South Florida homeowners seeing big increases in renewal notices for property insurance

When Paul Hobson received his State Farm Florida renewal this month, he was shocked to find the annual premium to insure his 2,200-square-foot house had increased to $2,715 from $1,092.

“That’s a 152 percent increase. I called to make sure the figure was right,” Hobson said. “Did the end of the world happen or something?”

The State Farm office he called in Jupiter assured him the amount for his St. Lucie West home was correct and due in August.

In April, regulators granted State Farm an average 18.8 percent rate increase, but as Hobson discovered, those averages mean little because there is no cap. Some homeowners are being hit with huge increases.

"This is only the beginning. The rates are being approved quicker and easier on behalf of the insurance industry. It’s quite sad," said state Sen. Mike Fasano (R-New Port Richey), who has been an advocate for consumers on insurance. "We have a governor now who is sympathetic to the insurance industry."

Last year, state insurance regulators approved about $718 million in rate increases affecting 4 million Floridians, The Associated Press reported. No totals are available for increases approved in 2011, but they are all starting to kick in this summer.

The state-run Citizens Property Insurance Corp., Florida’s largest insurer, has 1.35 million policyholders and more than 100,000 in Palm Beach County. It is allowed to increase its rates by an average of 10 percent this year.

In addition, 19 companies have pending rate increases for this year, including some that also were given the OK last year to charge higher rates, according to the Florida Office of Insurance Regulation.

“Working families and retirees are stressed enough trying to make ends meet,” said state Rep. Joseph Abruzzo (D-Wellington). “They do not need to be hit with a two-by-four. That is what the rate increases do.”

Abruzzo and Fasano both find Senate Bill 408, which Gov. Rick Scott signed into law last month, especially onerous. The law allows expedited filing for reinsurance costs of up to 15 percent, also known as "insurance for insurers" costs. Among its many other provisions is one that requires homeowners to pay upfront for repairs caused by damage and be reimbursed later.

The bill’s proponents said the changes were needed to curb sinkhole claims, which have quadrupled in the last five years; reduce fraud; and increase competition to create a sound insurance industry. For example, the law requires insurers to have at least a $15 million surplus to pay claims.

The rate increases thus far have nothing to do with the new law. They will show up over the next year as renewal dates come up.

But with no major hurricanes in the last six years, and Florida’s high unemployment and foreclosure rates, Hobson and other homeowners are wondering why insurance increases were granted.

“If I were unemployed and could not afford it in the first place, how am I supposed to find another $1,700?” said Hobson, a financial analyst.

He doesn’t understand how such increases are allowed to happen in a regulated environment.

“Why do we need an Office of Insurance Regulation? Why do they exist? What are we paying them for?” Hobson said.

State Farm spokesman Michael Grimes said policy­holders may be seeing increases because of a reduction in wind mitigation discounts that took effect March 15.

State Farm policyholders whose renewal date is July 15 or later also will see the rate increases.

“Individual policyholders will see a varying degree of change,” Grimes said.

Factors that determine the amount of a rate increase include the property’s location, previous claims, coverage selected, deductible and discounts, Grimes said.

“This will help State Farm Florida’s efforts to remain viable in the marketplace,” Grimes said.

Lantana resident Steve Wainscott, an electrical supply salesman, has felt the new law’s impact. His insurer, Argus Fire & Casualty Insurance Co., gave him 45 days’ notice that it was leaving the state. Before the new law, the company would have had to provide 100 days’ notice.

Wainscott said: “This is an outrage.”

On May 31, the Office of Insurance Regulation granted Argus’ request to cease operation as an insurance provider in Florida. A consent order states the company lacked adequate reinsurance coverage for hurricane risk.

Meanwhile, Wainscott’s insurance agent is scrambling to find coverage, which will cost at least $600 to $700 more than the $1,400 a year Wainscott has been paying on his 1,000-square-foot house west of I-95.

“Since the three sister hurricanes [Frances and Jeanne in 2004 and Wilma in 2005], it’s been a nightmare trying to keep this thing insured,” he said.

Fasano predicts the higher rates will cause more of those who do not have mortgages to “go bare” and have no insurance coverage.

“Then when a storm hits, there will be an even bigger negative economic impact. You will have homes that will never get repairs,” Fasano said.

As for Hobson, he said a quote he obtained from Citizens is less than what State Farm wants him to pay.

“I’ve told State Farm I will be taking my vehicles elsewhere,” Hobson said.