Homeowners feel the squeeze

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Homeowners feel the squeeze

By JOHN HIELSCHER

posted 09/30/02

Venice retiree Cary got quite a jolt when he opened up his homeowners

insurance renewal last month.

State Farm is hiking his annual premium 153 percent, from $391 to $990.

While the coverage on his three-bedroom, three-bath house increased $21,600

to $263,600, said there was no reason to justify more than doubling

the price of his policy.

" It looks to me like this is a way to get rid of us, to get premiums so high

that we will go somewhere else for insurance, " he said.

Longtime State Farm customer Eberly learned that the renewal on his

Sarasota County home would jump 85 percent, from $750 to $1,390.

" We have been insured by State Farm since 1987 and have never filed a loss, "

he said.

He switched to another insurer and is paying $450 more than last year, but

he also boosted his coverage by 15 percent.

Ten years after Hurricane dramatically altered the Florida insurance

business, homeowners are facing another round of stiff rate hikes.

State Farm and Allstate, the two largest homeowner carriers in Florida, are

leading the way with hefty increases on most of their 1.7 million policies.

The cost of homeowners insurance has more than doubled since Hurricane

roared across Florida on Aug. 24, 1992, causing $30 billion in damage

in the most expensive natural disaster in U.S. history.

State Farm, Florida's largest homeowners insurer, has elevated its average

rates a total of 165 percent since . Rates at Allstate, the No. 2

homeowner carrier, have climbed 109 percent.

Insurance companies now say they need higher rates to cover a growing number

of claims from sinkholes, mold, water damage and burglaries. They also cite

the escalating costs of construction to repair homes, especially building

materials and labor, and covered medical expenses.

Last year, the property/casualty insurance industry suffered its first net

loss in history, with a $7.9 billion deficit, according to the National

Association of Independent Insurers, a Chicago-based trade group.

Losses and expenses have exceeded premiums for several years, but prior to

2001 the industry had been able to recoup through investment earnings.

" Insurers have not been able to make the type of return on investments

necessary to counteract increasing losses that are a result of an exorbitant

increase in various types of claims, " said NAII spokesman Don .

A coalition of national consumer groups is urging state insurance regulators

to investigate whether insurance companies are price-gouging customers.

The group Americans for Insurance Reform is lobbying to freeze homeowners

rates.

While the group agrees that rates were moving up before Sept. 11, " the price

increases were sped up by the terrorist attack, collapsing two years of

anticipated increases into a few months, " it said in a letter to state

regulators.

The National Association of Insurance Commissioners, which represents state

regulators, plans to study rising homeowners rates.

The NAIC said insurance companies respond to large disasters, such as

or 9/11, in " rather predictable ways -- increasing rates, canceling

insurance contracts and introducing coverage limitations. "

The local impact

Residents of the counties along the Gulf of Mexico can expect the homeowners

rate hikes to hit them harder than other Florida customers.

Florida Insurance Commissioner Tom Gallagher last month approved an average

15.7 percent rate hike for Allstate's homeowners policies, its first

increase since 1996. The company, which covers 750,000 Florida homes, had

requested a 21 percent increase.

But Allstate customers in Sarasota, Manatee and Charlotte counties will see

a 25 percent rise, the maximum Allstate can charge under Gallagher's

approval order.

A local customer who now pays $600 per year for coverage will cough up $150

more on renewal.

Residents of coastal counties typically pay more for homeowners insurance,

said Allstate spokeswoman Kathy .

" We have seen increases in loss costs, the cost of claims, due to increased

catastrophe and weather-related claims, along with the continually rising

cost of building materials and construction, " she said.

" What has happened is that the cost of paying for claims is exceeding the

premiums that we are collecting, " she said.

Battle with the state

State Farm, with 980,000 homeowners policies in Florida, is battling with

Gallagher for another rate increase.

The company wanted to raise homeowners rates by an average 22 percent and

its condominium association rates by 132 percent.

The homeowners increase would average 31.3 percent in Sarasota County, 27.1

percent in Charlotte County and 23.4 percent in Manatee County.

