Florida insurance controversies

[ecopal]

In 2002 Florida lawmakers created the Citizens Insurance Corporation which is the states insurer of last resort .

Citizens was given the authority by the legislature to to balance its budget by imposing an assessment on the states remaining residential property insurance companies.

In 2004 Citizens had a deficit of $516 million which was charged to those companies.

The private insurers can recover these extra costs by adding a surcharge to their premium.

So essentially that surcharge is like a tax imposed on those to live in less hazardous areas of Florida to subsidize those who built in more hazardous areas such as on the beachfront.

 

[TooFarTampa]

If the only people insured by Citizens were beachfront owners, I would share your concerns. But there are lots of people like my 73 yo dad, who has lived in the same modest ranch house inland in Pinellas County for 15 years, who recently had to get Citizens coverage because his current company dropped him and nobody else will cover him.

The mess that is Citizens has nothing to do with the beachfront owners and everything to do with the way it has been run, and the fact that most other homeowners insurance companies are running away from this state.

 

[SHELLY]

The mess that is Citizens has nothing to do with the beachfront owners and everything to do with the way it has been run, and the fact that most other homeowners insurance companies are running away from this state.

If Citizen's worked like a "real" insurance company they would be cranking rates through the roof for Gulf front homes--or not insuring them at all. The insurance game is all about RISK....your dad IS paying to subsidize those Gulf front properties--we ALL are.

 

[30A Skunkape]

Again, apples and oranges, but in Louisiana, Citizens is required by law to be expensive and strictly a last resort insurer. However, more and more people are finding it impossible to get a homeowner's policy from the big boys and must go with Citizens. The middle class are finding a mortgage note too hefty to tote;this is a bad, bad thing.

 

[TooFarTampa]

If Citizen's worked like a "real" insurance company they would be cranking rates through the roof for Gulf front homes--or not insuring them at all. The insurance game is all about RISK....your dad IS paying to subsidize those Gulf front properties--we ALL are.

I agree with you there Shelly. But it sounded like ecopal was inferring that the only homes covered by Citizens are "at-risk" homes, when we know that is definitely not the case.

I think we can all agree that Citizens is a mess and we are not any closer to resolving the insurance issues. I have read about the talk about Citizens possibly dropping homes (actual structures) valued at $1 million or more, which does not include the value of any land underneath. That is an interesting concept, because apparently many of those homeowners can have their homes insured for less money by a different type of insurer (Lloyds of London I believe is one example). But at the same time those policies are extremely complicated and may not offer the best coverage. I'm not sure that Citizens dropping them is a panacea. Like you, I say just charge them the true value of the policy. Put some more actuaries to work and figure out what their load should be.

 

[Smiling JOe]

I agree with you there Shelly. But it sounded like ecopal was inferring that the only homes covered by Citizens are "at-risk" homes, when we know that is definitely not the case.

I think we can all agree that Citizens is a mess and we are not any closer to resolving the insurance issues. I have read about the talk about Citizens possibly dropping homes (actual structures) valued at $1 million or more, which does not include the value of any land underneath. That is an interesting concept, because apparently many of those homeowners can have their homes insured for less money by a different type of insurer (Lloyds of London I believe is one example). But at the same time those policies are extremely complicated and may not offer the best coverage. I'm not sure that Citizens dropping them is a panacea. Like you, I say just charge them the true value of the policy. Put some more actuaries to work and figure out what their load should be.

Both ecopal and Shelly are suggesting that only Beach Front owners are causing these assessments. Have you not noticed that almost the entire Florida penisula has been hit hard with storms the last two years? Hello, you can pull your heads out of the sand now. With State Farm, Allstate and Nation Wide not isuing new policies for homes located within 2000 ft of the Gulf or 500 ft from the Bay or major bayous, Citizens may be the only choice for homeowners in those areas. Sure, that is beach front relative to lets say Kentucky!, but it is not really beach front, now is it?

