Editor's note: This is the second of a three-part series of stories based on LegalNewsLine.com's conversation with Mississippi Attorney General Jim Hood.
WASHINGTON, D.C. - To Mississippi Attorney General Jim Hood, selling insurance is a lot like driving a car.
"Insurance is a regulated area," he told LegalNewsLine.com at the National Association of Attorneys General spring meeting. "You gotta have a license as a condition to practice.
"It's like getting a driver's license. It's a privilege, not a right."
Maybe that's why he sees the need, and ability, for Congressional intervention with the industry. A self-proclaimed "free-marketer," Hood is also doing all he can with the state power he possesses to increase that regulation. And he says he's been in contact with other coastal attorneys general to help his cause.
His lawsuit against five insurance companies -- most notable is State Farm -- over an alleged lack of coverage following Hurricane Katrina has started the great wind damage v. water damage debate. Standard homeowners and commercial insurance policies feature a flood exclusion that requires the policyholder to purchase insurance from the National Flood Insurance Program that began in 1968.
Similar exclusions, Hood says, lead to consumers having several different types of insurance from several different companies on the same structure.
The situation invites confusion, which has set up shop in Mississippi. Hood has taken his message on the road to D.C., where he testified before a House subcommittee about the need for national insurance reform.
He's also introduced legislation based on measures passed in Florida that would prevent State Farm's plan to stop writing new homeowners policies in Mississippi. The company said the legal and political climates in the state have become too unpredictable.
Florida has had similar problems with insurance companies, though Gov. Charlie Crist and the state Legislature successfully passed measures that prevented insurance companies from dropping policyholders until after this year's hurricane season.
The problem, according to Florida Attorney General Bill McCollum, is the issue of reinsurance. That's one area he'd like to see reformed.
"I was in Congress for many years and authored a catastrophe insurance bill back after Hurricane Andrew," said McCollum, who has been advising Crist during the state's insurance dilemma. "There appears to be a long-term insurance crisis, and there needs to be a solution that addresses reinsurance."
A catastrophe fund that helps pay for events that only occur "once in a hundred years," is what McCollum desires. That timetable, though, has been a problem. Insurers in Florida want to base their premiums on weather patterns of the previous five years (which include the hectic seasons of 2004-05), while the state government feels they should be based on the last 100 years.
In Florida, state-run Citizens Property Insurance is the largest insurer in the state. Without being able to raise premiums (there is also a freeze on increasing premiums), some feel private businesses will not be able to compete with Citizens.
Private insurers may draw from the Florida Hurricane Catastrophe Fund -- reinsurance provided by taxpayers.
"Insurers will not be willing to insure catastrophic events unless there is some reinsurance possibility," McCollum said.
Hood also wants to follow Florida's lead on companies he feels are choosing which types of insurance they want to offer -- also known as "cherry-picking."
Florida's law forced insurance companies that offer auto and home policies in other states to offer home insurance in Florida or be banned from the marketplace.
Florida Insurance Commissioner Kevin McCarty told the Tallahassee Democrat that insurance companies "are going to threaten to leave the state. I have heard it a thousand times. We are already in a period of chaos and instability in Florida."
Hood says he has a problem with businesses that will offer automobile and other types of insurance "with no respect to the other areas."
And, of course, there's his belief to which he testified before Congress that the insurance industry is not paying for things it covers in the first place.
With Rep. Gene Taylor and Sen. Trent Lott on his side, Hood might make a bigger dent in D.C. than in his own state. After introducing his legislation and requesting it get hurried through like Florida's did, he received a letter from Gov. Haley Barbour. It was published in the Jackson Free Press.
"Thank you for your letter and request for me to order State Farm and other insurers to sell homeowners and commercial property insurance in our state," Barbour wrote. "Having considered my statutory and constitutional emergency powers including the statute you cited in your letter, I have no authority to force a private company to sell its products in the State of Mississippi."