After being dropped, shuffled around and stuck with huge rate increases, Florida homeowners should see their average property insurance bills cut by nearly a quarter, state regulators said Thursday.
The net result of a sweeping change in Florida law designed to lower premiums, the average savings statewide for homeowners plus condo and mobile homeowners is expected to be 24.3 percent, but the numbers range from about 10 percent in the Panhandle to more than 50 percent in South Florida.
In the Tampa Bay area, the average overall savings will range from 18 to 35 percent, with Pinellas County seeing the greatest savings because homeowners in that county pay more for hurricane coverage.
The discounts apply only to the wind portion of a homeowner policy, but in coastal areas, that can amount to more than half of the total premium.
Regulators stressed that the calculated cuts were averages and could vary widely for individual policyholders.
"This is the right way to go," said J. Robert Hunter, a director of the Consumer Federation of America who was paid $50,000 to help the state calculate the formulas. "It will save a lot of money for the people of Florida."
The savings were made possible by a law enacted in January that for the next three years will allow insurance companies to buy more backup coverage, or reinsurance, from the state-backed Florida Hurricane Catastrophe Fund (CAT Fund).
Since CAT Fund reinsurance is cheaper than reinsurance found in the private market, the Legislature mandated the insurance companies pass the savings on to policyholders.
Companies have until March 15 to make changes in their rate filings to reflect the discounts. The reductions begin June 1 and continue as policies come up for renewal.
There is a downside, however. Once insurance companies make their new filings, they are free to drop policies.
And regulators will allow insurers to make adjustments to their filings later in the year based on how much reinsurance they buy. If they buy less, the premium reduction could also be less.
But Insurance Commissioner Kevin McCarty said companies are more likely to buy reinsurance from the CAT Fund, "and that should be more savings to pass on to policyholders."
The rate filings also might be adversely affected by a separate state law dealing with mitigation discounts. Insurance companies will soon have to pay more in discounts for policyholders who harden their homes. Those insurers, in turn, could try to pass on their higher costs through higher rates.
"We're going to look at that," McCarty said, saying it would be part of a later rate review.
What's also unclear is the impact on the 1.3-million customers of state-backed Citizens Property Insurance. The CAT Fund's biggest customer, Citizens, doesn't buy private reinsurance.
The company has already rolled back its rates to 2006 levels, so regulators think Citizens reductions would likely be in the single digits.
"We don't know yet how it will affect us," said Citizens spokesman Rocky Scott, adding that Citizens officials will meet with regulators Monday.
Still, the overall impact should be lower rates for most homeowners.
"Some people who have not gotten their increases from last year could see a more modest decrease," McCarty said. "That will be determined on a case by case basis.
"But for most Floridians, they can expect a very significant reduction in the hurricane portion of their premium on or after June 1."
The insurance industry remains cool to the idea.
"While these savings will have an immediate impact on Florida homeowners, we remain concerned that these short-term fixes will not prevent long-term headaches for consumers," said William Stander, vice president for the Property Casualty Insurers Association of America, an industry trade group.
Easier said than done.
"Every plans works if we don't have a storm," McCarty said. "We're at a higher risk, no question.
"But the Legislature had to strike a strategic balance."
Zip code County Average reduction
33508 Hillsborough 22.1 percent
33684 Hillsborough 20.9 percent
33755 Pinellas 30.0 percent
33705 Pinellas 35.6 percent
33523 Pasco 18.0 percent
34602 Hernando 18.0 percent
34460 Citrus 11.6 percent
What it means
To cut down on risk, property insurers buy an added layer of insurance (called reinsurance) from other companies. Because of changes in Florida law, insurers can now buy cheaper reinsurance from the state and pass their savings on to policyholders. Until Thursday, no one knew exactly what those savings would be. Now we do. The average savings statewide is 24.3 percent. But the savings, which apply only to the wind portion of a policy, vary greatly depending on the amount of coverage and where a home is.
By March 15, insurance companies have to file new, lower rate requests. At the same time, they're allowed to start dropping unwanted policies, ending a state-ordered moratorium.