Insurance looms larger than hurricanes
We haven't even gotten through income tax day and we have to start worrying about hurricanes again. The ironic thing is that the insurance we need to protect us against those hurricanes is a bigger problem than the actual hurricanes.
Citizens Property Insurance Corp. is in the news again in a big way. The Florida Legislature has introduced a bill (HB 1243) intended to raise rates on the state-owned Citizens. The company currently insures nearly 1.3 million properties and although intended as the insurer of last resort, has morphed into the primary insurance carrier for coastal properties in the state and the largest property insurer.
The bill proposes that Citizens should be allowed an annual increase in premiums by up to 25 percent, but not more than a 20 percent statewide average. In addition the bill calls for not insuring homes valued at more than a $1 million as of Jan. 1 and then by 2016 eliminating coverage for homes valued at $500,000 or more. The only way these homeowners could obtain a Citizens policy is if the only policies they could find cost 25 percent more than Citizens.
The Republican legislators and Gov. Rick Scott, who are supporting the bill, contend that this is the only way to get private insurers back into the Florida market. Many of these insurers left the state in the turmoil of the busy 2004 and 2005 hurricane season and have not returned, leaving Citizens to pick up uninsured properties.
Private insurance companies say they can't compete with Citizens' low rates, and the backers of the bill say the rates being charged by the state-run pool don't nearly cover the risks. In 2007 Citizens' rates were frozen until 2010 when rates started going up, but they have been capped at a statewide average of 10 percent. Even with this increase in premiums by Citizens most industry experts and officials agree that Citizens is actuarially unsound.
Critics of the bill cite the inability of many coastal residents to be able to pay any increase in premiums and the negative effect on the slowly recovering real estate market. Sen. Alan Hayes, one of the bill's supporters, says "It's dead wrong to perpetuate the life of Citizens; we've got 85 percent of the people of Florida on the hook so that 15 percent of citizens can have insurance."
Anna Maria Island is smack dab in the middle of this latest insurance controversy. With every property on the Island in a coastal region and our real estate market's recovery in full swing there is a lot at stake. On the one hand allowing Citizens to continue to grow by keeping premiums artificially low never solves our insurance issues. On the other hand no one wants to see insurance premiums go higher and higher every year hoping that private carriers will eventually create a competitive marketplace.
It's sure tempting to go without homeowners insurance as many coastal residents have done and simply self-insure against a storm. But if you have property with a mortgage or intend to purchase a waterfront property with financing, you don't have that option. Right now most Florida residents are probably more worried about their insurance premiums than the weather forecast; at least until the first tracking cone appears on their television screens.