Fla. Homeowners Rates to Rise by 6.8 Percent Again This Summer

Florida homeowners can expect to receive a 6.8 percent increase in their insurance rates to pay for Citizens Property Insurance Corporation’s deficit, according to Bob Hartwig, chief economist at the Insurance Information Institute in New York. This increase is in addition to already requested increases averaging from 5 percent to almost 30 percent since the 2004 hurricane season. “It’s unlikely that increases in 2005 are going to be sufficient,” Hartwig said. “While other states may also need higher homeowners’ insurance rates, none will see increases on par with Florida’s.

“Florida is the most at-risk state for hurricanes, homeowners insurance is going to be expensive there, it’s inescapable,” Hartwig told the Tallahassee Democrat. “Florida is a constant drag on earnings. It needs to become more self-sufficient.”

Consumer groups, like the Consumer Federation of America, oppose more rate increases.

“You said that would do it, now you’re coming back for another bite of the apple. Why?” asked Bob Hunter, CFA director.

Insurance industry officials, however, defend their performance. They say that more than 95 percent of the nearly 1.7 million claims made in Florida have been closed. They claim rate increases are needed to make sure that insurers will be able to pay for damage when it occurs.

“The thing for customers to remember, and our primary point, is protecting customers is our No. 1 priority,” Mike Siemienas, an Allstate spokesman, told the Democrat. “We need to make sure we have adequate capacity to cover customers.”

Hartwig said the insurance industry overall is well prepared financially. Only one insurer went bankrupt after last year’s four storms, compared to 11 after Andrew.

But Fitch Ratings said another serious storm could make more insurers insolvent.

“Severe back-to-back storm seasons could also be the catalyst needed to raise premium rates to adequate levels and attract better capitalized insurers to the state,” the credit rating agency said recently.

Major insurers like Allstate are also dropping some homeowners because they live in areas where the risk of hurricane damage is too high. Those residents have to try to find other insurers willing to take them on. If they can’t find a willing company, they sign up with Citizens Property Insurance Corp., the state-backed insurer of last resort that gives coverage to those who can’t get it from private companies.

But Citizens charges higher rates than other companies to deal with the increased risk. The company’s average annual premiums for single family homes are now $1,858, up $202, or about 12 percent, from last year.