Florida’s property insurance companies filed for significant rate increases last year, most citing sinkhole claims as their rationale. Homeowners are skeptical that the sinkholes are at the bottom of the issue. The issue made it to the legislature, and the Senate Banking and Insurance Committee released a report this week that is likely to continue, rather than resolve, the controversy.
The hurricane season of 2004 brought devastation to many areas in the southeast. Even though hurricanes have historically caused significant damage, what the people experienced six years ago was unlike any other. Florida experienced one of the busiest hurricane seasons in 2004, but since then Mother Nature seems to have calmed down for the time being. With fewer hurricanes over the past several years, insurance policyholders might expect insurance premiums to go down or at least stay the same. However, rates continue to increase.
The last post in this series.
A Florida newspaper’s report about the reinsurance market pointed out the enormous profits made by the off-shore companies — profits that could be, but aren’t, reinvested in the state. It doesn’t look as if the trend among Florida insurance companies of relying so heavily on these reinsurers is on the downswing, either. And, apart from the companies’ lack of commitment to the state and her residents, there’s something distasteful about the way reinsurers root for catastrophes.
We’re not quite done with our discussion of the reinsurance market in Florida. A recent news report brought to light the facts and the issues associated with reinsurance arrangements Florida insurance companies have taken on since the 2005 hurricane season. Homeowner insurance premiums have increased, but the money insurance companies rake in isn’t staying in the state. It’s going to off-shore investors, who run shell companies here while they track hurricanes from afar.
In our last post, we talked about Florida’s homeowner insurance market and a newspaper investigation into the industry’s growing reliance on off-shore reinsurance companies. The issue is a sensitive one for Floridians, given the multiple rate hikes over the past few years. The news report links the shift from “traditional” insurance companies to Hurricane Katrina.
Florida residents know all too well that homeowners insurance premiums have gone up over the past few years. According to quarterly premium reports, the average Florida homeowner’s rate has jumped 72 percent since 2003. Regulators have approved rates approaching $8,000 on a $100,000 Palm Beach home. In the Florida Keys, the same home would cost $13,000 a year to insure.
Florida’s state insurance company is the target of a class action suit filed last week. The suit, filed on behalf of 1.2 million Citizens Property Insurance Company policyholders, alleges that the insurer awarded 33 no-bid contracts improperly over the past six years. Citizens was founded to provide insurance to property owners, both private and commercial, who could not find insurance elsewhere.
In our last post, we talked about the law changes affecting insurance discounts for hurricane-proofed homes throughout Florida. Initially, following the devastating 2005 hurricane season, the Legislature required double discounts for hurricane mitigation efforts in order to minimize both the damage to homes and the claims cost to insurance companies. The rationale for many of this year’s laws was to protect customers and their insurers from financial harm as well as to protect the health and safety of customers. Critics and homeowners are wondering if in practice the emphasis was more on insurers than on customers.
In the wake of Hurricane Wilma, Florida lawmakers required homeowners insurance companies to double the discounts allowed for hurricane-safe structures for the next plan year. The primary goal was to encourage homeowners to make improvements to their property in order to minimize damage from future storms. Insurers figured the discounts granted would cost less than paying billions of dollars in hurricane claims.
