Insurance Industry Braces For Citizens' Next Price Plan - The Ledger

<p>Nearly 200 companies offer home insurance in Florida, but only one has the power to influence rates for all 6.1 million policies statewide when it meets this week to set prices for 2013 — state-run Citizens Property Insurance.</p><p>The company's decision on whether to pursue dramatically higher rates for new policies will be felt far beyond the company's 1.43 million customers.</p><p>Private home insurers have curbed price increases in recent years to stay competitive with state-run Citizens, a development that is causing widespread displeasure in the industry.</p><p>Still, private home insurance companies filed 74 requests with state regulators to increase rates in the first six months of 2012. The majority of them also still exceed the 10 percent annual increase Citizens is allowed by law. One Allstate affiliate wants a 33 percent boost, and State Farm is seeking 15 percent.</p><p>But insurance executives increasingly worry that their rates are rising too rapidly compared with Citizens, which writes more policies than any other company locally and statewide. Some insurers are seeking smaller price increases to ensure they do not lose business to the government insurance giant.</p><p>Florida's fourth-largest home insurance company, St. Johns, initially asked for a rate hike of less than 1 percent last year, even though regulators said 43.4 percent could have been justified. Regulators pointed to Citizens' rates as the limiting factor in St. Johns' decision.</p><p>That Citizens partly acts as a brake on statewide property insurance rates is not widely understood by Florida home insurance customers, 77 percent of whom are not covered by the government insurer but still might pay less because of the company's cap on rate increases.</p><p>This dynamic is at the heart of a growing debate over Citizens' proper role in Florida's home insurance market, and what kind of rates the company's board should approve.</p><p>Private insurance executives closely track Citizens' rates and vehemently argue that the company should lift its 10 percent cap on increases.</p><p>"If I buy reinsurance at a certain price with a certain book of business and lose 30 percent of my book to Citizens because my rates are higher because my costs are higher, I have lost a lot of money," said Tom Jerger, who runs two small Pinellas Park property insurance companies.</p><p>Jerger said Citizens charges too little because it does not buy enough reinsurance to cover a massive hurricane, relying instead on the ability to tax insurance products throughout the state to cover any shortfall.</p><p>Gov. Rick Scott and many state leaders agree. They worry that Citizens is absorbing too many policies, and they want to force customers out of the company by raising prices and decreasing coverage.</p><p>FEELING THE PINCH</p><p>But some consumer advocates say private insurers already charge too much because of accounting gimmicks that inflate their costs.</p><p>Lifting Citizens' rate cap could encourage private companies to charge even more than is warranted, said Jay Neal of the Florida Association for Insurance Reform.</p><p>"If Citizens raises rates more rapidly, then the private market will as well," Neal said, adding that the ripple effect on the economy could be huge.</p><p>Property insurance is now a more pressing issue for many homeowners than property taxes, which declined along with real estate values during the Great Recession.</p><p>Just a 10 percent increase in statewide home insurance premiums would cost Floridians another $1 billion annually.</p><p>Property insurance rates are on the upswing again in Florida after a brief reprieve under former Gov. Charlie Crist.</p><p>Crist pushed a series of reforms in 2007 that expanded Citizens, froze the company's rates and forced all property insurance companies to buy more cheap reinsurance from the state, decreasing their expenses and the need for rate increases.</p><p>The result: Statewide home insurance rates declined in 2008 after years of steady increases.</p><p>The average statewide rate for the most common homeowner's policy dropped to $1,390 in 2008, down from $1,534 the year before, according to data compiled by the National Association of Insurance Commissioners.