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Insurance surges sock homeowners

As prices continue to escalate, companies that offer coverage and the state are debating changes.

By JEFF HARRINGTON
Published April 17, 2005


For many, the most frustrating and costly part of preparing for hurricane season has nothing to do with bottled water, batteries or plywood.

Just try to find affordable homeowners insurance.

Consider the plight of longtime bay area residents such as Bernie Earley of Largo.

Because insurers are reluctant to write policies on older homes like his, which they view as higher risks, Earley was forced to buy insurance from Citizens Property Insurance, the state-run insurer for those who cannot find coverage on the open market.

His rates under Citizens jumped about $260 in 2003 and another $500 in 2004.

"I'm now up to $1,800 a year" in premiums, he lamented, "and I haven't filed any claims in the 28 years I've been here."

Odds are insurance will only get more expensive for Earley and other homeowners. Last year's four hurricanes and insurers' worsening fears of sinkholes in west-central Florida have exacerbated the crisis.

Bay area residents continue to sign on with Citizens Property which, by law, is supposed to have higher rates than the marketplace as a disincentive. Heeding that directive, Citizens has filed to nearly double the average premiums for many of its bay area policies this year. Dozens of other insurers, including large players such as State Farm and Nationwide, also filed for rate increases after the storms.

Stopping short of ordering a rate freeze, Florida Insurance Commissioner Kevin McCarty in February asked property insurers to delay filing for rate increases until legislators work through "fixes" in the insurance industry in their spring session. The filings have continued nevertheless.

In addition to rate increases, all property owners statewide also face a likely assessment on their insurance premiums to help Citizens Property pay $2.6-billion in hurricane claims.

Citizens is running a deficit of more than $500-million in its high-risk account and has projected it will need an average assessment of 7 percent on all property insurance bills in order to recover. Florida Chief Financial Officer Tom Gallagher is leading an effort to use sales tax revenue to help Citizens, negating the need for a surcharge.

That's just one of a flurry of property insurance-related proposals now circulating in Tallahassee. The state Legislature is also debating whether to:

-- Revamp Citizens Property. Lawmakers are examining how Citizens' board should be structured, how rates are set and whether people who could get partial coverage from another insurer should be allowed to use the agency.

-- Require insurance companies to offer different hurricane deductibles, perhaps as high as 10 percent. Higher deductibles are riskier for consumers if disaster strikes but they mean smaller premiums.

-- Prohibit insurers from canceling a policy until 60 days after repairs are complete after a hurricane.

-- Forbid an insurer to drop or non-renew a policyholder who has been insured for five years with no claims.

-- Re-examine the statewide building code.

-- Give insurance companies more money from the state's catastrophe fund if more than one hurricane strikes in a season.

The latter point is one some insurers, notably Allstate, have been lobbying for fiercely since the multiple hurricanes struck.

Last season, insurance companies had to rack up $4.5-billion in combined losses from a single storm to get money from the catastrophe fund, or CAT Fund. As a result, most insurers received little or no reimbursement after paying claims from the four 2004 storms, even though combined losses from the season exceeded $20-billion.

If homeowners get a break on paying more than one deductible, some insurers argue they should get a similar break from multiple storms.

The Property Casualty Insurers Association of America is among those pushing Florida to establish an annual hurricane deductible for insurers and lower the threshold of losses that a company pays out after a hurricane before it can recover money from the CAT Fund.

"Florida must act on the lessons learned last season, and properly prepare for the 2005 hurricane season and beyond," said William Stander, regional manager for the insurers association.

Not all are convinced the insurance companies merit a break. Critics have noted that insurers piled up profits during years of light hurricane activity and many of their parent companies enjoyed record profits nationally in 2004 despite the hurricanes.

-- Material from Times files was used in this story. Jeff Harrington can be reached at harrington@sptimes.com or 813 226-3407.