Property insurers seeking major rate increases

Jun 11, 2011

The following article was published in the Sarasota Herald-Tribune on June 11, 2011:

Prroperty Insurers Facing Major Rate Increases

By Paige St. John

More than half a million Florida homeowners could see their home insurance rates rise in the coming year following a wave of rate-increase requests from insurers.

In little more than a month’s time, more than a dozen insurers have asked state regulators to approve new rates that will force some customers to pay 70 percent more to insure their homes.

And despite five years with no hurricanes, more increases are expected, affecting not only coastal communities, but also homeowners in inland areas such as Orlando.

This latest round of increases is not related to legislation signed by Gov. Rick Scott last month making it easier for insurance companies to qualify for 15 percent premium increases each year to cover expenses.

Those additional increases could come in the next few months, as insurers tally up this year’s cost for reinsurance — the coverage they buy to cover their losses in a hurricane.

“There’s no question the bill will raise rates,” said Sen. Mike Fasano, R-New Port Richey and a chief critic of the legislation that passed.

Fasano contends the state Office of Insurance Regulation — under the anti-regulatory leadership of Gov. Rick Scott — is likely to approve the increases insurers seek.

“When Governor Crist was in office you saw much more of an attempt to slow down and minimize these rate increases,” he said. “Now insurance companies have a sympathetic ear.”

Filings by 15 insurers seeking rate increases since the Legislature finished business in early May show that those carriers are still seeking to recover some of what they spent in 2010 to buy hurricane reinsurance.

Since 2006, the cost of reinsurance to Florida carriers has spiraled so that it is now the single largest bill for doing business in the state.

Despite rising reinsurance premiums, state regulators held premiums for homeowners under a near-freeze for two years. The increases began at the end of Crist’s term as governor and show no sign of slowing.

Increases already approved include 17 percent for State Farm, allowing the company to dramatically reduce the discounts regulators had forced it to give to policyholders living in hurricane-strengthened homes.

First Community was granted a 21.5 percent increase, but the cost of wind coverage for some customers will rise as much as 60 percent, rate filings show.

The $7 million boost is almost double what the state Insurance Consumer Advocate argued First Community deserved. The advocate contended the increase included hidden profits to management firms set up by insurance company owners.

Meanwhile, a 26.7 percent increase from Fidelity National remains pending.

By far, the largest of the pending requests is from Allstate, whose Florida subsidiaries last week asked state regulators to approve a $91 million increase. Counties hit hardest by the Allstate rate increases, such as Okaloosa, would see premiums jump nearly 75 percent.

Castle Key seeks a statewide 29 percent increase in homeowner premiums. Castle Key Indemnity is asking for 39 percent.

Homeowners have been seeing insurance bills rise for more than a year because insurers won a series of rate boosts in 2010. And rates will continue to increase as customers renew their policies.

“I had one home go up over $4,000,” said Sarasota insurance agent Richard Greene. “Someone said, ‘My rate went up $211.’ I said, ‘Be happy, most increases are $400 to $600.'”

From 2005 through 2010, the average statewide premium increased 44 percent. In coastal regions, rates have doubled and tripled.

Last year alone, regulators approved $718 million in rate increases — despite five years of no hurricanes.

Rates are not the only way consumers are paying more. Insurers also continue to reduce the coverage they sell, especially for sinkhole damage.

The four carriers under the Tower Hill umbrella, for instance, seek to require homeowners to carry a separate 10 percent deductible on sinkhole coverage, akin to the separate deductible that applies to hurricane coverage.

Not everyone believes insurers will take advantage of the newly minted authority to seek expedited approval of 15 percent increases.

“I wouldn’t expect to see any dramatic change in the real near future,” said Rep. Jim Boyd, a Bradenton insurance agent who supported the new legislation. “I don’t think companies yet understand how that will affect them.”

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