</p><p>Before the 2008 dip, home insurance rates had increased a total of 65 percent over the previous four years.</p><p>But insurance companies were not happy with the reforms, and they fought back.</p><p>Responding to insurance industry complaints, the Legislature replaced Citizens' rate freeze in 2009 with the 10 percent "glide path."</p><p>Statewide home insurance rates began increasing again, rising 5 percent in 2009.</p><p>The NAIC has not released data for 2010 or 2011 yet, but rates almost certainly rose more dramatically over the past two years as private insurers looked to make up for lost ground.</p><p>Castle Key Indemnity Company — one of Allstate's Florida subsidiaries and the state's seventh-largest home insurance company, with 128,377 policies — boosted rates by 36 percent in 2011. Universal Property and Casualty — the state's second-largest insurance company, with 567,187 policies — had a 15 percent rate hike.</p><p>Tempered by Citizens</p><p>Last year, 50 different insurers received approval from the state Office of Insurance Regulation to increase prices beyond 10 percent for the most common type of homeowner's policy.</p><p>But some companies asked for much smaller increases, and even the larger rate hikes might have been tempered by Citizens.</p><p>Florida Insurance Commissioner Kevin McCarty noted in a speech last year that St. Johns could have requested an increase of up to 43.4 percent.</p><p>"Companies must lower their prices to compete with Citizens," McCarty told insurance industry leaders gathered at a conference in Miami, according to a transcript of the speech posted on an industry website.</p><p>McCarty said competition from Citizens is not good for the home insurance market. He said regulators have forced private insurers to accept larger rate increases than initially proposed because they needed the money. That included St. Johns.</p><p>Neal, of the Florida Association for Insurance Reform, said Florida home insurers hide profits and make their balance sheets look weak to justify rate increases.</p><p>"They'll always set up their insurance company entity to break even or lose money so they can submit a rate filing," Neal said. </p><p>A 2010 Herald-Tribune investigation found that overhead costs for property insurance companies in Florida are 50 percent higher than the national average. Insurers funnel money to affiliated companies that handle almost every aspect of the business but are not subject to strict regulatory oversight and profit limitations.</p><p>These affiliated management agencies can make huge profits — even as the main company declares a loss.</p><p>Competition from Citizens could force some insurers to be more efficient and move less money into unregulated entities.</p><p>But Citizens was set up to take policies private that insurers do not want, not compete with the private market, said Sam Miller with the Florida Insurance Council.</p><p>The deck is stacked in Citizens favor, Miller said, because the company does not pay taxes or buy large amounts of reinsurance.</p><p>"Competition is good, even when it hurts some private carriers, as long as you have real competition," he said.</p><p>PLENTY IN RESERVE</p><p>Others say Citizens acts more like a traditional insurer than Florida's private companies, socking away huge sums of cash in years with no damaging storms. </p><p>Citizens' surplus is now large enough to handle all but the most catastrophic hurricane without resorting to taxes on insurance policies statewide.</p><p>In contrast, private insurers have added little to their cash reserves despite an unprecedented six years without a hurricane striking Florida. Instead, they buy vast amounts of expensive reinsurance from unregulated offshore entities and pass the costs on to consumers.</p><p>"They buy reinsurance from affiliated companies," Neal said, decrying the insurers' "accounting tricks."</p><p>"If Citizens is allowed to jack up rates because of political pressure, it might be a way for some of the private carriers to get stronger," Neal said. </p><p>"But it's an awfully tenuous conclusion."</p>

