upon verification. Property

owners will have an opportunity to reduce their surcharge after the initial 90 days by completing the suggested improvements and paying

for an inspector to come and verify. However, verification after the first 90 days of the improvements will reduce the next scheduled

surcharge. Therefore, no refunds of surcharges will be provided. By using a surcharge system in this manner, all Floridians are treated

fairly. Additionally, this mechanism will provide incentive to Floridians to upgrade their homes to current building standards.

By leveraging an already existing and successful model, the state government can provide REAL relief to property insurance woes. By

reducing the risk to insurance companies, competition will help to reduce property insurance costs to Floridians. In promoting competition,

the state insurance company, Citizens, would be expected to provide competitive quotes ... therefore, all restrictions currently to Citizens

wwould be lifted.

This plan has an enormous opportunity for success and looks at and addresses the root problems, which so far has not been done. There

would need to be some further detailing of this plan including research and definitions of processes. The primary thing here is that this

plan would provide REAL relief to the consumer. This REAL relief for property insurance would help to relieve the real estate issues and

therefore, help local economies and Floridians.