 

[ecopal]

Both ecopal and Shelly are suggesting that only Beach Front owners are causing these assessments. Have you not noticed that almost the entire Florida penisula has been hit hard with storms the last two years? Hello, you can pull your heads out of the sand now. With State Farm, Allstate and Nation Wide not isuing new policies for homes located within 2000 ft of the Gulf or 500 ft from the Bay or major bayous, Citizens may be the only choice for homeowners in those areas. Sure, that is beach front relative to lets say Kentucky!, but it is not really beach front, now is it?

Joe, it is not like you to have such a knee jerk emotionally charged angry reaction. Maybe you should reread my post .

I did not say or even imply that beach front homes are causing the assessments. I said ?such as the beach front?.

Of course I know many non beach front owners have to rely on Citizens. But it is obvious that some property is riskier than others to insure.

It is no mystery why insurance companies do not want to insure beach front property. The closer you are to the Gulf the higher the hurricane winds and the higher the probability for a greater degree of destruction.

Although lets not forget that inland they are more prone to spinoff tornados than homes near the beach. I wonder if the insurance companies considered that?

A home close to the beach is more likely to experience a greater degree of damage. That would increase the likelihood of a home closer to the beach exceeding its 2% deductible and tapping into the Citizens insurance fund. Most of us further back may never meet our 2% deductibles if we were built to the recent codes.


The insurance industry seems to feel that just about every house in Florida is too risky to insure. They say the only reason they stay in Florida at all is so they can write auto insurance etc.

But I don?t feel that the only criterion for canceling coverage is the degree of danger a property is in.

I think they are giving preference to people who live here probably because they are a potential buyer of other insurance products they want to sell. They might also be looking at your income level, age and education levels.

Another discriminator seems to be when your house was built or to what building code standard.

Also, we have to consider a hidden agenda by the insurance companies to get some concession from the state.

Also, maybe the insurance companies aren?t as smart as they think they are at handicapping risk.

 

[Smiling JOe]

Joe, it is not like you to have such a knee jerk emotionally charged angry reaction. Maybe you should reread my post .

I did not say or even imply that beach front homes are causing the assessments. I said ?such as the beach front?.

Of course I know many non beach front owners have to rely on Citizens. But it is obvious that some property is riskier than others to insure.

It is no mystery why insurance companies do not want to insure beach front property. The closer you are to the Gulf the higher the hurricane winds and the higher the probability for a greater degree of destruction.

Although lets not forget that inland they are more prone to spinoff tornados than homes near the beach. I wonder if the insurance companies considered that?

Yes, I bet you are right. Those insurance companies never thought about tornado damage potential since those claims won't affect the insurance companies at all. Yeah, right! Tu es muy loco.

So essentially that surcharge is like a tax imposed on those to live in less hazardous areas of Florida to subsidize those who built in more hazardous areas such as on the beachfront.

Yes, you did say that, but why only point out one portion of the affected properties? By not mentioning all inland areas which were on record as being affected by the storms, you are implying that the Beach Front areas carry more weight. I bet you that in the state of Florida, the there were more non-beach front properties damaged by the storms than beach front -- in the number of properties and number in dollars. Almost the entire state of FL was affected by at least one of the storms from the previous two years. The panhandle of Florida is only a part of the state. ;-)

 

[SHELLY]

CITIZEN'S IS BACK AT IT AGAIN:

Citizens seeks higher rate increases
Insurance could go up 20 percent for some condos
Paige St. John
News Journal capital bureau

TALLAHASSEE -- Citizens Property Insurance is seeking further rate inreases -- up to 20 percent statewide for high-rise condos -- to keep ahead of private company prices in Florida's eroding insurance market.

The state-run insurer of last resort on Thursday approved seeking the rate request for about 18,000 commercial residential associations -- mostly large condominium complexes on the coast -- without knowing the exact amount it will seek.