That would come on top of approved rate hikes that averaged 6.4 percent in

2001 and another 14.3 percent in January.

Gallagher rejected State Farm's proposal, calling it excessive in light of

the two previous increases.

" The price tag for homeowners is an additional $128 million a year in

premiums, leaving some homeowners stuck with cumulative increases as high as

125 percent, " he said. " Double-dipping for rates in the same year is

inexcusable. "

The company fought back on several fronts. It took its rate request to

arbitration, hoping to convince a three-person panel that the higher prices

are justified.

During the arbitration process it can increase premiums to customers, but it

will have to refund the money if it loses the case. The panel's decision is

expected within two or three months.

" Those increases reflect the recent rise in our claims cost, " said State

Farm spokesman Tom Hagerty.

The company's average noncatastrophe claim was up 13.9 percent in 2000 and

14.8 percent last year, he said.

" Those are regular, everyday claims, as opposed to a hurricane, " he said.

The insurer also said it would no longer sell new homeowners policies in

Florida, and it would cancel its 4,800 condo association policies as they

come up for renewal. The company raised its condo association rates by an

average 17.5 percent last year.

The company said it needs to charge higher rates because it lost $231

million from January 2001 through May 2002 on claims from sinkholes, mold

and floods.

Hagerty said the company would reconsider its moratorium on new homeowners

policies if it wins its arbitration appeal.

But it also wants some kind of limits on its liability for mold, claims for

which more than tripled in the past year.

Analysts say State Farm is paying the price for trying to build market share

with low rates.

The company kept its rates down from 1998 through 2000 to attract customers

from other insurers, but it wound up with billions in operating losses.

State insurance officials say the bottom line is that Allstate convinced

them it needed a rate increase to cover losses in the homeowners market, but

State Farm did not.

Gallagher also recently rejected a proposed rate increase from Nationwide

Insurance, which insures about 250,000 Florida homes. The company is

appealing the decision.

Facing the hefty premium increase from State Farm, shopped around for

homeowners insurance for his Venice house.

The only company that quoted less than his $990 renewal price wasn't writing

any new policies in Florida, so for now he's sticking with State Farm.

" That really threw me for a loop, " he said. " This may be what the market is

coming to. "

[Guest guest]

First of all, the rest of the country's premiums makes up for the

disasters in one small section of the country. This report doesn't

tell you what their profits are. They just mention what seems to the

average person to be an exorbitant amount in damages.

In retrospect, the $7.9 billion deficit is probably a drop in the

bucket compared to what the insurance industry has been making in

years past. What are the CEOs of some of these companies raking in?

How much are the underwriters themselves netting? Is this information

available anywhere? How much of the profits are being skimmed off and

sent out to hidden accounts in other countries? I think that it's time

the insurance industry is required to prove their accountability. Two

major mold claims have created this ruckus? Give me a break. This has

very little to do with mold.

How many exclusions are the insurers going to be writing into policies?

If it's just fire and theft remaining, then let's start to form some co-op

bonded insurers at the local level for reasonable rates. Get rid of the

national insurers who don't want to lose a dime of their trillions of

dollars we're giving them. At least at the local level, the risks can

be more easily assessed. Right now, local agents' hands are tied. They

have no control over the rates. Unless they do something about this

soon, their businesses will be eliminated. They seem doomed for

extinction at this point. More profits in the underwriters coffers.

Barth

NEW: TOXIC MOLD SURVEY: www.presenting.net/sbs/sbssurvey.html

bmc> http://www.heraldtribune.com/

bmc> Homeowners feel the squeeze

bmc> By JOHN HIELSCHER

bmc> The cost of homeowners insurance has more than doubled since Hurricane

bmc> roared across Florida on Aug. 24, 1992, causing $30 billion in

damage

bmc> Last year, the property/casualty insurance industry suffered its first net

bmc> loss in history, with a $7.9 billion deficit, according to the National

bmc> Association of Independent Insurers, a Chicago-based trade group.

bmc> " Insurers have not been able to make the type of return on investments

bmc> necessary to counteract increasing losses that are a result of an

exorbitant

bmc> increase in various types of claims, " said NAII spokesman Don .