Soaring insurance costs rattle customers

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http://www.sptimes.com/2002/10/16/Business/Soaring_insurance_cos.shtml

Soaring insurance costs rattle customers

Homeowners say they're at the mercy of companies such as State Farm, which

is raising some rates 85 percent over two years.

By JEFF HARRINGTON, Times Staff Writer

© St. sburg Times

published October 16, 2002

Throughout his career, has handled insurance claims, developed

spreadsheets, worked for accounting firm PriceWaterhouse, even analyzed

executive compensation packages.

" So I'm used to handling figures, " says , 77, now retired and living

in St. sburg, " and what is happening is just wrong ... It doesn't add

up. It's unconscionable. "

The numbers upsetting him came in the mail with his latest homeowners

insurance bill. State Farm is charging $374 more for his twice-a-year

premium, a 62 percent increase.

" The insurance companies are licensed to reach into your pocket and take

anything they want because the mortgage on my house requires me to have

homeowners insurance, " said. " They're playing the system, and I say

the system doesn't work. "

Homeowners insurance has been a flashpoint for Floridians ever since 1992's

Hurricane made homeowners scramble to find coverage and gave

insurance companies extra clout to raise rates and drop longtime customers.

But ' complaints and those of his fellow homeowners rose a few more

decibels this week.

As the St. sburg Times first reported Tuesday, a state arbitration

panel overruled Florida Insurance Commissioner Tom Gallagher and approved a

request by State Farm, Florida's largest insurer, to raise rates an average

of 22.5 percent annually this year and next. But that's the overall average:

Some homeowners could see rates rise as much as 85 percent over the next two

years under the ruling of the three-member panel.

Gallagher spokeswoman Tami said the commissioner's office had not

received the ruling as of Tuesday afternoon and could not comment on whether

Gallagher would challenge State Farm.

Under the way it applied, State Farm was allowed to impose rate increases

since June as it awaited the arbitration panel's decision.

The panel capped the amount State Farm can raise an individual policy at

42.5 percent both this year and next. That means the insurer will have to

pass out partial refunds to homeowners like whose premium increases

this year exceeded that cap.

Jim of Seminole is also due to get some money back after State Farm

raised his annual premiums by 66 percent this fall, from $899 to $1,495. But

a partial refund is little solace.

" When you're on a fixed income ... even 42 percent is a steep increase, "

said. " It's a killer. "

With nearly 1-million policies statewide, State Farm writes nearly a third

of all homeowners policies in Florida. Among other large insurers, No. 2

Allstate received permission to raise rates an average of 15.7 percent in

August.

The insurers say they are reacting to higher claims and the rising costs of

doing business, but consumer groups accuse them of mismanagement. State

Farm, in particular, is accused of keeping its rates artificially low for

years to build market share.

Jim Kirkman has dutifully tracked the annual rates paid to State Farm to

insure his Seminole home since he retired in 1993.

The policy's cost rose steadily and surely every year. It was $289 in 1993,

$378 in 1994, $409 in 1995, $454 in 1996, $455 in 1997, $457 in 1998, $460

in 1999, $470 in 2000, and $495 in 2001.

The most recent bill he received: $787 for 2002, a 59 percent increase.

" A little bit here and a little bit there every year we can live with. We

know real estate continues to increase, " Kirkman said. " All of a sudden this

big jump here is an awful lot.'

Some policyholders are making difficult tradeoffs as a result.

Stunned by a 42 percent increase in her State Farm homeowners premium after

20 years with the insurer, Dorothy Laun of Largo chose to drop her

nonrequired flood insurance to afford the higher payment.

" I was just grateful they didn't cancel me out like they did my neighbor, "

she said.

Sol Vischio of Spring Hill likewise believes State Farm has the upper hand.

He said he didn't report a recent minor claim to the insurer for fear it

would be used as an excuse to drop him.

Homeowners aren't the only ones suffering.

Condominium owners associations are also bracing for large increases. State

Farm is in talks with state regulators over its bid to raise rates for

owners of condominiums and apartment buildings by 132 percent.

, the St. sburg homeowner, wishes Congress would take action to

give policyholders an upper hand.

He suggests federal oversight in setting insurance rates for all states.

That would force insurance companies to open their books and reveal how much

money they are making around the country in seeking increases. It would mean

a three-member arbitration panel wouldn't have so much power. And it would

buttress state insurance regulators with the clout of federal regulators.

He said he has written Sen. Bill , D; Reps. Mike Bilirakis, R-Tarpon

Springs and C.W. Bill Young, R-Largo, and even President Bush.

So far, 's office has been the only one to respond but an aide to the

senator offered little encouragement. According to the aide said

" asked around and he's getting a 'ho-hum' response. "

-- Jeff Harrington can be reached at harrington@... or (813)

226-3407.