Article Courtesy of The Sun Sentinel

By Julie Patel
Published July 12, 2010

Warren Kurtzman was elated when Gov. Charlie Crist vetoed legislation last month that would have made it easier for insurers to raise property insurance premiums.

That's why it came as a shock when his insurer, HomeWise Insurance, informed Kurtzman two weeks later that the premium on his Delray Beach condominium unit is increasing by 42 percent – from $609 to $864 – this year.

"I thought [the veto] was the greatest thing in the world," Kurtzman said, "and all of the sudden, I get this [notice] and I almost choked!"

Despite Crist's veto, and four relatively quiet hurricane seasons, thousands of Florida residents are experiencing similar rate hikes this year. The reason: The veto doesn't end rate increases – regulators can continue approving or rejecting rate hikes. They've ordered some insurers to lower rates, rejected some rate hikes but have approved the vast majority.

Since January 2009, the Office of Insurance Regulation approved about 140 residential insurance rate hikes, ranging from less than 1 percent to 29 percent. Some individual policy holders' bills went up more because the approved rate increase is a statewide average.

The increases were approved after many insurers argued that efforts made by the state Legislature to cut premiums in 2007 and 2008 had left them unable to keep pace with claims and other costs. Lawmakers were pressed to act after policyholders experienced huge increases in premiums – doubling and tripling in some cases – after Hurricane Wilma in 2005 and other storms.

Last year, Crist signed legislation that made it easier for insurers to boost premiums as much as 10 percent annually to pay for certain backup coverage costs. About 22 of the 140 increases were filed under that law.

Regulators say there are deeper problems with the property insurance market, including the development boom during the past few decades and, in turn, an increase in the possible damage that could result from a major hurricane.

As homeowners' policies come up for renewal, they are learning that their rates are rising. Some say they feel helpless dealing with their property insurance, which is required by most lenders.

Karen Leshin, of Weston, said her State Farm property insurance premium increased 60 percent, from $3,198 last year to $5,110 this year. "How is it possible?" she said. "We're kind of caught between a rock and a hard place."

Leshin said she wants to move out of Florida due in part to the cost of insurance. But like many other Floridians, her home isn't worth close to what it was when she and her husband, a retired airline pilot, bought it. She said they have bought State Farm policies to insure their home and cars since 1971. Before paying the higher premium, she said she tried shopping around but found other insurers charging about the same.

"I guess they all got the memo," she said.

Kurtzman said he plans to shop around. He said he can't afford a dramatic rate hike because he's on a fixed income after retiring from a career in finance: "I'm getting killed in the stock market."

Sylvia Dow, a retired communications worker, said her insurer, Southern Fidelity Insurance, increased the premium on her Margate home by 36 percent from $2,010 to $2,729 this year.

"It was quite a shocker, but we have to deal with it because we have to have insurance," she said.

Dow said she was surprised when Allstate dropped her coverage in 2007 because she doesn't live near the coast and she hasn't filed a claim in the 20 years that Allstate covered her home and car.

Major national insurers such as Allstate and Nationwide dropped policies after the 2004 and 2005 hurricanes. State Farm, the state's largest property insurer, faced some unique challenges.

The company announced its plan to leave Florida's property insurance market early last year after the state rejected its request for an average rate hike of up to 67 percent.

Months later, the state Legislature approved a sweeping measure to deregulate insurance rates, hoping it would help the state keep companies like State Farm in Florida, but the bill was vetoed by Crist.

But Deputy Insurance Commissioner Belinda Miller said State Farm's low rates were its own doing: Unlike other insurers, the company offered voluntary discounts, not required by the state, for years.

"That was not rate suppression. That was a company doing in Florida exactly what it's doing in other states," Miller said. "They put us through hell over the 67 percent rate increase when in fact at least half of that was self-inflicted."

Eliminating the discounts translated to a statewide average rate hike last year of 28 percent for State Farm, regulators estimated. State Farm struck a deal with regulators to stay in Florida but to drop 125,000 policies and increase rates by another 14 percent, on a statewide average basis.

Miller said Florida's problem stems from its growth in development in recent decades, which means there's more potential damage from hurricanes. At the same time, insurance companies have less appetite to cover catastrophes; they'd rather sell other, more profitable types of insurance, such as life insurance.

"It's not that we have more hurricanes. The problem is we're building more in their path," Miller said.

In addition, some lawmakers and regulators argue that it's unclear just how bad some insurers' financial health is; many pay fees to affiliate companies to manage parts of their business. Unlike the insurers, their affiliates aren't subject to regulatory restrictions on profit and dividends, and they aren't required under state law to file audited financial statements.

"It seems like there's a big loophole there," said Chris Cury. Cury is a real estate developer who recently got his license to become a public insurance adjuster.

State Farm increased the premium on Cury's home in Plantation from $2,500 to $4,200 – 68 percent. "I didn't understand it because there hadn't been hurricanes in several years," he said. "I'm in the real estate business, so it hit me hard."

Gail Bierworth, of Lighthouse Point, said State Farm increased her homeowner insurance premium 83 percent, from $3,395 to $6,214, even though her home was completed in 2005 and has hurricane impact windows and other features fortifying it against storms. She said State Farm covers her home and car. She's purchased her homeowners insurance from the company for 20 years – and never filed a claim.

"I can't believe that a company can raise the premium 83 percent in one year. This seems to me to be most unconscionable, especially at this time of our uncertain economy," she said before calling state officials to complain. State officials, she said later, weren't very helpful.

She ultimately she lowered her coverage dramatically – from $698,600 to $390,000 – to bring the premium near last year's, $3,420. "That was the lowest they'd be able to lower my coverage," she said. "It's probably on the low side…but I'm comfortable with it."

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