Insurance upgrades tough to identify
The state touted sweeping industry change, but for many, it all looks the same.
By Tom Zucco, Times Staff Writer
Published May 27, 2007
John Kapili represents what was not supposed to happen as Florida enters the 2007 hurricane season this week.
After Nationwide dropped the insurance policy on his Treasure Island home, state-backed Citizens Property Insurance picked it up, and then Sunrise-based Florida Peninsula took it over. Last month, Florida Peninsula dropped him, effectively sending him back to Citizens.
Four insurance companies in five years.
It's not just dropped policies. When David Sprake-Jones received his letter from State Farm recently, the 70-year-old Spring Hill homeowner found his premium will jump to $2, 500 from $1, 800 when it comes up for renewal June 30.
Four months after the Florida Legislature spent a week in special session to address the property insurance mess, this much is known:
Forecasters are predicting an above-normal hurricane season, gas prices have reached record levels, sky-high property taxes have stopped the real estate market, and many homeowners are still facing a property insurance crisis left over from last year.
Here is what the Legislature has said will happen:
Homeowners should see meaningful discounts for making their homes more hurricane-resistant. They should also have easier access to state-backed Citizens Property Insurance. If a private company like State Farm or Nationwide is charging rates 15 percent or more above what Citizens would charge, a homeowner can switch to Citizens.
To sweeten the pot, Citizens rates have been frozen until Jan. 1, 2009, and the company will soon begin to write more commercial policies, bringing much-needed relief to small businesses.
The insurance companies will also have easier access to cheaper reinsurance through the state-backed Florida Hurricane Catastrophe Fund. What the companies save on reinsurance is to be passed on to consumers in the form of an average statewide rate reduction of 24 percent.
That scenario hasn't exactly unfolded as promised.
So far, the reductions have averaged closer to 10 percent, the mitigation discounts remain vague, policies continue to be dropped and, perhaps worst of all, the state has agreed to take on far more risk than ever before, putting every Floridian on the hook if a hurricane strikes a major metropolitan area.
Consider the case of Sprake-Jones.
State Farm had been ordered by the state to reduce its premiums, but since State Farm's 7 percent reduction was far smaller than the 51-percent increase the company had already been awarded, his rates had to go up.
"I understand the game, " he said. "You raise it a lot then reduce it a little."
And the insurance discount he received for spending $2, 000 on hurricane shutters, meanwhile, was a paltry $67 a year.
Meager grant payouts
The state has weighed in with a $250-million grant program designed to help people put up shutters and harden their homes. But as hurricane season arrives, it's barely under way.
Richard Kurkendall needed to spend $4, 000 to put shutters on his St. Pete Beach home. This is where the My Safe Florida Homes program could have stepped in with a matching grant of up to $5, 000 for just that purpose.
But like many other homeowners who either didn't know about the program, didn't get a response or were placed on a waiting list, Kurkendall saw the hurricane clock ticking. He gave up and paid for the shutters himself.
"I didn't even try to contact them, " he said, "because it seemed like a totally unrealistic way to approach it."
Begun last August, the program was touted as the definitive answer to the insurance crisis. But excluding low-income homes, the My Safe program has awarded about $47, 000 in grant money to 19 homeowners as of last month.
There are more than 4-million single-family homes in Florida.
At least where rates are concerned, Florida insurance Commissioner Kevin McCarty pleads for patience. There is nothing to stop companies from dropping policies, he said this week.
But when the state announced in March an average savings of 24 percent, it was based largely on educated guesses. Most companies had not completed their reinsurance contracts.
The companies have to make complete rate filings by Sept. 30. And that, McCarty said, should lead to more savings.
"They can file for an increase, " McCarty said, "but that doesn't mean it will be approved."
McCarty also said that since January, his office has approved seven new insurance companies to do business in the state, with 10 more pending.
But how long those companies plan to remain in Florida and how many coastal policies they plan to write is unclear for now. Although they could get a bonus to do it, no company has taken a coastal policy out of Citizens since March 2006.
Also unclear is how those companies would react if the 2007 hurricane season is anything like 2004 or 2005.
"Any storm of a serious magnitude will bring instability to the marketplace, " McCarty said. "That's the impact a hurricane has. Companies will revisit their business plan."
Lawmakers acknowledge that by shifting the insurance burden to the state, even one hit by a major hurricane this year could place Florida in deep financial trouble.
But to a large extent, they say, they had no choice.
One of the central players during the special session, Rep. Jack Seiler, D-Fort Lauderdale, said he's had calls from several homeowners who have seen their rates go down.
And like McCarty, he said relief will take time.
But Seiler also said the Legislature could have done more if lawmakers simply had better data.
"I was extremely frustrated that we could not get the accurate numbers we needed throughout the whole special session, " Seiler said. "We couldn't get it from the insurance industry, from Citizens or from staff. It seemed like everything was speculation.
"We should not be making policy feeling around in the dark."
Seiler and others want to empower the insurance commissioner and the Legislature to force insurance companies to hand over the data lawmakers need, an idea he said is supported by Gov. Charlie Crist.
As yet, no such legislation has been filed.
In the meantime, the insurance struggle continues. Among the e-mails Crist received recently was this from Ellen Popovich, a Clearwater retiree.
"I wrote to you over two months ago and haven't received an answer yet in regards to the cost of homeowners insurance and what were you planning to do to lower rates.
"Well, I have my answer. My Citizens bill went from $2, 302 last year to $2, 205 this year.
"Is this the lower rates you promised?"
Tom Zucco can be reached at firstname.lastname@example.org or 727 893-8247.