The washed-out hotels, crumbled asphalt and shuttered businesses that marred Florida’s Pensacola Beach after Hurricanes Ivan and Dennis in 2004 and 2005 are mostly gone — the debris hauled off and the damaged structures demolished or rebuilt.
But real estate agent John Pinzino still cannot find buyers for the homes and condos he has listed along this refurbished stretch of white sands and turquoise waters. Despite a hurricane-free 2006 and what he calls “a strict buyers’ market,” would-be beach dwellers are staying away, primarily because of soaring insurance rates in coastal areas statewide.
Only five of 354 residential properties on the market in Pensacola Beach sold in January. Pinzino lost one deal after the prospective buyers paid a deposit, but later discovered the $3,500 they had estimated for insurance would actually be $8,500.
“(Insurance) is a huge deterrent to anyone looking at buying property anywhere in our state. We have property for sale that normally would have been gobbled up but, because of the insurance situation, is just sitting,” Pinzino said.
Pinzino and others are counting on reforms signed into law after January’s special legislative session on insurance issues to make a difference. Many legislators say the session was a successful first round in Florida’s fight against an out-of-control insurance system, which has seen rates double and worse since the state was struck by eight hurricanes in 2004 and 2005. But they say more has to be done in the coming months to keep Florida’s economy out of a growing insurance quagmire.
Sen. Mike Fasano, R-New Port Richey, points to a spike in the number of residential loan foreclosures in his Tampa Bay-area district as proof of the dire need for insurance reforms.
“People can no longer afford their mortgage payments because of their insurance premiums,” said Fasano, who has authored legislation that would provide grants to help low- and middle-income homeowners with insurance rate hikes.
Fasano is also pushing legislation that would require the state-created Citizens Property Insurance, Florida’s largest insurer, to refund the cost of private appraisals for homeowners whose insurance rates are later lowered.
Citizens customers can challenge rate increases by seeking a private appraisal. Fasano said the private appraisals sometimes show that Citizens’ rates are based on inflated property values.
“We made significant inroads in the special session, but we cannot stop. We must go further and make more gains. The governor has made his message clear to the insurance companies,” Fasano said.
The special session changes, supported by all but two of the 160 House and Senate members and signed into law by Gov. Charlie Crist, included an agreement to expand insurers’ access to Florida’s Hurricane Catastrophe Fund, which pays claims when insurers cannot.
Legislators also approved a mandatory rate rollback by Citizens, which sells insurance to Floridians whom private insurers have declined to serve. Other reforms require regulators to deny rate increases that would lead to “excess profits.” And the new laws allow consumers to choose much higher deductibles, or go without wind coverage to reduce premiums.
Legislators took another swipe at insurance companies by trying to prevent them from dropping policies or leaving the state. The new laws require companies offering auto insurance in Florida to also offer homeowners coverage if they cover property in any other state.
Insurance companies aren’t happy with the changes.
The Florida Insurance Council filed a petition to stop the state from enforcing an emergency rule preventing insurers from filing for rate increases or cancelations before the new reforms take effect June. It withdrew the petition after the state said companies could still drop customers who had already been notified.
Sam Miller, executive vice president of the council, said state leaders are gambling on a mild 2007 hurricane season and Florida taxpayers will be asked to pay the bill if legislators are wrong.
“Some of these things will dramatically raise rates if another storm hits,” he said.
Whether the state should continue to allow Florida offshoots of major insurance companies — known as “pup companies” — will likely be another important issue in the upcoming regular session. Such companies have been allowed in Florida since 1996, four years after Hurricane Andrew destroyed much of Homestead and caused $30 billion in damage.
Companies such as Allstate Floridian carve out their Florida business into a separate company, insulating the parent company from losses in the hurricane-prone state. Crist has called the companies “a shell game,” which allows a company to claim major losses in one state even though they have made billions of dollars nationally.
Rep. Ray Sansom, R-Destin and chairman of the Legislative Budget Commission, predicted many insurance-related issues will be debated in the regular session.
“I don’t think anyone felt like the special session was the end of the discussion,” he said. “There are still a lot of decisions the Florida Legislature will need to make and discussion we will need to have.”
Meanwhile, Pinzino and other Pensacola Beach real estate agents say they’ll have to wait and see if the state’s efforts to lower insurance costs bring a turnaround in the slumping market.
“We think the special was very positive,” Pinzino said. “Interest rates are low, inventory is high, but word just needs to get out that the state is doing something to address insurance.”
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