Florida Confronts Costs of Insurance

Several insurers have pulled out of storm-prone regions; state legislators in Louisiana and Mississippi have sought ways to hold premiums down without driving away any more companies.

But the crisis may have been most acute in Florida, where a hurricane strike is deemed most likely.

When compared with rates in other states, home insurance rates in Florida, particularly in its densely populated coastal counties, are staggering.

The typical cost to cover a $150,000 home in Miami-Dade County exceeds $3,000 annually, according to the state. Coverage near the beach is much higher.

Rates began jumping after Hurricane Andrew in 1992. And after the busy 2004 and 2005 hurricane seasons, rates rose again. The state's failing real estate market -- and the exodus of many Floridians -- has been attributed in part to those rising costs. By the 2006 gubernatorial campaign, it became one of the state's leading issues in polls.

It still is.

"The single biggest crisis in the state today is the high cost of property insurance," state Sen. Steven Geller said recently.

While former governor Jeb Bush (R) had espoused free-market solutions to the insurance complaints, Crist moved to get government involved.

At the time Crist took office, insurers were blaming the price increases on their rising costs of reinsurance -- basically, the insurance they bought to cover themselves in the event of a major strike.

To help the industry, legislators enlarged the "catastrophe fund" -- essentially letting the state assume a much larger share of the hurricane risk.

The measure put Florida taxpayers on the hook. But by saving insurers money, insurers could drop prices -- or so the thinking went.

"We assumed a large risk because the insurance industry told us rates would go down dramatically," Geller said. "There should have been a major rate cut."