Windstorm rate cuts come up short

Many homeowners are feeling let down by the much-promised insurance rate reductions touted by lawmakers.

Article Courtesy of The Miami Herald

By Beatrice E. Garcia
Published  April 20, 2007

Discounts? What discounts?

Florida homeowners were promised relief from soaring windstorm premiums. That was the mission of a special legislative session, where Gov. Charlie Crist turned up the heat and lawmakers passed a massive insurance reform bill.

But when homeowners compare discounts insurers have promised to the 25 percent, 50 percent or even more than 100 percent premium increases they've been hit with in the past two years, few are impressed.

''It's like a game of bait and switch at the car dealer,'' says Manny Delgado, who lives in unincorporated West Broward.

He's waiting for a quote from Royal Palm Insurance, which is offering an average 20.7 percent discount.

Joseph A. DelVecchio of Miami Beach is thinking of jumping to Citizens Property Insurance, the state-run company that is now Florida's largest insurer of homes and condos.

His Homewise policy shot up 83 percent last year, to $3,647. Yet Homewise, licensed in late 2005 to take policies out of Citizens, is offering only a 12.8 percent to 20.4 percent cut.

''The rate reductions aren't as significant as we were led to believe,'' says Alex Sink, Florida's chief financial officer.

In parts of South Florida, which has the state's highest rates, reductions were expected to exceed 50 percent. Statewide, the cuts were projected to average 24.3 percent.


A far different reality is unfolding. Major private insurers State Farm, Allstate and USAA filed discounts ranging from 3.1 percent to 14.2 percent.

Yet the last round of rate hikes for these companies ranged from 8 percent for USAA to 52.4 for State Farm. In Broward County, State Farm homeowners east of the Intercoastal Waterway received renewals with 165 percent increases.

On paper, the 37.7 percent rate discount offered by American Guarantee and Liability Insurance's group of companies, which includes Zurich American Insurance, looks great. But agents say the company is writing few new policies.

Under the new law, insurers are expected to pass on savings they reap as they buy backup insurance from the Florida Hurricane Catastrophe Fund, made less expensive during the special session. But State Farm says it buys most backup insurance at low cost from its parent company, meaning a smaller reduction to pass on.

To many State Farm policyholders -- including Rep. Julio Robaina, a Miami Republican -- the company's projected 7 percent rate reduction is downright puny.

''It's just not enough,'' says Robaina, whose State Farm premium jumped to $6,800 from $3,600 this year. He raised his deductible to 10 percent to significantly reduce it.

''I gave myself a discount,'' Robaina says, knowing he's on the hook for the first $21,000 of storm damage on his Miami-Dade home.

Citizens' policyholders were spared a scheduled 21.4 percent rate hike this year. But many are still smarting from last year's increases -- as much as 125 percent for condo associations, many of which can get only Citizens.

Citizens filed a projected 14.7 percent rate discount on its windstorm policies on homes as well as condo associations. It began mailing refund checks to policyholders this week.

''Fourteen percent isn't meaningful rate relief,'' says Chris Kowalczyk, vice president of Having Affordable Coverage, a consumer group fighting for affordable homeowners insurance in Florida.

About 50 Miami-Dade homeowners -- some of whom had made a similar nine-hour trek to the special session -- took a bus trip to Tallahassee this week to demand insurance and property tax relief.

''My insurance is $400 a month,'' said Pedro Borrego, 69, of Hialeah, who was part of the group. ``They haven't brought the insurance down yet.''

They expect legislators to do much more to bring down rates.

''We want their help now! We helped them by voting them into office. We want what they promised,'' said Emma Montero, 67, of Aventura.

Even legislators who worked hard during the special session to reduce premiums are asking where the cuts went.


Republican Sen. Alex Villalobos of Miami wonders if insurers are disclosing all the facts as they file for state-mandated rate discounts.

Villalobos pitched his Truth in Government Act to the Senate Committee on Criminal Justice last week to require anyone addressing a legislative committee to take an oath before speaking. Before voting on the bill, committee members were asked if any had received an insurance refund. No surprise: The bill, SB 2196, passed unanimously.

Crist, who has long promised consumers a break on insurance, maintains that what lawmakers did during the special session was ``only the beginning.''

''But this insurance industry . . . will come in every crack and crevice they can find to try to find a way to keep rates up,'' Crist said earlier this week.

Crist, who says a competitive Citizens pressures private firms to lower rates, made two rare appearances last week to lobby for bills that would expand Citizens. One, sponsored by Robaina, is expected to sail through House committees.

While letting consumers pick Citizens could save money for some, legislators including Rep. Don Brown, head of the House Insurance Committee, and even state CFO Sink worry that may not be the best solution. Nearly half of Citizens' exposure is in South Florida.

''The governor says it would be fine if Citizens is the only insurance company in the state. But it's not fine with me,'' Sink says. ``We need to keep some type of viable insurance market in the state, so we can attract more private capital.''

Though burdened by high premiums, some homeowners still worry about the stability of the market and future assessments.

This round of legislative fixes could be like ''a thumb in the dike. If we get hit this summer, people will be very unhappy with assessments and even higher rates next year,'' says Denis Weinberg, whose total insurance bill for his Miami Beach home is 40 percent higher than what he pays in property taxes.