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BROWN ON INSURANCE: “TOO LITTLE, TOO LATE”

May 8th, 2009 | 0

By ASHLEY AMASON

Former State Representative Don Brown opened at the Walton County Chamber of Commerce May 1, telling the room, “The title representative no longer applies. I’ve received a promotion—I’m now a has-been.”
Following this quip, Brown spoke on the serious issue of government-run insurance entities Florida Citizens Property Insurance Group (Citizens) and the Florida Hurricane Catastrophe Fund (CAT fund), neither of which have enough reserve funds to cover their risk.
Having recently eturned from a summit in Orlando in which experts on insurance and Florida’s climatic future presented facts on the precarious insurance bubble, Brown shared the summit’s highlights.
Brown said insurance should serve three functions: serving Floridians, working well to cover risk, and bringing new business into the state. Rhetorically asking if the system worked, Brown said, “No, no, no. Insurance is a promise to make a future payment,” Brown announced. However, Citizens is underfunded by 40 percent, and the CAT fund is over $18 billion short of meeting its needs should policyholders come calling.
Brown highlighted the negative effects of keeping rates artificially low, comparing what the state is doing to fraud. Brown explained that if he, an insurance salesman for 30 years, were peddling policies that he knew could not provide coverage because of artificially low rates with failure-rated companies, he would lose his license. However, he said, that is exactly what the state is doing.
Brown said one of the biggest downfalls of artificially low rates is they often lead to improper development. Business or homes are built on high-risk coastal property because the developer can use Citizens to insure the property and rely on the CAT fund in the event of disaster. The state then assesses all Florida policyholders statewide (not just Citizens’ policyholders) to collect the difference caused by inadequate premiums.
Brown said this method is “crippling the market.” As a result, insurance companies who see the storm brewing are leaving the state. The most notable of the companies leaving Florida is State Farm Insurance, who will take with it over $5 billion in capital.
Legislative efforts are finally being made in the right direction, Brown noted, “but they are far too little, too late.”

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