Willie Sutton's Rule

Willie Sutton robbed banks, he said, "because that's where the money is."

Property insurance companies will continue to write policies across Florida, despite last year's hurricane losses, because "that's where the people and money are."

That's the point of Matt Reed's incisive piece in today's Southwest Florida News-Press, titled Net Gain After The Pain: Insurers Make Money Despite Four Storm Payouts.

You might have assumed — if you've dickered with an adjuster or fretted over your windstorm deductible — that property insurers must double their rates to survive.

Or that insurers will drop policies and leave the state. Or that a state fund must cover a bigger share of disaster claims for companies to remain solvent.

But none of that is true.

In fact, Florida's major property insurers managed to earn profits during the period that included hurricanes Charley, Frances, Ivan and Jeanne, securities filings and earnings reports show. Even as the industry announced record losses and called for higher rates, company executives told analysts they were strong enough to pay claims and still make money. And that's before any changes.

However, Reed points out, insurance company lobbyists often downplay or deny the reality of the highly profitable Florida casualty insurance business when working to scare legislators into approving rate increases.

Case in point? Allstate Insurance.

After the storms, the numbers still looked solid for Allstate Corp. On Oct. 21, chief executive Ed Liddy fielded questions from industry analysts during the company's third-quarter earnings conference call.

"Does the storm activity impact your decision to buy back stock in the near term?" a Merrill Lynch analyst asked.

"No. We're generating good amounts of free cash flow," Liddy said. "We have more than enough capital to pay the claims and repurchase our shares."

His thoughts on the Florida homeowners market?

"We like Florida," he told an analyst from Deutsche Bank. * * * Three weeks later, Allstate told the news media that the hurricanes had wiped out a decade of profits in Florida. The company would stop selling homeowners policies until the Legislature decided whether to share more of the risk, Liddy said.

It's a proven posture for Florida's insurance industry: plead hardship to state politicians while still earning profits, or "surpluses" in the case of mutual insurers.

"Millions" in entertainment, food, and campaign contributions are spent in Florida by insurance industry lobbyists every year to persuade "state officials to grant rate increases or improve access to public catastrophe money," Reed reports.

With the legislature set to open its 2005 session next month, the noise you're likely to hear will be the surge of lobbyist money sloshing around Tallahassee. In such a flood, is there any doubt that it will be the customers of insurance companies who will be drowned?