April-FoolNormally, April 1st is known for being the one day when you can pull pranks on friends and co-workers and still escape the beating that would normally follow on any other day.  By merely yelling, “April Fools!”, you can escape judgment for all sorts of sins and misdeeds – all in the name of “good fun”.

Unfortunately, this April Fools Day will hold special meaning to property insurance policy holders in Florida because, as of April 1, 2015, the Homeowner Flood Insurance Affordability Act of 2014 goes into effect.  As history has shown, anytime the Federal government passes a law with the word “Affordability” in the title, you know you are going to have to reach for your pocketbook.  The Homeowner Flood Insurance Affordability Act was passed last year to kick the can down the road with regard to sky rocketing flood insurance premiums under the Biggert-Waters Act, but it looks like “down the road” is now staring Floridians in the face.  Although the new premium increases won’t be as draconian as the $30,000 residential flood insurance premiums homeowners were facing under the Biggert-Waters Act, Floridians can still expect to see increases of approximately 18% annually until the premium charged for flood insurance coverage is “actuarially sound” (i.e., never).

But not to worry!   A local congressman just introduced a bill entitled the Flood Insurance Premium Parity Act of 2015.  Based on this lofty sounding title, the bill is sure to solve any and all problems and make flood insurance affordable for all in perpetuity.  See – nothing to worry about.

Last night, Citizens Property Insurance Corporation held a public hearing on its proposed hikes to the homeowners insurance premiums currently paid by Floridians.  The hearing was requested by former state Senator Mike Fasano in advance of the Florida Office of Insurance Regulation’s upcoming decision on whether to approve the rate increases being requested by Citizens Property Insurance.  Despite the fact that these proposed rate increases would have a dramatic affect on the premiums Tampa Bay residents pay for homeowners insurance, only about three dozen people showed up for this meeting – most of whom were either employees of Citizens or of the Office of Insurance Regulation.

It seems as though Floridians have given up any hope of ever getting a fair shake from Citizens Property Insurance – or any other homeowners insurance carrier in Florida.  Despite the already high rates Citizens currently charges, Citizens is proposing an average increase of 6.6 percent statewide for residential coverage, and an average of 7.5 percent for all properties insured in Florida.  (The difference between the 6.6 percent increase for residential and the 7.5 percent increase for all properties hints that the proposed increase for non-residential coverage is substantially higher!)  Furthermore, these insurance rate increases DO NOT include any proposed increase in the insurance premiums charged for sinkhole loss coverage.  Although the premium for the non-sinkhole loss portion of the policy is set to go up 6.6 percent, the premium for the sinkhole loss portion of the policy is set to go up as much as 20 percent in Hernando and Pasco counties and as high as 50 percent in Hillsborough County!    To quote a long-gone infomercial guru – “Stop the Insanity!”

Remember, we have not had a hurricane or other major loss event in Florida for over 7 years.  Furthermore, any actuarial argument for higher sinkhole loss premiums is specious at best.  The premiums charged for a current policy year can only pertain to losses which could actually come into fruition during that policy year.  Since the passage of SB 408 in May 2011 and the subsequent inclusion of this law into insurance policies, the ability to effectively pursue a new sinkhole loss claim has been reduced to almost nil.  Ergo, for upcoming policy periods, the insurance carriers will not require large premiums dollars to pay sinkhole loss claims which may arise during these new policy periods because, quite bluntly, there won’t be any such claims.  If no sinkhole loss claims to pay – no reason to charge unreasonable premiums.  Despite this fact, Citizens Property Insurance points to data from prior to the passage of SB 408 to support its claim for higher reserves and premiums.  To any logical thinking person (without an agenda, that is), this is nothing more than a lie to the policy holders of Florida.

Someone needs to hold Citizens Property Insurance accountable for its actions.  Unfortunately, as reflected by the meager showing at the public hearing last night, the policy holders of Florida may have already given up hope.