Tumult of 2004 changed Florida
September 6, 2009
Summer’s quadruple strike walloped wallets, nerves
BY JIM WAYMER
FLORIDA TODAY
They sent premiums — among other things — through the roof.
Four storms in 44 days caused an estimated $45 billion in damage in 2004, ranking each event among the top 10 costliest hurricanes in American history.
Charley, Frances, Jeanne and Ivan redefined risk in Florida, shattering affordable premiums along with the windows and nerves. They resulted in more than $2.4 billion in claim payments in Brevard County, alone.
Five years later, Brevard residents pay a much higher price to live in paradise. Some continue to battle insurers or pay premiums 40 percent to 60 percent higher, with bigger deductibles. Others, with all the repairs behind them, rest more secure in sturdier homes. But their premiums and deductibles still surge as their insurance options shrink.
The onslaught led the state’s largest private insurer, State Farm, to pull out of Florida, leaving uncertain the fate of 31,000 policies in Brevard. And on Jan. 1, 1 million covered by state–run Citizens Property Insurance Corp. face up to a 10 percent rate hike.
It’s enough to make some curse the names Charley, Frances and Jeanne to this day.
"I’m paying $1,700 and I’m mad as hell about it," said Jeanne Osborne of Barefoot Bay, who took a pounding from Hurricane Jeanne and some friendly razzing from neighbors about her first name.
She says she paid about $1,200 for her annual premiums before the 2004 storms, which claimed her screened porch.
Robert and Grace Pearsall took refuge in their Mercury Cougar as Frances’ winds beat up their Barefoot Bay manufactured home. But there’s been no escaping the tumult in the insurance market.
They fought hard for the $35,000 in repairs they needed from their private insurer, which initially agreed to pay about a third of that amount. Now, they’re stuck with the cash-strapped insurer-of-last-resort, Citizens.
"We’ve been seriously thinking of not carrying insurance," Grace Pearsall said, sitting on her rebuilt porch.
Although many have struggled with the changes, the insurance market on the Space Coast has improved significantly since the initial shock of the storms. Following an overhaul of state insurance regulation, dozens of new insurance companies have entered Florida to pick up business left behind by the majors.
That competition has lowered prices and improved availability for consumers willing to shop around.
On the beachside and parts of Merritt Island, competition and new wind-mitigation discounts have brought down premiums on a typical house by as much as one-third to one-half.
Leaving the state
In August 2008, Insurance Commissioner Kevin McCarty rejected State Farm’s request for a statewide average 47 percent rate hike. In January, the company responded by announcing it would pull out of Florida and filed a proposal to do so over two years. That leaves the question of how many of its 770,000 customers will wind up insured by Citizens, already underfunded and overburdened. The Office of Insurance Regulation is negotiating how State Farm will exit the state, and an administrative law judge set an October hearing to settle differences.
There are 30,983 State Farm property policyholders in Brevard.
McCarty plans to review rates for Citizens’ 1 million customers next month.
Now the state’s largest insurer, Citizens also needs an estimated 48 percent statewide average increase to become fiscally sound, the company says. But annual increases are capped at 10 percent by law, regardless of what Citizen’s asks for.
"Our rates have been frozen at the 2006 levels through the end of this year," said John Kuczwanski, spokesman with Citizens. "This is the first time that we are making a rate filing based on actuarially sound data, without some other restriction being put on it."
Higher risk
Citizens took on much more risk when Poe Financial Group Inc. went bankrupt in August 2006 and Citizens took on its 320,000 policies.
In early 2007, the Legislature expanded the state’s liability for hurricane losses from $16 billion to $28 billion, making Citizens the largest property residual market entity in the world and the 10th-largest property insurer of any kind in the United States.
Citizens hopes to lower its exposure by getting qualified private insurers to assume selected policies. Last year, almost 400,000 policies were moved from Citizens into the private market.
Smaller firms have helped to fill the void left by private insurers.
"Regardless of the risk, and the fact that large insurance companies are still peeling off risk and trying to reduce exposure, we have had 30 new insurance writers since Jan. 2006," said Tom Zutell, spokesman for the Florida Office of Insurance Regulation.
Better buildings
Better building could bring premiums down, too, insurance regulators say. The Florida Department of Financial Services gave $2.3 million to build four model "hurricane homes" to withstand 140 mph winds. The eye of Frances hit one of the houses in Ft. Pierce with no significant damage.
The 2004 hurricanes led to the emergence of My Safe Florida Home program, making $250 million available for free home inspections, wind inspections, and matching grants to help lower premiums. "It was supposed to get folks to have their home inspected for free," said Zutell said.
Tie-downs kept many manufactured homes in place, such as Jeanne Osborne’s. A neighbor’s carport tore off and destroyed her screen porch in Barefoot Bay, where many lots remain vacant .
Insurance frustrations chip away at the serenity of this community, where golf carts are as common as cars, but a pitcher or two of beer at the 19th Hole eases insurance woes.
"They’re increasing the premiums but they won’t replace the actual amount of property that they’re insuring for," said John Armstrong, hanging out with friends at the 19th Hole after a round of golf. Like many there, he laments higher premiums and deductibles — the new price of paradise, here to stay. "For the most part, the consumer loses on both ends."
Contact Waymer at 242-3663 or jwaymer@floridatoday.com.
Additional Facts
Helpful links.
Florida law allows policy owners up to five years from the date of loss to file or re-open hurricane insurance claims.
– Florida Office of Insurance Regulation: www.floir.com
– Helpful information for State Farm policy holders: http://www.floir.com/pdf/SFFHelpfulInfo.pdf
– For information on the Florida Division of Emergency Management and to GET A PLAN!, visit: www.FloridaDisaster.org.
– Students, teachers and parents can find educational information and free downloadable hurricane preparedness materials at: www.KidsGetAPlan.com.
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