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PO Box 1212 Tampa, FL 33601 Pinellas Updated October 2005
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Homeowner Premiums To Rise Sharply
TALLAHASSEE - Homeowners throughout Florida will be socked with higher insurance bills over the next few years, whether they were hit by recent storms or not. For some in the Tampa Bay region, the pinch could more than double.
A state Senate committee heard projections Wednesday that some Citizens Property Insurance Corp. policyholders will face premiums that will seem like another mortgage payment.
The news sparked this exchange between state Sen. Mike Fasano, a New Port Richey Republican, and Bob Ricker, executive director of Citizens, the state-sponsored insurer of last resort, at a meeting of the Senate Banking and Insurance Committee:
"What are the people in my district going to have to pay?" Fasano asked. "What are you looking at in increases next year?"
"In Pasco in particular, you're looking at 100 percent-plus rate increases," Ricker responded, adding that some Pasco County rates are going up because of sinkhole claims.
"So in essence if somebody is paying $3,000 a year right now on Citizens, they'll pay $6,000 by the end of next year?" Fasano asked.
"Yes, sir," Ricker replied.
With numbers such as that, Gov. Jeb Bush and Senate leaders are suggesting that broad changes are in order.
"We're going to have another season of hurricanes, and we will expect there will be less private insurance rather than more, more Citizens policyholders rather than less," Bush said. "This could become a very vicious cycle, so a more comprehensive approach to this should be part of the answer."
But until a solution is found, many local homeowners are facing a big hit. Most Citizens policyholders who live west of U.S. 19 in Pasco County are facing the biggest increase in the state -- about 124 percentfor standard policies without wind coverage.
Hernando County homeowners would see the second-highest increase, an average of 85 percent. In Pinellas County, rates would rise between 8 percent and 18 percent. Hillsborough County would see a 20 percent rate increase. In coastal Pinellas, homeowners who have separate wind policies with Citizens are due for an average 91.5 percent increase on those, according to data from the company.
Those increases are just part of a one-two punch for homeowners. Citizens was set up to cover home buyers who cannot get coverage anywhere else, and every other policyholder in the state pitches in to help when it loses money.
This year, preliminary estimates show a deficit of $950 million, which could translate into an extra assessment to non-Citizens policyholders of 10 percent to 11 percent of their premium to cover that. The surcharge would add $220 to a $2,000 bill.
Policyholders already will see a 6.8 percent surcharge as they renew over the next year to pay for Citizens' deficit of $516 million from last year's four hurricanes. That added about $136 to a $2,000 homeowner premium.
Floridians may have to get used to the idea of higher homeowners insurance rates, said Senate President Tom Lee, R-Brandon.
"In a way, it's tough medicine for a state that I think has been sold a bill of goods, that we can live on low rates and cross our fingers that ... we won't have to pay the price down the road," Lee told reporters Wednesday. With eight storms over the past two years and more than $30 billion in claims, "it's caught up with us," Lee said.
"I think that there is a high probability that over time, with the storm activity we have had in this state, that we're going to have to have higher rates," he said of the insurance market as a whole.
Robert Hunter, the insurance director of the Consumer Federation of America, said reforms need to be made to encourage private insurers to write more policies, to reduce Citizens' total exposure. Citizens has been growing at a rate of 20,000 to 30,000 policies a month and now has almost 800,000 policies.
Several proposals have been floated on how to deal with the costs. Tom Gallagher, the state's chief financial officer, wants to use sales tax revenue from reconstruction work after storms to help Citizens with debts. Such construction brought in an estimated $800 million in general revenue to this year's state budget, and Gallagher proposes a legislative allocation to relieve the Citizens deficit.
He also wants to cap wind-damage policies at a $1 million payout, which would force more expensive homes into alternative coverage.
Lee said a legislative allocation is the "easy solution."
"I'm torn about that," he said. "You just take tax dollars and plug the hole, but you don't solve the problem. It's kind of like putting a Band-Aid on a cancer. The problem is that Citizens is not actuarially sound. Citizens cannot pay its bills. It cannot pay its claims. So we're going to take tax dollars and backfill the deficit from Citizens?"
Citizens has grown to become the second-largest homeowner insurer in Florida, as private companies withdraw or scale back.
Several senators at Wednesday's meeting suggested that a national catastrophe fund is part of the answer to soaring losses from hurricanes. A national fund, which is being touted by Gov. Bush, would limit insurance company losses from a hurricane, earthquake or other natural disaster. One bill pending in Congress introduced by Rep. Ginny Brown-Waite, R-Crystal River, would cap industry liability at $25 billion.
"I think we need to look at a broader solution," said Bush, adding that a state allocation to Citizens may be part of that solution.
Senate Banking and Insurance Committee chairman Rudy Garcia, R-Hialeah, said he's "absolutely certain there's more [debate] to come in this area."
No one doubts that, but the volatile mix of natural disasters, Florida's continued growth, and Citizens' recent track record worries some.
"The future scares the heck out of me," said Sen. Bill Posey, R-Rockledge.
POLICY INCREASES
All Florida homeowner policyholders will likely pay a surcharge of 10 percent to 11 percent beginning in late 2006 or early 2007 to cover deficits from Citizens Property Insurance Co., the state-sponsored provider of insurance for people who can't acquire it from private companies. The surcharge is in addition to a 6.8 percent surcharge that policyholders will see over coming months. Citizens policyholders will pay much more. In some costal areas, Citizens issues two types of insurance: wind-only coverage for storms and hurricanes and a standard policy, which covers other damage, including sinkhole cases. Below are estimated average percentage increases for Citizens policy holders
Pasco County:
Standard: 124 percent -- homeowners west of U.S. 19
66 percent -- homeowners east of U.S. 19 (includes wind coverage)
Wind only: 0 percent increase
Hernando:
Standard: 85 percent
Wind only: 5.8 percent
Pinellas:
Standard: 8percent to 18 percent
Wind Only: 91.5 percent
Hillsborough:
Standard: 20 percent
Wind only: Hillsborough County has no wind-only policy.
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