It seems like every April 1st, the National Flood Insurance Program informs us that it is raising the premium rates for flood insurance.  (Feel free to insert any April Fools jokes here.)

As of April 1, 2018, the average flood insurance premium rose 8 percent, with some property owners seeing increases of up to 25 percent.  Despite what you might initially think, these increases are not the result of Hurricane Irma, but are part of an ongoing effort by Congress to get the National Flood Insurance Program out of debt.  As of last count, the NFIP was approximately $25 Billion in debt.

The largest premium increases will be levied upon high risk properties.  This high risk designation usually applies to buildings that were constructed prior to 1970 when the first flood insurance rate maps were produced, or to newer properties that are either non-primary residential properties, business properties, or properties that sustained substantial damage in the past.  The properties deemed “low risk” will most likely see the smallest premium increases – perhaps less than 1 percent.

As a result of these higher premiums, there is a growing number of private insurance companies that are now offering flood insurance policies.  Since these policies are not related to the National Flood Insurance Program, these private insurance companies can provide different coverages and higher policy limits than the standard flood policies.  Although these private company flood policies may be a good choice for many consumers, you need to be wary as to exactly what you are purchasing, as the terms, conditions, and coverages of such policies vary wildly.

As they say, an ounce of prevention is better than a pound of cure.  As high as flood insurance premiums may seem, the protection such policies provide after a catastrophic flood event far outweighs the pain of the monthly premium.  If you have any questions regarding what coverages you have under your flood insurance policy, please feel free to contact our office for a free review of your policy.

Over the past few months, many Citizens Property Insurance policy holders received a notification that, unless they opted out within a certain time frame, their property insurance would be automatically transferred out of Citizens and into one of several small start-up insurance companies.  These newly formed property insurance carriers have been nick-named “take-out” companies because their sole source of new business is to take over property insurance policies that have been transferred out of Citizens.  This process has created a love/love relationship between Citizens and these new insurance companies as, through the transfer of policies out of Citizens and into these new start-ups, Citizens can further its goal of depopulating its customer base and the new start-ups get “free” customers without having to market for same.

Of course, all is not rosy for the actual policy holder.  As a recent report reflected, the recent crop of small, in-state property insurance companies have no record of withstanding the losses associated with a major hurricane and have not fared well with insurance industry rankings.  In fact, these new companies only average a “C-minus” rating by Weiss Ratings and 11 of these companies have failed since 2006 – without even having a major storm or hurricane to drive up the claims!  According to the new Weiss Ratings, 19 of the 48 Florida-based property insurance companies received a rating of “D-minus” or worse, which is eye-opening in light of the fact that Florida homeowners pay about $6 billion dollars a year to these companies and we haven’t had a large scale insurable event in over a decade.

The take away is that, although you may not be thrilled with the coverage or level of service that you may be getting from Citizens Property Insurance, you had better think twice about switching to one of the new take-out companies.  Despite all of its problems, Citizens does not have the failure risk of the small private companies and Citizens will always have the money to pay claims – even though it may take years to do so!

It may come as a surprise to many homeowners, but you may be able to substantially reduce your homeowner’s property insurance premiums by just looking through the provisions of your policy.  Specifically, most homeowner’s insurance policies set forth numerous premium “credits” for which you can qualify based upon the age and condition of your home.  These available credits are usually listed in the documents you receive along with your annual policy renewal – you know, the stuff you never read and immediately throw away.

For instance, you may be entitled to a substantial premium discount if your roof has wind mitigation straps.  These straps literally “tie” your roof to your exterior walls and may help avoid the structural failure of your roof and walls during a high wind event.  If your home was built after 2002 or if your roof has been recently replaced, your home most likely has these straps as the use of such was mandated after the building code was amended in 2002.  You should hire a wind mitigation specialist to do an inspection and to determine whether your roof has these wind mitigation straps and whether you qualify for any other premium discounts.  These inspections usually cost between $75.00 to $100.00 – a small investment considering the reduction in premiums you may be able to obtain.

As with many things, the devil is in the details, and this process will require that you take the time to read the onerous and often-times purposefully confusing provisions of your insurance policy – but you may be able to save several hundred dollars (every year!) in homeowner’s insurance premiums.  Better in your pocket than in your insurance company’s wallet!  As always, should you have any questions regarding your insurance policy, please feel free to give our office a call.

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.

 

Here in Florida, we tend to think that we have the exclusive right to complain about Flood Insurance and the rising premiums that go with it.  Unfortunately, flood insurance and ever increasing premiums are a problem not only in other states, but in other countries as well.

For example, a recent article in the Tampa Tribune pointed out that payouts for flood insurance claims from a single event in Germany would soon top 4 billion dollars (not a misprint – that is billion with a “b”!)  Over the past week, heavy rains in Germany, the Czech Republic, Austria, Slovakia and Hungary have cause extensive overflows of the Elbe, Danube and other rivers throughout the area.  Insurance costs in Germany alone are estimated to run over 3 billion dollars. 

But those shocking facts are not even the real story.  The real story is that the total damage caused by this flood is estimated to be over 16 billion dollars!   Why the huge difference between the estimated insurance claim payouts and the total estimated damage?  The problem is that many residents have been unable to obtain insurance coverage for this hazard due to insurance companies refusing to issue such policies in the area.  Even those who might actually be able to obtain such coverage, were not able to purchase same due to the prohibitively high cost demanded by the insurance carriers! 

Unfortunately, the net result of this situation is that there are a lot of people out there with damaged or destroyed property (to the tune of 12 billion dollars!) and there will be no insurance or other funds available to assist them with the repair of their property or replacement of their personal items.  Although it may be impossible to see into the future, you can always prepare for the future.  Therefore, check your insurance policies today to make sure you have the appropriate amount and type of insurance.  Although your flood insurance premiums may seem high, the cost of such insurance pales in comparison to the cost of replacing your property and personal items.

Despite no major storms or hurricanes hitting Florida since 2005, Florida property insurance rates have continue to skyrocket over the past few years – with no end in sight.  Shockingly, a recent AP report showed that Florida’s Office of Insurance Regulation has approved more than 100 rate hikes per year since 2009.  Where is the money going – surely not for claims!

The biggest “expense” an insurance company faces is the cost of reinsurance.  Simply stated, reinsurance is an insurance product that an insurance company buys for itself to offset any claims it must pay.  If an insurance company has a large number of claims in a given year, the insurance company submits a claim to its reinsurance company for reimbursement of the amount paid in claims.  The only difference between a policy holder’s relationship with his insurance company and the relationship an insurance company has with its reinsurer is…..the insurance company most likely owns the reinsurance company as well!!!  With this cozy relationship, an insurance company can jack up the rates that it must pay itself – er, I mean, its reinsurer – and thereby create an artificial “hardship”.  The insurance company then squeals to the media and to the legislature that it can’t make any money in Florida unless they are allowed to further increase rates.  Clearly, since an insurance company can set its own expenses (due to the fact that it can manipulate the money it pays to itself as a “cost”), it will never show a profit from its Florida operations!  The Sarasota Herald Tribune wrote a Pulitzer Prize winning article on this concept in 2010.

Where does this leave the individual homeowner who is struggling to pay his ever-increasing property insurance premiums?  Until our representatives in Tallahassee are willing to stand up to the insurance companies and their lobbyists, all Floridians will have to just wait and see what this year’s hurricane season has in store for Florida.  Unfortunately, history has shown us that – whether a storm comes this year or not – we will be facing higher insurance premiums either way.  You know – because of those “reinsurance premiums”….