Citizens Insurance's plan to raise rates will have serious ripple effect - Gainesville Sun

Published: Saturday, July 21, 2012 at 5:27 p.m.

Last Modified: Saturday, July 21, 2012 at 5:27 p.m.

The company's decision on whether to pursue dramatically higher rates for new policies will be felt far beyond the company's 1.43 million customers.

Private home insurers have curbed price increases in recent years to stay competitive with state-run Citizens, a development that is causing widespread displeasure in the industry.

Still, private home insurance companies filed 74 requests with state regulators to increase rates in the first six months of 2012.

The majority also still exceed the 10 percent annual increase Citizens is allowed by law. One Allstate affiliate wants a 33 percent boost, while State Farm is seeking a 15 percent rate hike.

But insurance executives increasingly worry that their rates are rising too rapidly compared with Citizens, which writes more policies than any other company statewide.

Some are seeking smaller price increases to ensure they do not lose business to the government insurance giant.

Florida's fourth-largest home insurance company, St. Johns, initially asked for a rate hike of less than 1 percent last year even though regulators said 43.4 percent could have been justified. Regulators pointed to Citizens' rates as the limiting factor in St. Johns' decision.

That Citizens partly acts as a brake on statewide property insurance rates is not widely understood by Florida home insurance customers, 77 percent of whom are not covered by the government insurer but may still pay less because of the company's cap on rate increases.

This dynamic is at the heart of a growing debate over Citizens' proper role in Florida's home insurance market, and what kind of rates the company's board should approve.

Private insurance executives closely track Citizens' rates and vehemently argue that the company should lift its 10 percent cap on increases.

"If I buy reinsurance at a certain price with a certain book of business and lose 30 percent of my book to Citizens because my rates are higher because my costs are higher, I have lost a lot of money," said Tom Jerger, who runs two small Pinellas Park property insurance companies.

Jerger said Citizens charges too little because it does not buy enough reinsurance to cover a massive hurricane, relying instead on the ability to tax insurance products throughout the state to cover any shortfall.

Gov. Rick Scott and many state leaders agree. They worry that Citizens is absorbing too many policies and they want to force customers out of the company by raising prices and decreasing coverage.

But some consumer advocates say private insurers already charge too much because of accounting gimmicks that inflate their costs.

Lifting Citizens' rate cap could encourage private companies to charge even more than is warranted, said Jay Neal with the Florida Association for Insurance Reform.

"If Citizens raises rates more rapidly, then the private market will as well," Neal said, adding that the ripple effect on the economy could be "huge."

Feeling the pinch

Property insurance is now a more pressing issue for many homeowners than property taxes, which declined along with real estate values during the Great Recession.

Just a 10 percent increase in statewide home insurance premiums would cost Floridians another $1 billion annually.

Property insurance rates are on the upswing again in Florida after a brief reprieve under former Gov. Charlie Crist.

Crist pushed a series of reforms in 2007 that expanded Citizens, froze the company's rates and forced all property insurance companies to buy more cheap reinsurance from the state, decreasing their expenses and the need for rate increases.

The result: Statewide home insurance rates declined in 2008 after years of steady increases.

The average statewide rate for the most common homeowner's policy dropped to $1,390 in 2008, down from $1,534 the year before, according to data compiled by the National Association of Insurance Commissioners.

Prior to the 2008 dip, home insurance rates had increased 65 percent over the previous four years.

But insurance companies were not happy with the reforms and fought back.

Responding to insurance industry complaints, the Legislature replaced Citizens' rate freeze in 2009 with the 10 percent "glide path."

Statewide home insurance rates began increasing again, rising 5 percent statewide in 2009.

The NAIC has not released data for 2010 or 2011 yet, but rates almost certainly rose more dramatically over the last two years as private insurers looked to make up for lost ground.

Castle Key Indemnity Company, one of Allstate's Florida subsidiaries and the state's seventh-largest home insurance company with 128,377 policies, boosted rates by 36 percent in 2011. Universal Property and Casualty, the state's second-largest insurance company with 567,187 policies, had a 15 percent rate hike.

Tempered by Citizens

Last year 50 different insurers received approval from the state Office of Insurance Regulation to increase prices for the most common type of homeowner's policy beyond 10 percent.

But some companies asked for much smaller increases, and even the larger rate hikes may have been tempered by Citizens.

Florida Insurance Commissioner Kevin McCarty noted in a speech last year that St. Johns could have requested an increase of up to 43.4 percent.

"Companies must lower their prices to compete with Citizens," McCarty told insurance industry leaders gathered at a conference in Miami, according to a transcript of the speech posted on an industry website.

McCarty said competition from Citizens is not good for the home insurance market. He said regulators have forced private insurers to accept larger rate increases than initially proposed because they needed the money. That included St. Johns.

