40% of Florida Home Carriers Losing Money Even With No Big Storms

With the start of the hurricane season just a few weeks away, a leading Florida consumer advocate joined independent agents at a press conference to warn that property insurance rates need to be raised if insurers are going to be able to pay claims on time or at all in the event a major hurricane hits.

Florida homeowners and taxpayers can “pay now or pay later,” said Walter Dartland, executive director of the Consumer Federation of the Southeast, suggesting insurance companies must be allowed to adjust their prices.

“The only thing worse than expensive insurance is worthless insurance,” Dartland said. “In trying to artificially drive down insurance premiums, Florida taxpayers may be set up to face the biggest tax increase in our history, and Florida homeowners may be forced to pay for ‘force-placed’ coverage that only protects their mortgage holders’ interest in their homes.”

The state’s “artificially low” rates for state-backed Citizens Property Insurance, strict rate regulation, an underfunded state hurricane fund and an unfriendly regulatory climate have created a “fragile system” that is not sustainable, according to Jeff Grady, president, Florida Association of Independent Agents (FAIA).

Grady said the warning signs are growing that Florida’s “dangerous experiment with forcing short-term savings at the expense of long-term stability renders Florida an unsupported insurance island that will collapse under its own weight.”

According to Grady, the need for pricing freedom is critical given that, based on his group’s research, 40 percent of the property insurers writing in Florida reported net losses in 2008, a year in which no major storms hit.

Grady said there are other warning signs as well:

• A shortfall in the Florida Hurricane Catastrophe Fund is estimated to be as high as $12 billion.
• While only 16 percent of Florida homeowners are covered by the state-backed Citizens, their coverage is subsidized by assessments on the remaining 84 percent, many of whom get coverage from smaller insurance companies that are less than three years old.
• Demotech, the company that rates insurers in business less than three years, recently threatened to downgrade carrier Financial Stability Ratings because of over reliance on the underfunded hurricane fund. If the rating agency were to take this step, tens of thousands of homeowners could be in default of their mortgage requirements.

Topics Florida Carriers Windstorm Hurricane Homeowners