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Florida Seeks Homeowner Insurance Fix Amid Housing Woes

Home Inspector with Gold Coast Inspections


MIAMI (Reuters) - Florida's big push to slash homeowner insurance premiums, a major issue in a state hurt by a sinking real estate market, has turned to bust in the face of stiff opposition from the powerful property-insurance industry.

"It certainly didn't pan out," said Bob Milligan, the state's consumer insurance advocate.

"At best we've seen kind of a reduction in the increases, not really decreases from what they were prior to 2006," Milligan said in an interview.

He was referring to the huge increases many homeowners have seen since eight hurricanes crisscrossed Florida in 2004 and 2005, when insurers paid out about $35 billion in insured losses in the state.

Prodded by Gov. Charlie Crist, who has had several insurers subpoenaed over rate issues after campaigning aggressively last year on a promise to fix the insurance problem, state lawmakers have enacted a sweeping package of property insurance reforms.

Among other measures, they doubled the size of Florida's state hurricane catastrophe fund to $32 billion and authorized state-controlled Citizens Property Insurance Corp. to compete directly with private insurers.

Through the catastrophe fund, lawmakers also agreed to provide state-subsidized reinsurance -- backup coverage for property -- to insurers on the understanding that savings would be passed on to their customers.

Though expected to result in a statewide cut in homeowners' insurance premiums averaging 24 percent, Bob Hunter, insurance director at the Consumer Federation of America, said the new laws were now seen cutting rates only about 12 percent.

"It's the big national companies that are balking," Hunter told Reuters, saying they had failed to pass on reinsurance savings to consumers despite record profits in recent years.

One such company is Allstate Floridian Insurance, a unit of Allstate Corp, the nation's largest publicly traded insurer, which recently filed to raise homeowner rates in Florida by nearly 42 percent.

Allstate Floridian spokesman Adam Shores said the increase, partly prompted by a decision to buy additional reinsurance on the private market, was in line with harsh economic realities and the costs associated with catastrophic risk.

"We fully recognize that this is a difficult time for a lot of Floridians; people are hurting; and they're experiencing a lot of high costs with property insurance, property tax, things of that nature. But we need to be in a position of financial strength to protect customers when a major catastrophe strikes, like we know it will," Shores said.


"There have been a lot of promises that have been made by the political leaders in Tallahassee about where rates would be and what those rates would look like," he added. "The promise that we have made, and the promise that we will continue to stand by, is to be there for our customers when it comes time to pay their claims."

Crist, a Republican, is still pressing for relief in a state saddled with what industry insiders rate as the second- or third-highest priced homeowner's insurance of any state in the country. He appeared to win at least a partial victory last week when State Farm agreed to cut its property insurance rates in Florida by an additional 2 percent, on top of the 7 percent cut it implemented earlier this year.

State Farm, one of three companies hit with subpoenas by officials probing high insurance costs, has also agreed to cooperate with authorities on further investigations into potential collusion between insurers, trade associations and rating organizations aimed at preventing homeowner premiums from going down.

Since more dramatic rate cuts have failed to materialize so far, however, many Floridians say they back a measure proposed by two of the state's Democrats, who recently submitted a bill in Congress calling for the creation of a federal catastrophe fund where states could pool their risks against future storm damage.

"The citizens of Florida are really fed up," said Teri Johnston, who heads a grass-roots organization known as Fair Insurance Rates in Monroe that has pushed for insurance cuts in the Florida Keys.

"They're very frustrated and angry right now," said Johnston, who noted that skyrocketing premiums have been driving residents out of a place once considered a sun-drenched, tropical paradise at a rate of about 17 people a day.

Like other homeowners in southernmost Key West, Johnston said she currently pays more than $1,000 a month to insure her 1,200-square-foot house there.

"It's something that's supported by a number of important insurers," Bob Hartwig, president of the Insurance Information Institute, an industry trade association, said when asked about a federal catastrophe fund.

"I think the issue is getting somewhat more traction and interest in Congress," he added. "As we move along I think we'll hear more about this."