Citizens has 169 such commercial-residential policies in Escambia County and 32 in Santa Rosa County.

The increase is intended to match a 38 percent rate hike approved in February for QBE Insurance Corp.

Citizens plans to finish calculations and submit its filing to the Office of Insurance Regulation by the end of next week. By law, the state-run company must have rates higher than private companies so it doesn't compete for that business.

"We have been hearing for some time now that Citizens' rates are competitive in that line, and that's not good," said Scott Johnson, vice president of the Florida Association of Insurance Agents.

The consumer-subsidized insurer expects a $1.7 billion deficit for 2005 hurricanes, on top of the $516 million bill passed on to Floridians last year.

In the interim, Citizens is digging deeper into its reserves to pay claims. The board on Thursday approved a second withdrawal, of $300 million, from reserves. Financial advisers this week recommended Citizens borrow or line up credit for $3.5 billion as soon as possible to raise cash for future storm seasons.

Citizens Property Insurance already has rate increase filings pending before state regulators that would raise rates an average 80 percent for coastal residents and 50 percent for inland dwellers. Its rates for commercial residential policies have not been raised in the last year.

 

[ecopal]

I feel that the assumption that all beach front homes are the most at risk for hurricane wind damage than some of those further inland is faulty.

However before I pursue this defense of BF homes I should respond to SJ.

.... I bet you that in the state of Florida, the there were more non-beach front properties damaged by the storms than beach front -- in the number of properties and number in dollars. Almost the entire state of FL was affected by at least one of the storms from the previous two years. The panhandle of Florida is only a part of the state. ;-)

Response to SJ:
In proportion to the number of units insured there probably would be a higher percentage of homes on or very near the beach (lets say within a block -this I agree is arbitrary but probably as accurate as the insurance company criteria) exceeding the 2% deductible than those further inland.

Of course there are more inland claims than from those closest the beach front. There are also considerably more inland homes paying into the insurance fund to cover the losses of the inland homes.

You really don?t think that in a hurricane the percentage of homes near or on the beach exceeding the 2% deductible would far exceed the proportion of inland homes exceeding the 2% deduction?

You don?t think that $ losses would come disproportionately from homes on or close to the beach front?

You don?t think that if you pooled the beach homes separately from inland homes that the beach front pool would experience significantly more % of dollar losses?

You really don?t think that insurance rates could be lower
if beach homes were not in the pool?



My concerns about insurance policies:

We all pay for Citizen?s over budget losses even though we are not considered a candidate for canceling by a private insurer. Even though I am not insured through Citizens I have to pay a ?tax? added to my insurance bill to support losses incurred by those rightly or wrongly placed in the high risk pool.

However, I think that in regards to windstorm damage it is unfair to assume that in all cases beach homes would sustain the most damage. Many of the newer homes (especially those on the beach and within 1/4 mile of the beach which by code had to be built to higher wind load standards) are built rather sturdily and may sustain less damage than a less well built house further inland.

Also as SJ and I agree on , inland structures are also more susptible to more powerful spin off tornadoes than structures close to the beach-spinoff tornados usually are not as strong as those inland).

Many of the newer well built beach front homes I see would survive most hurricanes as long as storm surge didn?t get them. I feel that insurance companies are unfairly discriminating against some owners who have made good choices on their building location and quality of construction.

The exposure to hurricane damage would also vary on our exposure to the wind. A house on an exposed hill in Blue Mt. Beach or one of those multistory tower houses might sustain wind loads as much or more as experienced on the beach.

A house located within a couple blocks of the beach behind a large wind block such as a large condo may be more protected from wind than a house a half mile back. So for the sake of discussion lets use the terms ?structures at risk for wind damage? or SARFWD rather than beach front.

There are homes being canceled which are no more at risk for wind damage than some that remain privately insured. I feel the criteria for SARFWD should be defined and applied more fairly to determine insurance rates and cancellations.