David Jolly has a plan to replace private property insurance in Florida with a government plan. It is a bold proposal. Is it a good one?
There is, or should be, a strong presumption against socializing anything. The relevant criteria are as follows:
1. HOW PERVASIVE IS THE PROBLEM? CAN FLORIDA PROPERTY OWNERS AVOID IT? While the degree of risk is obviously much higher along the coasts, all Florida property owners have at least some exposure to serious damage from wind in tropical events.
2. HOW SERIOUS IS THE PROBLEM FOR INDIVIDUAL HOMEOWNERS? Premiums have skyrocketed. Some Florida homeowners can no longer afford to live in the state. By and large, however, the population has adjusted.
3. TO WHAT DEGREE IS THE MARKET ALREADY REGULATED? IS THIS REALLY A BIG CHANGE IN POLICY? Florida has a state-operated property insurance program already, and insurance is highly regulated. This apparently revolutionary change would be akin to moving to “Medicare for All” from the public option.
4. IS THIS A MARKET FAILURE THAT ONLY THE GOVERNMENT CAN REMEDY? Insurance companies are simply responding to the additional risks created by climate change. That is a problem created by the government, not the companies. Government action to improve resilience is probably a better use of public funds than the creation of a socialized insurance program.
The bottom line here is that the argument for a socialized system is reasonable, but not compelling. Even if Jolly wins, however, we’ll never find out; the Florida Legislature is never going to embrace his proposal.