In Broward, cuts are small compared to rate hikes
By Kathy Bushouse South Florida Sun-Sentinel May 6 2007
Florida home and condominium owners shouldn't count on big property insurance savings promised by Gov. Charlie Crist and state legislators.
On June 1, when lower rates are supposed to take effect, many in South Florida will still pay hundreds or thousands more for coverage because the state gave insurers approval for sharp price increases in 2006. Insurers are trimming rates to comply with the state law passed in January, but for most consumers the cuts are small when compared with the premium increases already taking place.
It's kind of a decrease in the increase, is a better way of describing what has happened, said Bob Milligan, the state's insurance consumer advocate.
Homeowners could end up paying even more for property insurance, if the 2007 hurricane season is more like 2004 and 2005 than last year's quiet season. That's because the rate savings that insurance companies are passing on to consumers are based on changes the Legislature made recently to the Florida Hurricane Catastrophe Fund.
In many cases, the savings result in far less insurance price reductions than the 24 percent statewide average cuts state officials expected. Insurers pay into the catastrophe fund and tap it to help pay claims after major storms. It appears to me that we're getting a snow job, said Leonard Giamanco, a retired life insurance salesman in Plantation.
Of the state's top 20 private property insurers, which insure more than half of Florida's 6.15 million home and condo owners, none has sought rate cuts matching the statewide average savings predicted by a consultant for the state Office of Insurance Regulation, according to an analysis of insurers' rate data by the South Florida Sun-Sentinel. Statewide, the average increase of those insurers in 2006 was 26.6 percent, while the average proposed cut this year is 10.6 percent.
Crist, who made cutting property insurance prices the centerpiece of his election platform last year, said last month he plans to continue pushing for lower premiums. When the annual legislative session wrapped up Friday, Crist succeeded in his effort to make Citizens more competitive -- a move he believes will further drive down rates but industry officials say will simply pressure private insurers to leave the state.
We've got to keep pushing ... to work very hard and make sure that we give continued insurance rate reduction as well as property tax reduction, Crist said, before a recent town hall meeting on property taxes and insurance in Palm Beach Gardens. ... The people know that they've had it.
Doubled and tripled
With smaller-than-expected insurance savings, Giamanco and other homeowners wonder what January's emergency legislative session to address the state's property insurance crisis accomplished.
A State Farm Florida Insurance Co. customer, Giamanco will pay 90 percent more when his annual homeowner policy renews this month -- $3,200, up from $1,800 -- and that's with a 5 percent hurricane deductible and a $5,000 deductible for other claims. He'll be in line for a 7.9 percent decrease, or a $252.80 reduction in May 2008.
Others like Al Kniberg of Boca Raton, are shopping for new insurance after being dropped by companies seeking to reduce their hurricane risk in Florida. Kniberg has been a Nationwide customer who has been told he wouldn't be renewed as of October.
I don't think the rate's going to come down anywhere near what they had projected when they passed that bill, Kniberg said. ... Until the rates come out, I guess we won't know.
In only a few of Florida's 67 counties, insurers' proposed rate cuts exceeded the 24 percent state officials wanted. Only three insurers -- Universal Insurance Co. of North America, St. Johns Insurance Co. and Hartford Insurance Co. of the Midwest -- went beyond that figure in South Florida, where estimated customer savings range from 28 percent to 52 percent in Broward County. Even those reductions are minimized by rate increases in 2006.
In Broward, the biggest proposed price reduction among the top 20 private insurers was a 25.2 percent cut for customers with St. Johns Insurance, which has slightly more than 3,700 policies in the county.
Still, the insurance savings will mean little to South Florida homeowners whose premiums doubled or tripled in the past year.
For the average State Farm Florida customer in Broward County already wrestling with an 81 percent increase, the reduction knocks $486 leaving a new average premium of $5,668.
State Farm Florida officials made clear during January's emergency session that it didn't expect to gain much from changes to the state catastrophe fund, predicting at best an average savings of 7 percent statewide, company spokesman Justin Glover said. That's because the company buys a majority of its reinsurance -- insurance for insurance companies -- from its parent company at prices company officials say are lower than the premium charged by the state catastrophe fund. Last month, the company asked the state to approve a 7 percent average statewide price reduction.
Shaky catastrophe fund
The state heads into the June 1 start of hurricane season with the catastrophe fund still short on cash even after last year's quiet season.
After surviving the 2004 hurricane season without relying on all Florida property insurance policyholders to bail the cat fund out, the 2005 hurricanes walloped the fund. It ended with a $1.55 billion shortfall that resulted in a 1.4 percent assessment -- or $10.40 for every $1,000 of annual premium paid -- that Floridians will pay as an extra charge on their automobile and property policies for the next 10 years.
The fund now has $850 million in cash, and will receive a projected $1.2 billion to $1.4 billion this year in premiums from insurance companies, said Mike McCauley, a spokesman with the State Board of Administration, which oversees the catastrophe fund. That means if a large hurricane or series of small storms hits Florida this year and insurers draw from the catastrophe fund, Floridians will have to pay even more on their insurance premiums to replenish the fund.
That worries homeowners like Michael Schechter, a technology consultant who lives west of Boynton Beach. He wonders whether the state can handle the cost of storms this year.
I know the government and I know Charlie Crist is trying to do things to earn his election last year, Schechter said. Coral Gables... But I just have a problem with the government trying to undertake so much of a responsibility because they're stretched fairly thin to begin with.
Kathy Bushouse can be reached at email@example.com or 954-356-4667.
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