WHY ARE HOMEOWNERS INSURANCE RATES IN FLORIDA INCREASING WHILE INSURANCE COMPANIES ARE MAKING PROFITS NATIONALLY?

• Policies priced at state level, profits reported nationally
  The profits you read about in the news are for all lines of business – including auto insurance, workers compensation, health care, and homeowners insurance, and they reflect revenue for all states combined. Nationally, insurance companies are making a profit, but there is no money being made in Florida. In fact, providing insurance protection for Florida homes is tremendously unprofitable. Eight storms in two years wiped out all of the profits insurance companies made from property insurance in the 12 years since Hurricane Andrew hit Florida in 1992.

• Florida rates must reflect Florida risks
  Each state regulates its own insurance market. In Florida, the Office of Insurance Regulation tightly controls the rates charged by insurers and responsible for ensuring that rates reflect the actual and anticipated loss experiences in Florida and only in Florida. Just as Florida regulators would never allow companies to raise their rates in Florida if they were losing money in New York, regulators in other states—where insurance companies are much more profitable—will not allow their residents to be charged higher rates because insurance companies are losing money in Florida. Each state and type of insurance must stand on its own because each state has its own insurance regulator looking out for the best interest of that state’s insurance consumers.

  It’s important to know that insurance companies are open to independent and state review. Each Florida insurance company is subject to state financial regulation, which means company finances are examined in detail and rate increase requests are reviewed by state actuaries to assure the public is not being overcharged. Regulators also have the responsibility to ensure that companies are able to collect sufficient premiums so that they can pay all their policyholders’ claims in the event of a catastrophe. Florida’s Insurance Consumer Advocate also has an in-house actuary who reviews homeowners’ insurance rate filings, giving Floridians two layers of protection.

• State-run insurer has high rates, still losing money
  Remember, Citizens Property Insurance Corporation was established by the state to provide coverage to homes that private companies aren’t able to write. As the insurer of last resort, Citizens is the largest provider of homeowners insurance in the state. The issue of national profits doesn’t come into play for any of Citizens’ policyholders. And although Citizens coverage is very expensive, it still lost nearly $2 billion after paying claims for 2004 and 2005. That should put the cost of doing business in Florida into perspective.

• Violent weather pattern to last 20 more years
  Insurance premiums in Florida have gone up because Florida has a hurricane problem, and the prognosis for the future doesn’t look good. Hurricane scientists say hurricanes run in cycles of roughly 30 years, and we’re only 10 years into this current cycle.

• Expensive property being built in most vulnerable locations
  Florida’s susceptibility to hurricanes is only half the problem, though. Because the Sunshine State’s beaches are second to none, they attract home buyers who want to live in paradise. As a result, Florida leads the country in insured coastal exposure with nearly $2 trillion, ($1.937 trillion). New York is close with $1.9 trillion, but nowhere near the hurricane threat faced by Florida. No other state in the country has even $1 trillion in insured coastal exposure.

  Florida also leads the Atlantic and Gulf Coast states in the value of coastal residential property, with $942.5 billion in total insured property – all of it at risk each time a storm comes ashore.

  Florida also continues to be the fastest-growing coastal state. Over the next 25 years, Florida’s population is expected to grow by roughly 50%.

  Greater risk of hurricanes and the increasing value of insured property both contribute to rising homeowners’ insurance rates. Florida’s insurance companies raise rates to ensure they have the resources to pay for the big hurricane claims expected over the next two decades.

• Costs for insurers are rising
  Companies - usually international - that sell "insurance" to insurance companies are called reinsurers. Reinsurance rates went up dramatically for the 2006 Hurricane Season, due in part to a high demand for the product from Florida homeowners and commercial property insurance companies. Also increasing the costs of reinsurance were higher projections of catastrophic damage to the Florida peninsula during the current cycle of high hurricane activity. Catastrophe reinsurance is an absolute necessity for companies in their financing of losses from a major hurricane or active hurricane season. Increased reinsurance costs contributed to this year's rising homeowners insurance costs, but as noted throughout this section, they were only one of the factors.

Insurance plays a key role in the state’s economy engine as witnessed by the $36 billion in paid claims resulting from eight hurricanes during the 2004 and 2005 hurricane seasons.

Insurance payments, along with FEMA money and other federal and state dollars, helped rebuild Florida homes and businesses after the tumultuous 2004 and 2005 hurricane seasons. For example, the money paid out by insurance companies repaired the doctor’s office in Gulf Breeze that was hit by Hurricane Ivan, as well as the house in South Florida pummeled by Hurricane Wilma.

Florida economists conservatively estimated that hurricane recovery efforts had a $485.3 million positive impact on state sales tax revenues this year (FY 05-06) and another $359.3 million impact on sales tax revenue the previous year. More than one third of the increase in sales taxes in the FY 04-05 budget was attributable to building activity, alone.

The increase in available revenue helped Florida boost its spending on everything from K-12 education to new roads. The spike in dollars also allowed Florida to develop a one-of-a-kind matching grant program to help Floridians strengthen their homes against hurricanes. Information on the home inspection and mitigation program can be found at http://www.mysafefloridahome.com