Atlantic Beach Insurance News
With a special legislative session on property insurance later this month, the insurance industry is trying to spread the word that the companies shouldn't be blamed for the rising cost of policies.
Bob Hartwig, senior economist at the New York-based Insurance Information Institute, said the state's vast hurricane-vulnerable waterfront location is the prime reason for the increase.
He characterized Florida as being "the most dangerous, most vulnerable place in the entire planet" for insurers.
Several different coalitions, representing different industries, are lobbying lawmakers to overhaul Florida's insurance laws during a special session of the Legislature that begins Jan. 16 in Tallahassee.
On Friday, Hartwig was joined by Sam Miller, executive vice president of the Florida Insurance Council, to discuss property insurance issues affecting homeowners and commercial properties statewide and on the Treasure Coast.
Here is a breakdown highlighting responses from Hartwig and Miller.
Q. Why has the price of residential and commercial property insurance gone up in Florida since 2004?
A. Home and business owners have been assessed more than $3 billion to cover deficits in Citizens Property Insurance Corp., the Florida Hurricane Catastrophe Fund and the Florida Insurance Guarantee Fund.
. Insurance options for many Florida homeowners have dwindled because some companies have scaled backed operations. Additionally, some insurers were shut down by the state for not having sufficient funds to pay claims after hurricanes Frances and Jeanne.
. Other insurers have chosen to leave the state because of the amount of risk involved in insuring a coastal home in Florida.
Q. Why is Florida more expensive than other coastal communities such as Louisiana, Texas, Georgia or the Carolinas?
A. There are higher coastal property exposure values in Florida than any other state - about $2 trillion as of 2004 and Florida's coastal property exposure values are expected to double by 2014.
. Florida now is the third most populous state in the country and population growth rates are expected to be at least twice that of most other states.
. Florida and all other Gulf and Atlantic states are expected to experience above average hurricane activity for the next 15 to 20 years.
Q. Why have some premiums doubled or even tripled in the past two years, creating an economic burden for so many local property owners?
A. Florida insurers paid $31 billion in insured losses on more than 3 million claims during the 2004 and 2005 hurricane seasons.
. From 1992 through 2006, home insurers in Florida paid an estimated $10.7 billion more in claims than they received in premiums.
. This $10.7 billion underwriting loss remains - even after including an estimated $2.75 billion in profits in 2006.
. It will take until 2009 for insurers just to get to the break-even point for the 15-year period (from 1992 through 2006) even if there are no storm losses in 2007, 2008 and 2009.
Q. But how can this be when insurance companies raised my premium?
A. The average annual rate of return on Florida homeowners insurance was minus 38.1 percent from 1990 to 2006, despite 2006 being a profitable year, according to financial models from the Insurance Information Institute.
Q. What can I do to lessen my premiums or avoid being dropped by my insurer?
A. Implement home improvements that abide by new building codes to substantially reduce wind damage from hurricanes.
. Purchase stronger homes. Safer and stronger homes cost less to insure.
. Lobby local municipalities for new land use policies that will limit future storm damage.
Q. What is the insurance industry lobbying for and what does it think will solve the crisis?
A. The industry maintains that spreading the risk on a global scale is important. Reinsurance and bonds can help achieve that objective.
Q. Can't Florida spread our risk to other coastal states or even states that aren't hurricane-prone?
A. By law the rates charged for insurance are based exclusively on past and expected losses in that state. Profits in other state or from other types of insurance cannot be used to subsidize losses in the Florida homeowners insurance market. Likewise, losses in other states, for example, earthquakes or blizzards, cannot be subsidized by Floridians.