FORT LAUDERDALE, FL. March 29, 2016: A year after Gov. Rick Scott tried to force an insurance regulator on the public, he and the Florida Cabinet will conduct interviews today for the state’s most powerful unelected position. They should choose the person who will make consumers, not industry, the priority.
In early 2015, aides to the governor and members of the Cabinet — Attorney General Pam Bondi, Chief Financial Office Jeff Atwater and Agriculture Commissioner Adam Putnam — secretly executed Scott’s plan to fire Florida Department of Law Enforcement Director Gerald Bailey. Even after news of the plot broke, Scott made clear he also wanted to replace three other agency heads who report to the Cabinet, one of them being the insurance commissioner. Scott’s office floated the name of a possible replacement.
Whether the timing was causal or coincidental, Insurance Commissioner Kevin McCarty announced two months ago that he would leave the Office of Insurance Regulation in May after 13 years. Fifty-five candidates applied for the job, which was an elected position until voters in 1998 changed it to an appointed post. McCarty is the only one to have held it.
Though the Legislature sets policy on insurance, the commissioner must ensure companies play fair. Property insurers, for example, can raise rates as much as 15 percent each year without a full rate hearing. The Office of Insurance Regulation reviews those requests. The office also checks to see that private companies do not use deceptive tactics when soliciting customers of state-run Citizens Property Insurance Corp.
The stakes get high when a company tries to bully regulators. In 2008, State Farm threatened to pull out of the property insurance market if regulators rejected its request to raise premiums more than 40 percent. McCarty worked out a settlement. Around that time, he also stood up to Allstate.
But those actions happened under Charlie Crist, who was less cordial to the insurance industry than Jeb Bush was or Scott has been. McCarty went along when Scott and the Legislature opposed the Affordable Care Act and prevented regulators from blocking rate increases for health insurers.
Pleasing the governor matters. Hiring or firing an insurance commissioner requires a majority vote of the Cabinet — with the governor and chief financial officer being in that majority.
The two candidates to be interviewed are Jeffrey Bragg and Bill Hager, a state House member who represents southeast Palm Beach County. Based on what we know, Bragg is the better candidate, but Scott and the Cabinet should be prepared to reject both if their answers aren’t satisfactory.
Though Hager was Iowa’s appointed insurance commissioner, that was years ago. He later ran the Boca Raton-based trade group for workers compensation insurers. Hager then started Insurance Metrics, whose website calls him an “insurance expert and reinsurance arbitrator” who can offer testimony in court cases.
In September 2013, Hager attended an event in West Palm Beach featuring Scott. When an attendee complained about property insurance rates rising after eight years of mild hurricane seasons — it’s now 10 years — Hager responded before Scott could: “Move to Wyoming.” What helpful advice.
Bragg is not from Florida, and he has been retired for more than a year. Unlike Hager, though, he has not been seeking business from Florida insurance companies. His last job also could be relevant to Florida.
In 2003, Congress created the Terrorism Risk Insurance Program. The 9/11 attacks had shown that terrorism is what the industry calls an “uninsurable peril.” For insurers to charge the true cost of underwriting terrorism risk would make coverage unaffordable. The program is a public-private partnership to manage risk. Last year, President Obama extended it through 2020.
A similar program to cover natural disasters — hurricanes, tsunamis, earthquakes — passed the U.S. House in 2009. It never got a Senate vote and hasn’t been brought up again, but without such a plan, hurricanes could become another uninsurable peril. Bragg might be a helpful advocate for a national catastrophic plan.
Scott and the Cabinet, however, need to question the two candidates on a range of issues. Should Florida repeal the state’s no-fault auto insurance system? Do the candidates agree with Citizens Property that fraudulent water damage claims justify a rate increase? Could Florida truly develop a private flood insurance program that would offer rates lower than the national program?
Insurance Journal reported that the Florida Association of Insurance Reform opposed Hager. The group’s director noted Hager’s experience in Florida — he has served on the House Banking and Insurance Subcommittee — but said, “You can be familiar with an issue and just be wrong and that’s what Hager is.”
Florida needs insurance regulation that balances the needs of companies and consumers. If they don’t sense that sentiment in either candidate, Scott and the Cabinet should start over.
Sun Sentinel Editorial Board