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Homeowners battle high insurance costs

Homeowners are having trouble finding policies - and paying much more when they do.

By TERESA BURNEY, Times Staff Writer
© St. Petersburg Times
published June 30, 2002

Bill Fagan had advance warning from his insurance agent, but it did little to prepare him for what he saw when he opened the State Farm envelope.

"I about died when I saw it," Fagan said. "It was shocking."

His homeowners insurance premium had nearly doubled -- to $1,298 a year. His bill last year was $722. The year before it was $599, he said.

Homeowners everywhere are finding nasty surprises in insurance company envelopes. Rates across the nation have skyrocketed as insurance companies, their profits suffering from big-claim payouts, coupled with a loss of revenue from investments, seek to make up for their losses.

Homeowners such as Fagan, who live anywhere near a sinkhole, are finding themselves saddled with hefty rate increases. And, with many insurers refusing to take on the risk of writing new policies in sinkhole-prone parts of Hernando and Pasco counties, many have no choice but to pay the rate increases to keep the policies they have.

Bill in hand, Fagan went insurance shopping, only to be turned down by two companies.

"As far as a homeowners quote is concerned, we do not have a market for your home due to sinkhole activity in that ZIP code," AAA Auto Club South wrote in turning down his request for insurance.

At first, he thought Liberty American Insurance Group would insure him, but that company turned him down when it checked its maps and discovered he was within 1 mile of a sinkhole.

"I don't even know where these sinkholes are," said Fagan, who lives on Keysville Avenue, about a mile north of Northcliffe Boulevard, in Spring Hill -- north of most of the recent sinkhole activity caused by heavy rains.

Fagan's case is not isolated, said John Reddin, owner of Economy Insurance Mart in Spring Hill.

"We've got (homeowners facing big bills) coming from everyplace -- Nationwide, Allstate, State Farm," Reddin said. "There is not a lot they can do."

During the last three or four years, insurance companies have become more reluctant to insure homes in sinkhole-prone areas.

Reddin used to have five insurance companies that would write homeowners policies in sinkhole areas. Now he is down to one: Lloyd's of London. Not surprisingly, that famous company's rates are triple or quadruple what traditional insurers charge.

Liberty American, which is the most liberal traditional insurer Reddin deals with, will not write a policy for a home that has had a sinkhole within a mile. The others are using a 5-mile limit.

"If you look at a map of sinkholes in Hernando, that is about everywhere," he said. "And (the writing of homeowners policies in) West Pasco is practically shut down."

Insurance companies aren't facing big payouts because houses are falling into sinkholes left and right, said Reddin. Just having a suspicious hole in the ground investigated by an expert to determine whether it is a sinkhole costs between $7,000 and $8,000, and homeowners everywhere are having every suspicious dimple inspected. The insurance company pays the bill. Last week, Reddin said he had 25 such inspection claims on his desk.

Lisa Wilson of the Wilson & Wilson insurance agency in Spring Hill stresses that sinkholes are not the main reason people are seeing increases in homeowners policies.

"The sinkhole factor doesn't help things, I'll tell you that," Wilson said. "Nobody is going to write a risk on a sinkhole."

While insurance companies cannot cancel policies for homes surrounding new sinkholes, people trying to buy homes in the areas may find it difficult, if not impossible, to find insurance, she said.

"The homeowners market is becoming difficult in this market," Wilson said. "All the agents are seeing it. ... I do have three (companies) left that can still write new (policies), but those are the places that you go to as a last resort."

"I've said to the people, "People really need to speak out,' because it's gotten to a point where it affects the people who are buying the home, she said.

An increase in the cost of sinkhole claims is one reason State Farm asked for, and received, permission from the state insurance commissioner's office to raise rates an average of 14.3 percent in January, said State Farm spokesman Tom Hagerty.

The company asked for a second average increase of 22 percent for owners of single-family homes, but that was recently denied by the state. On Friday, State Farm announced that, because of the denial, it would stop selling new homeowners policies and would not renew any condominium association policies in Florida.

Hagerty said he doesn't think sinkholes are the only reason Fagan's bill has nearly doubled.

"I can't see sinkholes alone being the only reason for the premium increase," he said. "That doesn't seem right to me."

The company will not comment on the percentage it has increased premiums for homes near sinkholes. And, Hagerty said, State Farm has neither a specific rule about how far a home has to be from a sinkhole nor a ban on writing policies in specific ZIP codes.

"We will look at every applicant on an individual basis," he said.

Reddin and other agents say the situation is getting dire enough that there is talk about having to send more clients to the Joint Underwriting Association, the state-backed insurer of last resort. The JUA, created after Hurricane Andrew in 1992, provides homeowners insurance to residents who cannot find private insurance to protect their homes.

Considering the circumstances, Fagan, 57, has decided to keep his State Farm policy.

"I'm going to have to renew with State Farm at $1,298," he said. "That's shocking to me, and I make a decent income. What If I were a retired person on a fixed income?"

Reddin said if Fagan were a retired person on a fixed income with a paid-off mortgage, he knows what would happen in many cases with a homeowners policy: "They are going to go without it."

-- Staff writer Jennifer Liberto contributed to this report.

State will investigate

Homeowners in Florida who have experienced a large increase in homeowners insurance premiums, or who have had coverage canceled, have the right to ask the state to investigate. The phone number for the state's consumer help line is 1-800-342-2762.

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