Neal, of the Florida Association for Insurance Reform, said Florida home insurers hide profits and make their balance sheets look weak to justify rate increases.

"They'll always set up their insurance company entity to break even or lose money so they can submit a rate filing," Neal said.

A 2010 investigation found that overhead costs for property insurance companies in Florida are 50 percent higher than the national average. Insurers funnel money to affiliated companies that handle almost every aspect of the business but are not subject to strict regulatory oversight and profit limitations.

These affiliated management agencies can make huge profits even as the main company declares a loss.

Competition from Citizens could force some insurers to be more efficient and move less money into unregulated entities.

But Citizens was set up to take policies private that insurers do not want, not compete with the private market, said Sam Miller with the Florida Insurance Council.

The deck is stacked in Citizens favor, Miller said, because the company does not pay taxes or buy large amounts of reinsurance.

"Competition is good, even when it hurts some private carriers, as long as you have real competition," he said.

Others say Citizens acts more like a traditional insurer then Florida's private companies, socking away huge sums of cash in years with no storms. Citizens' surplus is now large enough to handle all but the most catastrophic hurricane without resorting to taxes on insurance policies statewide.

In contrast, private insurers have added little to their cash reserves despite an unprecedented six years without a hurricane hitting Florida. Instead, they buy vast amounts of expensive reinsurance from unregulated offshore entities and pass the cost on to consumers.

"They buy reinsurance from affiliated companies," Neal said, decrying the insurers' "accounting tricks."

"If Citizens is allowed to jack up rates because of political pressure it might be a way for some of the private carriers to get stronger," Neal said. "But it's an awfully tenuous conclusion."

Homeowners Pay for Many Kinds of Insurance - Fox Business

A typical homeowner has multiple insurance policies beyond a standard homeowners insurance policy. Some types of insurance are optional and some are mandatory, depending on your location and whether you have a mortgage. Some insurance policies protect you directly while others safeguard your lender.

Here are common types of insurance policies available to homeowners.

Mortgage Insurance

Mortgage insurance protects the lender or investor against default from the borrower, says Anthony Guarino, vice president of public policy development and research at Genworth Financial Mortgage Insurance in Raleigh-Durham, N.C. The borrower pays the insurance premium, even though the lender is the beneficiary. Usually, the premium is added to the monthly mortgage payment.

Private mortgage insurance, or PMI, is required for conventional loans with down payments of less than 20%. Premiums vary according to the characteristics of the mortgage loan and the borrower, Guarino says.

"PMI was created because lenders were unwilling to make loans with a lower down payment because of the risk," says Guarino. "Without PMI, homebuyers would have to come up with a 20% down payment for their purchases."

Private mortgage insurance has a government counterpart: the Federal Housing Administration, which insures FHA loans.

Title Insurance

Title insurance protects the policyholder against claims about rightful ownership of a piece of property. If you borrow money to buy a home, your lender will require title insurance.

"Title insurance for the lender is issued for the amount of the mortgage loan and only lasts until the loan is paid in full," says Jeremy Yohe, director of communications for the American Land Title Association in Washington, D.C. "The policy protects the lender to ensure the enforceability of the title."

Regulations about title insurance vary by locality. In some states, owner's title insurance is voluntary, while in others it is mandatory for homebuyers.

"Owner's title insurance is typically issued in the amount of the purchase price of the home and is good for as long as the owner retains the property," Yohe says.

Homeowners Insurance

Homeowners insurance, also known as hazard insurance, is required by the lender if you have a mortgage. If you pay cash for your home this insurance is optional, although financial experts recommend insuring your property against fire, theft and other potential losses.

"The idea of homeowners insurance is to be able to replace the property to the condition it was in the minute before the loss occurred," says Dan Muhlenkamp, owner of the Preferred Insurance Center in Coldwater, Ohio. "The lender doesn't want the property to be worth less than the value of the mortgage, so that's why lenders insist on insurance coverage."

