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Crist’s insurance solution won’t solve anything

With finals right around the corner, it’s worth noting that college students aren’t the only ones with serious tests ahead.

The Florida legislature and Gov.-elect Charlie Crist may not find themselves in a traditional classroom, but will be graded nonetheless on the results of January’s special session to address the state’s insurance crisis. The outcome will have an impact not only on homeowners, but also on college graduates and future efforts by USF to attract companies.

The insurance crisis in Florida is a problem with no easy solution. This year’s hurricane season ended without one major storm striking the United States, but the effects of the disastrous 2004 and 2005 seasons and fears of future risks remain. Private insurers have responded to Mother Nature’s volatility by raising rates – and in many cases, leaving the state – causing Floridians to rely on the state-run Citizens Property Insurance Corporation.

Despite the disdain many residents express for private insurers who have fled the state, few seem to understand that their leaving is no more avaricious than the consequence of an open economy. A crucial tenet of the free market is the ease of entry and exit of both consumers and producers.

Private insurance companies are providing a service that, in the view of their employees and shareholders, is designed to make a profit. Bottom line is that these companies aren’t charities.While this dose of harsh reality may sting, it is crucial in understanding the futility of finger-pointing in addressing the difficulty of the crisis.

Despite the complexity of the details, Howard Troxler, a columnist for the St. Petersburg Times, framed the choices involved in the special session quite clearly in his Sunday column. There are two general routes to take in this dilemma: Either attempt, through various means, to attract private insurers back to the state or spread the risk more equitably to provide public sector insurance for everybody.

Either Crist just doesn’t get this, or he has already made up his mind. One idea he has supported would be to require companies that sell other types of insurance in the state to compete in the property market as well.

This sounds like a great populist message to get votes, but it will surely just cause more private insurers to pack up shop and head for more lucrative states.

Gov. Bush and Lt. Gov. Jennings both seem to know this, in fact. Increased regulation and restrictions on private firms can actually lead to higher prices as the pool of choices dwindles – not exactly what Floridians are looking for in terms of relief right now.

But this complex insurance problem, which has straddled many homeowners and businesses with double-digit rate hikes and policy cancellations, also has implications for college graduates. Options abound for graduates, and although many choose to remain in the Tampa area – or at least within the state – at least 49 other competitors would like to attract such talent. The ability to find affordable housing and the insurance to cover it is critical in creating the foundation for the future economic growth of the region.

Further, in the USF administration’s aims to attract a public-private partnership that will bring research dollars and spillover benefits to the community, amenities that go beyond sandy beaches are critical. Volatile insurance rates and the potential for changes that will drive more private insurers away is not the way to attract businesses to the state, or even encourage the ones here to stay.

The governor-elect and the new Legislature have the ability through this upcoming special session to make the difficult choices to help shore up the crisis in state property insurance. Radical ideas, compromise and even painful choices may be necessary. There also needs to be an understanding that Florida’s residents, businesses and government leaders all have a responsibility in providing an attractive risk pool for private insurers.

Otherwise, not only will homeowners at the margin be forced to leave the state, but the desire for college graduates to stay in the area may suffer, leading fewer businesses to invest in Florida.

Aaron Hill is a senior majoring in economics.