Lower Florida insurance rates have been slow in coming
By Lloyd Dunkelberger
Halifax Media Services
Published: Monday, January 20, 2014 at 4:45 p.m.
Last Modified: Monday, January 20, 2014 at 8:56 p.m.
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TALLAHASSEE — Lower expenses for private insurers should offer some relief to Floridians who pay the highest insurance rates in the nation, but premium reductions have been slow in coming to consumers, according to a new report by the state insurance office.
Comparing insurers in Florida
Here are the largest private property insurance companies in Florida that have filed for rate adjustments recently:
Universal Property and Casualty: 2.4 percent rate reduction (approved); homeowners market share: 10 percent; reinsurance savings: 15.7 percent
State Farm Florida: 6.3 percent rate increase (approved); market share: 7.8 percent; reinsurance savings: 6.1 percent
Security First: 9.2 percent rate reduction (approved); market share: 2.9 percent; reinsurance savings: 4.9 percent
American Bankers: 3.6 percent rate reduction (pending); market share: 2.5 percent; reinsurance savings: 34.4 percent
Castle Key Indemnity: 7.4 percent rate increase (pending); market share: 2.4 percent; reinsurance savings: 13.7 percent
SOURCE: Office of Insurance Regulation
Of 30 insurers covered in the report, 15 — representing 40 percent of the private market — have made filings reflecting a drop in a key expense for the firms, reinsurance, or backup coverage to help cover claims.
Still, six insurers have either had rate increases approved or rate hikes are pending state review. The hikes ranged from 12.2 percent for Castle Key Insurance Co. to 0.3 percent for Tower Hill Signature Insurance Co. Only two rate hikes have thus far been approved by the state.
State Farm Florida, the second-largest insurer to make a rate filing representing 7.8 percent of the homeowners market, won state approval for a 6.3 percent rate hike, although its reinsurance costs dropped by 6.1 percent.
Even with the recent hikes, “there is reason to be optimistic that the Florida homeowners market is steadily improving,” said Office of Insurance Regulation Commissioner Kevin McCarty in the report Wednesday to Florida Chief Financial Officer Jeff Atwater.
“Not only are rates trending downward,” McCarty said, but more policies are being moved from the state-run Citizens Property Insurance to private firms, and “new companies are coming to Florida and competition in the homeowners market is robust.”
“Barring an intervening event, the expectation is that these same positive trends will continue, therefore positioning insurers to pass savings on to policyholders in the future,” he concluded.
Florida has experienced a record eight consecutive years without a hurricane making landfall. As a result, companies have been reaping strong profits, as their cost of reinsurance has dropped by a range of about 5 percent to as much as 36 percent, according to the report.
Atwater had demanded the report last fall, as consumers failed to see rate relief despite the lull in hurricane activity and companies’ dropping costs.
“My question to you is simple: ‘Why have rates not come down?’” Atwater wrote in a letter to McCarty in late October.
McCarty’s report had originally been due in December, but the OIR received a one-month extension to complete it. He cautioned that reductions in reinsurance costs don’t immediately translate into a lower premium, since the reinsurance rates are only a portion of a company’s costs. Other expenses could offset the lower reinsurance rates including changes in catastrophe models and loss experience, the report said.
Additionally, state law allows insurers to purchase reinsurance to cover a major storm that could be expected to occur once in every 250 years.
“Reinsuring to a higher level helps ensure the solvency of insurers in Florida, allows a company to write more business, attracts capital to Florida and provides greater resources to pay catastrophic claims,” the report said.
But Atwater, who is up for re-election this year, sought to keep pressure on the insurance industry to lower rates, saying the “key takeaway” from the report is that lower reinsurance costs should be passed on to homeowners.
“The commissioner made it clear, barring any catastrophic event, he has every expectation that these lower reinsurance costs will be reflected in lower rates for consumers in future rate filings,” Atwater said. “I share the commissioner’s expectations. Floridians deserve rate relief.”
While the report shows the general trend for property insurers is toward lower rates, the data is incomplete since not all of the insurers have filed for their annual rate adjustments.
The report also did not include data on Citizens, which has the most homeowners’ policies and where rates have been on the rise — although increases are capped at 10 percent per year.
The review follows a December report from the National Association of Insurance Commissioners, which found that the state’s average homeowners annual premium of $1,933 ranked as the most costly in the nation — twice as expensive as the national average.
Lloyd Dunkelberger writes for the Sarasota Herald-Tribune.