After a loss, you will receive payment directly from the homeowners insurance company after a claim is processed. In some cases, your lender's name will also be on the payment.

"An insurance company will help you figure out how much coverage you need based on an estimate of what it costs to rebuild the home," Muhlenkamp says.

Some lenders require homeowners to pay their home insurance premiums through an escrow account with their mortgage payment in order to make sure the policy is kept current, but homeowners can sometimes opt to pay the premiums on their own.

Earthquake Insurance

Homeowners insurance covers most things, Muhlenkamp says -- fire, theft, wind damage "and even things like a deer running through your window." But a standard homeowners policy doesn't cover everything. "That list of exceptions is fairly long and includes things like acts of war, earthquakes and floods," Muhlenkamp says.

Homeowners can add "endorsements" to their homeowners policies to cover losses from events that aren't covered by the standard policy.

"Earthquake insurance can be added to a standard policy, but the price varies widely according to where you live and how likely it is you'll have an earthquake," Muhlenkamp says. "The deductible for an earthquake is a lot higher than your normal deductible, usually 5 (percent) or 10% of your coverage. On a $300,000 home, that means the deductible would be $15,000 or $30,000."

Flood Insurance

Flood insurance is an entirely separate policy, bought from the federal government.

"If you live in a designated flood zone, you'll be required by your lender to buy flood insurance," Muhlenkamp says. "Even if you are not in a flood zone, you should probably consider buying it after doing some investigation into the likelihood of a flood at your home. Flood damage can be very costly and will not be covered by a standard homeowners insurance policy."

Muhlenkamp recommends a "water backup of sewers and drains" endorsement on a standard homeowners insurance policy for all homeowners with a basement because it's an inexpensive add-on that will provide coverage if a blockage causes water to flood the basement.

Personal Property Insurance

Homeowners insurance policies generally provide a designated level of coverage for personal property, but Muhlenkamp recommends buying supplemental coverage for items such as jewelry, art, collectibles or guns that are not covered by the standard policy.

While you may not need every one of these insurance policies for your home, you should review your insurance coverage annually to make sure your assets are appropriately protected.

Auto & Home Insurance 101: WHY AND HOW ARE AUTO POLICIES PRICED ... - Island Gazette

Details

Published on Wednesday, 18 July 2012 23:55

Written by Super User

Steve Bowman, Property & Casualty Insurance Broker

Drivers are grouped according to level of risk which is the amount
of loss incurred by insurers within these categories. 
• Sex : Men  have more accidents than women.
• Age:  Drivers under 25 are considered higher risk having an accident.
• Marital Status:   Married drivers have fewer accidents than single.
• Personal Driving Record:    Years of experience, accidents, speeding tickets and drunk-driving offenses determine the risk you pose.
• Use of vehicle:    Business drivers or drivers who commute to work are of greater risk   than drivers  using vehicles for errands and recreation.
• Type of Vehicle:   Value, weight, size, age and cost of replacement parts determines price.
Larger, heavier vehicles are at  lower risk  than smaller, lighter ones.
Expensive cars cost more to repair than economy models. Cost is based on average cost covering actual losses, spread out in your "rating group". You may never need compensation, but others in your "group" may not be as fortunate. Your premium will help pay for these losses, just as their premium pays for yours.
From the office of: Steve Bowman, Property & Casualty Insurance Broker, 106 K Ave. Kure Beach, NC 28449 : Phone 910-458-1164 : 800-542-2502 : Fax 910-458-7311
This email address is being protected from spambots. You need JavaScript enabled to view it.

Home Insurance Discounts - WFTV Orlando

ORLANDO,FLa. —

Many local homeowners who saved thousands on insurance after adding hurricane protection are in for an expensive shock. Citizens Insurance is reinspecting homes, and thousands of owners have been denied discounts.

