TALLAHASSEE, Fla. – May 7, 2012 – If Florida’s property insurer of last resort takes action to raise rates for new customers, private carriers say they’re ready to compete for those policies – at the right price.
“There’s going to be a pretty significant opportunity in the next few months to see what the private market can do,” said Sam Miller, executive vice president of the Florida Insurance Council, an industry trade group. “But so much of it is about rate.”
Citizens Property Insurance Corp. is exploring the idea of eliminating a 10 percent cap on rate increases for new customers starting Jan. 1. Board members failed to adopt the plan April 26 but directed staff to study the measure further.
Florida has 400 private carriers registered to offer property insurance in the state. While many have dropped policies along the coast, windstorm coverage from private insurers is available to homeowners in Broward and Palm Beach counties, typically if they’re west of Interstate 95, in good condition and built no earlier than the 1990s, insurance agents say.
In recent years, those homeowners have gone with Citizens because the rates have been more competitive than those of individual carriers.
Some insurers don’t do business in Florida because the rates the state allows them to charge are too low for the risks they have to assume, says state Sen. Mike Fasano, R-New Port Richey.
“Companies are not going to write business when they know going in that they’re going to lose money,” said Locke Burt, president of Security First Insurance, an Ormond Beach-based carrier with 160,000 policies statewide, including about 16,000 in southeast Florida.
A study by Security First showed that customers who left the carrier for Citizens saved on average about $100 a month. Still, policyholders will find more complete coverage and better claims-handling in the private market, plus there’s no “stigma about being in the state pool,” Burt said.
Gov. Rick Scott has ordered Citizens to shed policies, saying its ability to levy post-storm assessments is a threat to the state’s economy.
Proponents of the plan to remove the 10 percent cap say that move, with other measures to reduce coverage for existing policyholders, would make Citizens less desirable and cut the state’s risk if a hurricane were to strike.
The state-run insurer has more than 1.4 million policyholders, including about 347,000 in Broward and Palm Beach counties.
Citizens has tightened eligibility for discounts the insurer grants for windstorm protection measures, such as shutters. It also has cut its maximum coverage limit to $1 million from $2 million for homes and condos.
In addition, the insurer no longer offers coverage for such things as awnings, most carports and screened-in pool enclosures.
But no matter what steps Citizens takes, it will only be able to cut so many policies, said Jeff Grady, president of the Florida Association of Insurance Agents. Either the properties are too risky for other insurers or the rates Citizens charges are too attractive for homeowners to consider leaving.
“I’d say 700,000 to 750,000 policies may not ever get out of Citizens,” Grady said. “There is a core that will always be there.”
© 2012 the Sun Sentinel (Fort Lauderdale, Fla.), Paul Owers, Sun Sentinel, Fort Lauderdale, Fla. Distributed by MCT Information Services

WASHINGTON – May 4, 2012 – The National Flood Insurance Program (NFIP) will charge homeowners more for coverage after Oct. 1, 2012. Officials say flood premiums will go up an average 5 percent nationwide, but they could rise as much as 20 percent in some areas while as other premiums go down. NFIP will also disallow rebates.
“People who receive the most subsidies in risky areas will see big premium increases, probably phased in,” Eli Lehrer, national director of the Center on Finance, Insurance and Real Estate at The Heartland Institute in Washington, told the South Florida Sun-Sentinel. “Rates have to go up. The real question is: Will the program be sustainable? It cannot continue at the rates it has now.”
The flood insurance program operates at a loss, and most experts agree it must generate more money to dig itself out of an $18 billion hole. However, a premium increase impacts Florida homeowners most. The state currently has 37 percent of all NFIP policies – 2.1 million out of 5.6 million.
Rebates
Since the federal government runs the national flood insurance program, insurers act more like middlemen between homeowners and NFIP. Currently, some insurers rebate part of their commission, allowed under state law, as a way to attract business. That practice must end on Oct. 1.
FEMA, however, says the national program is better served by an across-the-board premium policy that doesn’t favor one insurance agent over another. By banning commission rebates, the rule change will also effectively raise rates for some homeowners.
FEMA says that 48 states already ban rebates, calling them “an illegal inducement to purchase insurance.”
Potential changes
The U.S. Congress is also considering a long-term extension of the flood insurance program, which expires in its current form on May 31. In addition to extending the program, a law could change the way the program is administered. A bill passed in the House, for example, would put an individual homeowner’s policy premium more in line with actual risks for the area. The Senate has a different version of the bill, though, and nothing is assured.
Source: 2012 South Florida Sun-Sentinel, William E. Gibson, Washington Bureau
© 2012 Florida Realtors®