Wind Insurance Hikes Slap Coastal Residents

Coastal homeowners are getting socked again, and it has nothing to do with Charley, Frances, Ivan or Jeanne.

Homeowners who buy hurricane insurance on their homes through Citizens Property Insurance Corp., the state’s insurer of last resort, are finding their premiums suddenly rising by as much as 50 percent, or higher. The premium spike is the result of the state law that created the state-sponsored insurance pool in 2002 and held down rates until this year.

That law limited any premium hikes Citizens could impose during 2002 and 2003, but also mandated that on July 1, 2004, Citizens reset windstorm rates covering hurricane damage higher than those of private insurers.

“Basically, rates had been artificially suppressed by the legislature,” said Bob Lotane, a spokesman for the Florida Office of Insurance Regulation. “As of July 1, Citizens had to take everyone up.”
Astonished policyholders feeling the financial pain have complained to state regulators, only to hear it’s the law.

“It’s astounding,” said John Farr, a Palm Beach County insurance agent who sells Citizens’ policies. “How do you justify it?”
To make matters worse, there’s the distinct possibility that Citizens will have to raise rates again — for all its customers — depending on what private insurers do in the wake of the four hurricanes that hit Florida in August and September. One company, American Strategic Insurance Corp., has asked the state for a rate hike as a result of homeowner damage claims after the storms.

The recent premium hike for Citizens’ customers varies depending on a variety of factors, including where they live. It affects only customers who live in the territory formerly covered by the old Florida Windstorm Underwriters Association, what Citizens calls “high-risk” policies.

In Palm Beach County, that includes areas east of Interstate 95 south of PGA Boulevard, and east of Alternate A1A north of PGA.
It also includes a narrow slice of coastal St. Lucie County that contains about 2,400 customers, but none in Martin County.

Under state law, Citizens must charge insurance rates that are above the market rates of private insurers so that there is an incentive for homeowners to buy insurance from private carriers, if possible.
Susanne Murphy, corporate counsel for Citizens, said the story behind the big rate adjustment goes back to 1999, when Florida Windstorm raised rates by as much as 190 percent in parts of Palm Beach County. That hike was to be phased in over a period of years, beginning in 2000. But two years later, before the full weight of that increase hit policyholders, the legislature combined Florida Windstorm with another state-sponsored insurance pool to create Citizens.

Then the legislature said Citizens could hike rates for customers in the windstorm territory by a maximum of 10 percent in 2002 and 20 percent in 2003. In the meantime, Citizens had to develop a method for setting rates above what private insurers charge and implement it by July 1, 2004. Citizens adopted a rate system based on the highest hurricane rate charged among the state’s top 20 private carriers.

“We’re not supposed to have attractive rates,” Murphy said. “This is probably the first time that people are seeing what the true rates for their coverage should be.”

Other factors are affecting what policyholders are paying, including a home’s location, changes in property values and whether they qualify for any discounts, such as hurricane shutters or home construction type. Those discounts also have changed with the law in ways that could benefit some policyholders while hurting others.

On top of that, Citizens hiked rates last winter by a statewide average of 11.9 percent as of July 1. That hike increased the average Palm Beach County windstorm premium by $120 a year, to $1,765 from $1,645. Most customers in the county weren’t affected, although a small group were hit with a 24.9 percent rate increase.
By contrast, in 1999 when Florida Windstorm announced the 190 percent rate hike, the average Palm Beach County premium was $541 a year.

Farr, the Palm Beach County agent, said the new rate hike might go unnoticed by many, who pay their premiums through their mortgage company.

But it didn’t slip past Suzanne Maurno of North Palm Beach, who received her renewal notice this summer. Her annual bill went from about $6,900 to more than $10,000, though credits for impact-resistant windows should reduce the premium to about $9,300.
She said she was disgusted when she saw the bill.

“We even considered self-insuring till we put pen to paper,” Maurno said. “My concern is if my rate goes up again, where does it stop?”

Topics Florida Catastrophe Carriers Hurricane Homeowners