Greg Harrigan spent a lot to harden his home against hurricanes with tougher windows, a garage door approved for Category 5 winds and a new roof, so he was dumbfounded when Citizens Insurance canceled a big hurricane discount and raised his premium by several hundred dollars.

"I was quite upset because I spent a good deal of money trying to fortify my house," he said.

The denial came after Citizens sent its own contractor to verify that Harrigan's home qualified. But his new roof flunked the reinspection.

"They told me that I had not provided proof that my roof met building code," Harrigan said.

But Harrigan claims he did everything right, so he hired a state-licensed contractor who had all the permits required, and the roof passed a city inspection.

But the Citizens inspector said that was not enough proof.

"I can't see how one contractor gives you credit and then another contractor just takes it away on behalf of Citizens," said Harrigan.

And Harrigan isn't alone. A South Florida law firm filed a class action lawsuit claiming Citizens' reinspection program is an excuse to jack up rates.

WFTV did some digging and learned that in Central Florida, Citizens has reinspected 7,000 homes, and 77 percent of the owners had premium increases by an average of $450.

The Florida Roofing Association had questioned how Citizens can reject county- and city-approved jobs.

Harrigan filed several appeals, and Citizens restored his hurricane discounts.

"I am a structural engineer, so I had an advantage and knew exactly how the roof was put together," Harrigan said.

Citizens said a new state law allows companies to establish their own guidelines for approving discounts. The company denied that any owners have lost discounts for real structural improvements.

Real estate Q&A: Finding home insurance when all else fails - Sacramento Bee

QUESTION: We bought a home a couple of months ago that is about 35 years old. We had property insurance for the closing, but later an inspector came out to the house and the insurance company dropped us due to some deficiencies in the condition of the home. Our agent couldn't find us other coverage, even with Citizens Property Insurance Corp., the state-run insurer of last resort. We would have to make major renovations we can't afford. There is no equity in the home to borrow against. What can we do?

-Doug

ANSWER: Some homes don't qualify for standard insurance coverage. Basically, insurance companies are in the business of assessing risk, and occasionally they find a home that's too much of a risk to be included in their pool of insurance.

When this happens, your option is to go to a "surplus lines" insurance company. A surplus lines insurer is not required to file forms or rates with the state insurance regulator. This freedom from regulation allows the insurer to fit the insurance policy to your specific situation. The upside of surplus lines insurance is just that you will be able to get some insurance for your property. Downsides include: Your premium or claim is not guaranteed should your insurer go out of business; the insurance typically is more expensive and has more exclusions; and if you cancel the policy early, you may not get back all of the premium for the unused time.

ABOUT THE WRITER:

Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program. Send him questions online at http://sunsent.nl/mR20t7 or follow him on Twitter @GarySingerLaw.

The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.

Real estate Q&A: Finding home insurance when all else fails - Kansas City Star

QUESTION: We bought a home a couple of months ago that is about 35 years old. We had property insurance for the closing, but later an inspector came out to the house and the insurance company dropped us due to some deficiencies in the condition of the home. Our agent couldn't find us other coverage, even with Citizens Property Insurance Corp., the state-run insurer of last resort. We would have to make major renovations we can't afford. There is no equity in the home to borrow against. What can we do?

-DougANSWER: Some homes don't qualify for standard insurance coverage. Basically, insurance companies are in the business of assessing risk, and occasionally they find a home that's too much of a risk to be included in their pool of insurance.When this happens, your option is to go to a "surplus lines" insurance company. A surplus lines insurer is not required to file forms or rates with the state insurance regulator. This freedom from regulation allows the insurer to fit the insurance policy to your specific situation. The upside of surplus lines insurance is just that you will be able to get some insurance for your property. Downsides include: Your premium or claim is not guaranteed should your insurer go out of business; the insurance typically is more expensive and has more exclusions; and if you cancel the policy early, you may not get back all of the premium for the unused time.ABOUT THE WRITER:Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program. Send him questions online at http://sunsent.nl/mR20t7 or follow him on Twitter @GarySingerLaw.The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.