Arbitrators OK 75.8% rate increase for Homewise Insurance customers

Article Courtesy of The Sun Sentinel

By Kathy Bushouse
Published  March 9, 2007

A Tampa property insurer, with most of its customers in South Florida, has won its bid to raise rates by a statewide average of 75.8 percent.

Homewise Insurance Co. got the go-ahead Wednesday from a three-person arbitration panel to increase premiums for its more than 22,000 customers, prevailing in an appeal it filed after Insurance Commissioner Kevin McCarty rejected the increase in October. Insurance companies have the right to appeal if a rate increase request is turned down.

The insurer already was collecting the higher premiums, using a provision in state law that allows insurers to raise rates before getting regulators' approval. If the arbitration panel had agreed with McCarty's decision to reject the increase, Homewise would have been forced to issue refunds to its policy holders.

Florida insurance companies won't be able to make similar appeals, at least until Jan. 1, 2009. That's because the Legislature approved a freeze on arbitrations during its special session in January. But some insurers, like Homewise, had arbitrations scheduled before the freeze.

Homewise President Dale Hammond said Thursday that he was pleased with the panel's decision. He said the company was raising its rates because its reinsurance costs -- basically insurance for insurance companies -- had dramatically increased.

That was the reason for the rate increase request, Hammond said. "It was all reinsurance."

Homewise customers in Broward County will see their premiums increase by as much as 78.9 percent, while Palm Beach County customers will see rates rise as much as 79.6 percent. Homewise has 1,987 policies in Broward and 2,638 policies in Palm Beach County, according to figures from the state Office of Insurance Regulation.

The arbitration decision is final. The state can't appeal, said Bob Lotane, spokesman for the state Office of Insurance Regulation spokesman.

State insurance regulators have several problems with the arbitration process, including that companies are allowed to present evidence to the panel that they didn't present to the insurance department and that the arbitrators are not insurance actuaries, Lotane said.

The three members of the panel are arbitrators from the American Arbitration Association, with one member chosen by the insurance company, one chosen by the Office of Insurance Regulation, and one agreed to by both sides, Lotane said.

"We just find these to be an inappropriate venue to handle rate filings," Lotane said.

The department has good reason to dislike arbitration proceedings: It has never won a case taken to arbitration, since the arbitration process was created in 1996, Lotane said.

Another insurer, Nationwide Insurance Co. of Florida, is appealing its rejected increase that averages 71.5 percent. That company's arbitration starts Monday. That arbitration also was scheduled before the new law took effect.

There are a few other small insurers that could appeal their rejected rate requests, but those disputes likely will be worked out in negotiations with the insurance department and not go to arbitration, Lotane said.