Citizens Insurance


One of the truly depressing elements of the recent Health Care Scheme and its proponents is the easy way they switch into “fear the profit” mode. The private entities that make up “Big Insurance” are seen as greedy and manipulative, benefiting from a one-sided equation. They benefit, people suffer. This profit is simply overcharging and if unnecessary charges can be eliminated, things would be more affordable. This had been learned, painfully, to definitely not be the case. Millions suffered to learn it.

One of the BIG LIES about what’s going on in Health Care today is that high prices can be attributed to “greed” and people pursuing inflated profits. The truth of that is, the great fortunes in this country have been made by figuring out how to sell something to someone “cheaper”. Henry Ford, Rockefeller, A&P, ALCOA, Sears and Wal Mart, just to name a few. Business knows that inflated profits are not the path to success. That is, however, the path of socialized businesses. They have no incentive to hold down their prices because people either have no other choice or they are coerced into participating. Instead of making that one penny of profit on each transaction, the transaction now costs twice as much. But hey! We’re not paying for profit!

What Big Insurance is actually engaged in, just like every other free enterprise, is “profit and loss”. The hope for profits and the threat of losses is what forces business to produce at the lowest cost and sell what customers are most willing to pay for.  In the absence of these pressures, managers have far less incentive to be efficient, much less keep up with changing conditions. These outcomes represent the only two types of organizations that exist: those that are entirely voluntary and those that involve coercion.

Take the case of Citizens Property Insurance. For the last 17 out of 20 years before Katrina hit, property insurers along the Gulf Coast have lost money insuring property. Rates in Florida skyrocketed as insurers rushed to reap profits on underwriting.  But those profits would only last a short while. Competition was going to drive these profits down to nothing. Insurance companies stay in business in the long-term by investing premium dollars in good years. Real profits come from these investments, not insurance premiums. 
Unfortunately, the argument that “government needs to compete” was pushed in Florida, and successfully implemented. What you have in Florida today is a landscape largely emptied of the major Insurance Carriers. USAA, Hartford and now State Farm. What you have picking up the pieces is a puzzle of smaller carriers willing to accept state regulations. Fine, but how many of those companies will actually be solvent enough to pay up if another Ike or Katrina hits? See, without the profit motive, you don’t get better business and you don’t get better results.

Citizens, because it’s a government entity, really can’t invest its premium dollars the way the private sector can. Currently it can’t really make real investments at all. But letting the company do this would also prove a tremendous problem: government would actually be picking winners in the private market. Government does a pretty bad job at this. Without a very risky portfolio of policies and no ability to make investments, Citizens is doomed when a major storm hits Florida. Taxpayers will end up picking up the pieces and paying all the bills. Needless to say, the common people won’t benefit.

Recently, Floridians were polled about the success of Citizens Insurance, and whether they wanted to deregulate the rest of the insurance industry

Under this legislation, Florida homeowners would have three choices for their property insurance:

Homeowners could use the state sponsored Citizens Property Insurance Corporation, which may have lower rates, but which is under capitalized according to the state’s chief financial officer.

Homeowners could use smaller independent insurance companies that have entered the market and whose rates are fully regulated by the state government.

Homeowners could choose one of the larger, financially strong insurance companies and may pay a higher rate but with the assurance the company has the financial capital to pay its claims.

Now, after having heard some of the details of this legislation and how it would affect homeowners, do you favor it or oppose it?

60% support deregulation, allowing insurers to set rates mandated in order to “compete” with Citizens Insurance. Why are we not watching the lessons in our own 50 states? Government competition does not work. Where its put into place, the taxpayer is left either with no choices, less result, or second thoughts, and usually all three. You can read glowing, optimistic predictions of what will happen if we proceed with government health care. “The American people can do anything.” Well, yes we can. Which is why we don’t need the government to socialize medicine.

B.S. Report–If Obama succeeds in implementing his version of health care you can say good-bye to much of the innovation that our medical care system is largely responsible for. It is our drug companies that develop 70% of the world’s new medicines.  It takes over a billion dollars to bring a new medicine to the market.  With Obama punishing the success of drug companies, instead of encouraging them; he will inevitably persuade them not to pursue new remedies.
Our medical care in this country is the best in the world.  Our medical bureaucracy is what needs to be fixed.  Those are very different realities.  Trying the impossible like attempting to make sure everyone has the exact same medical care will only succeed in rationing and eroding the quality of medical care.
Of course, don’t expect that those in the Congress would be required to use the same medical care and medical plans that you and I would have to use.  As Orwell says, some animals are a little more equal than other animals.

About Terry Crowley