Florida Homeowners Insurance Crisis

Florida Government Response To Homeowners Insurance Problems

A Special Session of the Florida Legislature took place in January to begin an effort to restructure Florida's property insurance market and provide relief to Florida residents and businesses. Two of the gems I see in the proposals in response to the Florida Insurance Crisis, are:

1. taking away denial of coverage based on age of home, rather than wind resistance. I hope this removes the extra premium that Citizens charges for homes older than 50 years as well.
2. Citizens has also arbitrarily decided that home contents coverage should be 50% of cost of replacing the home (that does include some big ticket items such as the central A/C air handler and appliances). If we can take home contents out of a policy, then maybe we can insure them separately based on actual replacement or cost value.

Following is a summary of the reforms that the Florida Legislature passed and the Governor signed:

Good news on the Insurance reform bill

Here is the form letter to legislators that the coalition of consumer groups recommended be written.

The insurance companies did attempt to fight at least part of the package but ultimately dropped a court challenge to a new state rule preventing them from immediately canceling some homeowners policies or raising rates. The Florida Association of Realtors reports:

The rule, which took effect Jan. 31, is a stopgap until a new law takes effect June 1. That new law aims to lower property insurance rates by making it easier for companies to get cheaper backup coverage, among other things.

Companies will have to lower rates in most cases because of that new law, but Gov. Charlie Crist feared some companies would increase premiums in the interim, or would simply cancel policies before it took effect.

The Florida Insurance Council had asked a state appeals court to overturn the rule, arguing it was too vague and didn't specify whether some companies would have to agree to continue covering customers they had previously notified they were dropping. Companies had also feared the rule would prevent them from canceling policies for several months.

But on Monday, the Office of Insurance Regulation issued another rule clarifying that companies could proceed with plans not to renew policies for customers who had already been notified they were being dropped. Companies will also be able to resume canceling policies when they file their new rates in March, as long as they give policyholders 100 days notice.

Risk Assessment Based On Faulty Model

The Tampa Tribune reported that the speaker of Florida's House, Marco Rubio, is demanding that companies across the country hand over computer models used to justify huge homeowners insurance rate increases in many coastal areas.

Rubio took the action after a Tampa Tribune investigation revealed that even some scientists who helped develop one company's new model have doubts about major changes that were made to it last year. The Tribune reports:

Instead of relying on 100-plus years of historical data to estimate the risk from catastrophic storms, Risk Management Solutions is using a new five-year model, saying the threat from increased hurricane activity justifies rate increases of up to 40 percent in Florida and the Gulf Coast and 25 percent to 30 percent along the Atlantic.

One of the scientists whom Risk Management Solutions consulted, Jim Elsner, a professor of geography at Florida State University, told the Tribune that the company's five-year model "points to a problem with the way these modeling groups are operating" and that the results contain assumptions that are "actually unscientific."

Hunter and the Consumer Federation previously have alleged that Risk Management's industry-leading model "has become the vehicle for collusive pricing" in the insurance industry.

"I would especially focus on this conversion from the long-term to short-term model," Hunter said, including letters and other contacts Risk Management had with insurance companies before the modeling change.

Thomas R. Knutson, a research meteorologist with the National Oceanic and Atmospheric Administration in Princeton, N.J., and another Risk Management expert panelist, said Saturday the five-year timeline didn't come from the experts.

"I think that question was driven more by the needs of the insurance industry as opposed to the science," he said.

My Safe Florida Home

My Safe Florida Home was a program introduced last year to help homeowner's make improvements to protect their homes against damage that may result in insurance claims.