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For many, little drop in insurance

The two largest insurers have relatively cheap reinsurance, so there will be less savings to pass along.

By Tom Zucco, Times Staff Writer
Published March 3, 2007

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Nearly half of the homeowners in Florida who have property insurance will see rate reductions that could be less than a third of what the state outlined Thursday.

Regulators reported that homeowners' premiums statewide would be cut 24.3 percent on average thanks to Florida's new insurance law.

But the state's two largest property insurers, Citizens Property Insurance and State Farm Florida, confirmed Friday their savings will likely be far more modest.

For State Farm, it could be a statewide average 7 percent savings, and for state-backed Citizens, it could be an 8- to 10-percent savings.

With about 2.5-million of the state's 5.9-million policyholders, Citizens and State Farm comprise about 42 percent of the property insurance market in the state.

The reason for the smaller savings largely has to do with the amount of backup coverage, or reinsurance, that Citizens and State Farm buy.

By allowing companies to buy more of the cheaper reinsurance from the state, the Legislature mandated the savings be passed on to policyholders.

State regulators say that translates to a statewide average 24.3 percent savings.

But Citizens only buys reinsurance from the state, so there are no corresponding private reinsurance costs to negate. What's more, its customers are already enjoying a rate rollback, effectively freezing 2007 rates at 2005 levels.

"If this rate reduction is for companies that buy reinsurance in the private market," said Citizens spokesman Rocky Scott, "then we're pretty much sitting this one out."

State Farm officials say the overall savings for their customers will be small because the company already gets cheaper reinsurance - about 75 percent of its total - from its parent company.

"Nothing changed for us," State Farm spokesman Justin Glover said Friday. "We're already getting a bargain on reinsurance from our parent company, and our customers are already seeing the benefit of that."

Regardless of where they buy their reinsurance, State Farm and Citizens are still required to make a rate filing, "and show how much reinsurance they buy and where it comes from," said Jonathon Kees, a spokesman for the Florida Office of Insurance Regulation.

Until the savings take effect, homeowners continue to dread the trip to the mailbox, where a rate hike might be waiting.

For many, they'll have to wait until next year. The savings are effective only for policies that renew after June 1, so for a homeowner whose policy expires say, April 1, the savings won't take effect until April 1 of next year.

Tom Zucco can be reached at or (727)893-8247.

[Last modified March 2, 2007, 22:19:30]

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