Insurance premium hikes leave some bewildered

PANAMA CITY BEACH — Are Florida’s homeowners’ insurance premiums going up or down? It depends on who you ask.

Ask Panama City Beach resident Betty Gordanier and she will tell you her premium has increased steadily under Florida Peninsula Insurance, which claims to be one of the top 10 largest homeowners’ insurers in the state.

The retired Michigan schoolteacher said her wind and storm premium rose more than $1,000 over the last two years on her Summer Breeze home, which she bought new 17 years ago.

“I have never had a claim in 17 years,” said Gordanier, who was flummoxed after reading a report from the state insurance commissioner last month touting decreasing homeowners’ insurance rates.

Gordanier isn’t the only one to see rate increases.

The 1 million customers of the state-run Citizens Insurance Corp., Florida’s largest residential property insurer, are facing a fourth consecutive year of rate hikes in 2014. The company still is playing catch-up nearly a decade after Florida’s last major storm hit in 2005.

“Folks need to remember that we’re still trying to catch up to rates that have been for several years below actuarially sound rates,” said Citizens spokesman Michael Peltier.

An actuarially sound rate is one in which the premiums collected from customers more than offset damages paid out.

“In a lot of parts in the state we’re still trying to catch up to what our actuaries say our rates should be,” he said.

Florida insurance regulators approved a 6.3 percent rate hike for Citizens last fall. Under state legislation, Citizens can raise rates by no more than 10 percent per year.

Citizens provides policies for the highest risk homeowners in the state, and Peltier said the biggest rate discrepancies come from older homes on the coast.

Competition

As Citizens’ rates increase, private companies are beginning to offer more competitive rates for inland homeowners, Peltier said.

“Relief is coming to coastal property owners, but it’s a slower process than if you’re in a less risky part of the state,” Peltier said. “In coastal communities, the options available from other private carriers are more limited.”

With private coverage on the decline, Citizens recently launched a clearinghouse effort to shift more policies to private companies.

The process began Jan. 27 to send all new applications for coverage through the clearinghouse, which compares Citizens’ rates with rates of participating private companies. If a private company can offer a premium within 15 percent of the Citizens premium, the applicant is ineligible for Citizens coverage.

“One of the reasons behind the clearinghouse is that there are decreasing private options available for property insurance at comparable policies,” said Peltier, citing significant growth in Citizens policies following the 2004 and 2005 hurricane seasons, when private insurers dropped many coastal homeowners. “Lawmakers have been clear that they want Citizens to return to our role as an insurer of last resort.”

At its peak in August 2012, Citizens had 1.5 million policies, a number that has dropped to about a million.

While the clearinghouse does not affect current policyholders, Peltier said Citizens intends to expand the clearinghouse to renewal customers by the second quarter of this year.

On the private side, Trey Hutt, president of Hutt Insurance in Panama City, said rates under better capitalized companies have been gradually nudging up in the last five years, but he anticipates it will soon end. 

“Rate increases should come to an end over the spring and summer,” said Hutt, noting modest decreases already have been seen for companies that aren’t as well capitalized, so they don’t have the same post-storm staying power. “There’s a reason they’re cheaper than anybody else.”

Hutt said reinsurance rates in Florida also have been falling drastically because the state has seen little storm activity, and rates should follow suit. Reinsurance is backup coverage insurers purchase to cover claims in the event of a catastrophe. High reinsurance costs have been blamed for price spikes in the past. 

Hutt said shopping for homeowners insurance can often be daunting and urged customers to first research the market and shop around for the best rate.  

“Consumers know the difference between a Yugo and a Cadillac; they don’t know the difference between two insurance companies and their quality,” Hutt said.