Since New Year's resolutions are popular this time of year, here's is my wish for our state: I would like Florida to resolve to fix the problems with Citizens Property Insurance once and for all.

Citizens, as you probably know, is the state-owned company that provides insurance to Floridians who cannot get insurance in the private marketplace. Citizens has more than 815,000 policies in force. And while it is necessary for the state to ensure that property owners can get insurance, it is problematic for the state to be in the insurance business.

Bluntly, the state has done, and continues to do, a very bad job as an insurance company. Citizens rates are far too low and its underwriting standards are far too lax.

Unfortunately, these failures directly affect us all. Last year's hurricanes cost Citizens more than $2 billion, and as a result, homeowners across the state were forced to pay an additional 7 percent tax on their insurance policies to subsidize Citizens.

This year, the company has requested an additional 11 percent from all of us. And on top of that, Citizens has finally figured out that it must increase policy costs to those who live on the most vulnerable coasts. Insurance rates will rise from 12 percent to as much as 44 percent in some areas, and it is about time.

But the problem is worse than just the cost. Citizens rates will ultimately still be far too low, because Florida continues to allow building too close to the coast. Many years ago, the state determined a coastal setback line that was to prohibit construction seaward of the setback. For a while, this worked.

Over the last 20 years, however, ocean levels have risen and some areas have eroded, changing where the setback line should be drawn. But the state has not taken corrective action. So we've had billions of additional investment in vulnerable coastal areas in essence subsidized by Citizen's rates, which are too low to accurately reflect the risks involved.

We all suffer from this; it is very costly and very disruptive when storms hit. Furthermore, construction seaward of the setback lines promotes additional beach erosion.

When the inevitable erosion occurs, owners of costly coastal property want to shore up their investments and build seawalls and other protective devices. But these tend to magnify the erosion of storms on adjacent properties, ultimately making the situation worse -- not better -- for all of us.

It is high time for our state to resolve to stop this irrational policy of encouraging construction in places that are too risky.

 

Hank Fishkind, Ph.D., is director of Fishkind & Associates Inc., an economic consulting firm in Orlando.