Michelle and Kevin Erbrick are a lot like many homeowners in South Florida.
The couple closely followed the special legislative session on insurance in January in hopes they would see insurance rates come down after several years of increases.
The promise of an average 24 percent rate reduction initially lifted their hopes, but then the cuts failed to materialize. There was good news when it looked as if the Erbricks' provider, Clarendon Select Insurance Co., was an exception. It planned to cut rates by 28 percent effective June 1.
Then Clarendon eliminated the Erbricks' policy in March, along with most of the carrier's other policies in Palm Beach County - before any decrease occurred.
As with the Erbricks, tens of thousands of other South Florida residents are finding themselves without meaningful rate cuts. The circumstances vary, but the bottom line is most insurers have not made cuts to premiums. That's despite the promises of Gov. Charlie Crist and state lawmakers, who had reason to think cuts would be passed on to policyholders after they provided insurers a $12 billion carrot of discounted reinsurance.
On Tuesday, Crist conceded he may have overpromised.
For their part, insurers argue that the reinsurance fund's shaky finances - the fund could pay only a fraction of the $28 billion it would ultimately be liable for in a catastrophic event without surcharging home and auto policies - is making it necessary for them to buy more reinsurance from the private market.
Larger carrier cutbacks
That matters little to Sharon Garman, who works two jobs as a paralegal and a real estate agent and helps support her 83-year-old mother, Sylvia. She won't see the average 14 percent rate reduction Allstate is giving to customers as policies renew. Allstate plans to drop her policy in November before her decrease takes place.
Garman, who has lived in West Palm Beach since 1993, plans to take her Allstate agent's offer of a policy with a new company, Royal Palm Insurance Co. At first it sounded good. Royal Palm is offering an average 20.7 percent rate discount - even more than Allstate's 14 percent - because of savings realized by buying more reinsurance from the state fund.
The reality was less appealing. Garman's premium on her ranch home in the Villages section of West Palm Beach is rising from $2,388 to $4,000 a year. "I was hoping for a rate decrease. When I saw the letter I was floored,'' she said.
How could there be an increase?
Royal Palm President Locke Burt said the company's base rates are higher than Allstate's, and even with the rate cut some customers will pay more. As a new insurer, the company found it easier to get the rates it needed from insurance regulators to make a profit, he said.
Garman, 60, called the increase "huge. ... How are you supposed to save for retirement?'' She said she doesn't foresee a time when she can stop working. ''No one can afford to retire,'' she said.
What makes it even harder for Garman is that she has done everything she can to lower her risk, including modifications to her home. For example, she has a fortified garage door, hurricane shutters and other enhancements specifically recommended by state officials.
She said an Allstate agent told her that there are no other less-expensive insurance options and that switching to state-sponsored Citizens Property Insurance Corp. wouldn't save her any money.
The biggest cutback in policies has been by Allstate, which is in the process of reducing its statewide homeowners provider exposure by more than 200,000 policyholders as part of a massive cutback. The company had 750,000 policyholders in mid-2005. By April 2008, it expects to have 400,000 policies. Allstate isn't the only large insurer involved in policy reductions. State Farm and Nationwide also have announced plans to drop policies.
Citizens beefs up
As policies have been cut, Citizens has grown rapidly. It had 134,958 policies in Palm Beach County as of June 30, almost one of every three policyholders, compared with 89,268 a year earlier. That amounts to a 51 percent increase.
Insurance Commissioner Kevin McCarty acknowledged that there are fewer options for South Floridians, because private insurers are more reluctant to write policies than in other parts of the state.
He said consumers need to shop around, even abandoning their insurance agent and finding a new representative if necessary to find companies with lower rates still writing homeowners insurance. He insisted they are out there.
McCarty said in some cases policyholders are finding lower rates with Citizens than in the private market because the legislature canceled the company's two 2007 rate increases.
The insurer also lowered rates slightly, but many of the cuts in inland parts of Palm Beach County and the Treasure Coast have been in the 6 percent range.
Citizens is where the Erbricks landed after Clarendon Select dropped their policy and thousands of others. Clarendon, a relatively small company, had 81 percent fewer policies in Palm Beach County by March 31 than it had a year earlier, according to the Florida Office of Insurance Regulation.
The Erbricks learned there would be a decrease in their rates with Citizens. Their $3,200 premium would be reduced by $200.
In the end, the 6.3 percent decrease hasn't had much impact on the budget of Michelle, a Web designer, and Kevin, a construction superintendent. ''We don't get the big bonuses; we live paycheck to paycheck and do everything we can to survive,'' she said.
But just as disturbing for the Erbricks is the huge deductible they face if a hurricane hits. To prevent Citizens from doubling their Clarendon rates, the Erbricks were forced to accept a $25,000 deductible - more than twice what they would be liable for under their old policy.
"Fixing damage from a hurricane would be a challenge," Erbrick said. ''We don't have that kind of money sitting in the bank.''
McCarty cites successes
While many policyholders are struggling, there are others who have seen significant rate decreases since June 1, when reductions started taking place, McCarty said. ''It's not a one size fits all. There are different stories,'' he said.
An analysis by insurance regulators in June found the average insurer was making a 12 percent cut, but McCarty hoped the average could expand to at least 15 percent after insurers submitted so-called "true-up" filings with regulators. The filings are supposed to reflect the insurers' final costs of purchasing reinsurance from the state's fund and the private market.
But the news so far isn't good: The average for filed true-ups is a 28.2 percent rate increase. While only 42 of the 300 homeowner companies or subsidiaries have filed, 32 of those seek increases - not decreases - according to the state. Companies have until Sept. 30 to file.
Ultimately, McCarty said, companies cannot implement increases without the permission of insurance regulators. And regulators can order bigger decreases. A few insurers have rescinded their rate increase proposals, he added. Insurers can challenge that process by filing an appeal to a state administrative law judge.
William Stander, regional vice president of the Property Casualty Insurers Association of America, said it's clear to him that McCarty is going to reject applications calling for hikes or smaller rate decreases. He said insurers might choose not to challenge the commissioner at an administrative hearing because they are tired of the "politicized Florida insurance market."
But they also may scale back property insurance coverage in Florida even further because they can't get adequate rates, Stander said.
Even so, McCarty said he remains ''cautiously optimistic'' that many Floridians will still get rate cuts.