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Windstorm insurance may cost more

A study done for Citizens recommends an average 80.2 percent increase for those in high-risk areas. But if the changes are adopted, some could save.

By JONI JAMES
Published October 14, 2005

TALLAHASSEE - For hurricane-weary Floridians, there's potentially more financial bad news: A new study for the state's second-largest property insurer recommends an average 80.2 percent increase in windstorm insurance rates for homes in high-risk areas.

Citizens Property Insurance Corp., the state-backed insurer of last resort, is months away from formally adopting any rate increases for its 420,000 windstorm policyholders. Its board isn't scheduled to consider the matter until November, and any proposed increases must be approved by state regulators.

For some in the region, the study's results, if adopted, could be good news. Policyholders in Pasco County could see a 28.7 percent average decrease in windstorm premiums, offering partial relief from the soaring insurance costs. Elsewhere in the area, Hernando policyholders could pay an average of 5.8 percent more for windstorm coverage, and Pinellas policyholders could be hit with a 91.5 percent average increase.

The study, ordered last year by Florida insurance regulators, marks the second time in a month that Citizens policyholders have been put on notice they could be in for a new round of sticker shock far greater than this year's average increases of 12 percent for windstorm coverage and 20 percent for personal lines coverage.

In September, Citizens released a similar study for its 355,000 personal lines policies - which combine traditional homeowners and windstorm insurance - that recommended an average rate increase of 37.2 percent to remain actuarially sound.

In some regions, such as Pasco County, the recommendation in September was far higher. The study suggested Pasco personal lines policyholders pay 124 percent more on average because of the rising number of sinkhole claims there.

Both studies were conducted by Citizens staff with help from the New Jersey-based Insurance Services Office.

Citizens was created by the Legislature in 2002 to insure property in high-risk areas that couldn't be covered in the private market. In recent years, some homeowners insured by the carrier have seen their premiums more than double amid fears of hurricanes and sinkhole exposure.

Anticipation of a new round of rate increases does little for Citizens' public image, tarnished by poor customer service after last year's hurricanes and recent allegations that a top former official took kickbacks from the adjusters he hired to handle 2004 hurricane claims. State lawmakers will hold hearings on the latter issue next week.

Citizens officials were quick to emphasize the rate increases were far from a done deal.

"Let me be clear, the results of this analysis have not been approved by ... our Board of Directors, nor the state's Office of Insurance Regulation," Citizens executive director Bob Ricker said in a statement released Thursday. "We are sensitive to the concerns of our policyholders who are struggling to afford the rising cost of insurance."

The main reason Citizens' rates may rise so explosively: an order in November by Insurance Commissioner Kevin McCarty aimed at enforcing a state law that requires Citizens' rates be set higher than the private market but be actuarially sound.

Until now, Citizens had set its rates based on the rates of competitors, who were required to conduct actuarial studies. Citizens never did a study of its own.

But unlike private insurers, who can pick and choose where to write policies, Citizens' policyholders are heavily concentrated along the state's coastline, which disproportionately increases its risk and long-term liabilities.

Where Citizens' study suggests it needs 37.2 percent more in premiums to cover risks in its personal lines policies, the state's largest property insurer, State Farm, has requested an 8.6 percent increase, according to the state Office of Insurance Regulation.

Joni James can be reached at 850-224-7263 or jjames@sptimes.com

[Last modified October 14, 2005, 12:17:55]