Insurance 2008

Mike Vogel | 1/1/2008

Above, A1A near Boynton Beach “The crisis is still out there. The cycle we’re in is supposed to last another 10 to 20 years.” — Sam Miller, executive vice president, Florida Insurance Council [Photo: Tony Arruza]

Chasing opportunity, several companies last year took 225,000 policies off the hands of Florida’s state-subsidized insurer, Citizens Property Insurance. Meanwhile, Hollywood-based property management company Continental Group launched a self-insurance fund offering property coverage to the 900 buildings it manages.

Both, though, are relatively small developments in the scale of Florida’s insurance woes. Owners of homes, autos and businesses in Florida remain on the hook for billions in losses if a hurricane hammers Citizens and the Florida hurricane catastrophe fund that backs up Citizens and private carriers. The 225,000 takeouts only slowed the rate of Citizens’ growth. Citizens, the state’s largest insurer, ended the year with 1.4 million policies, well below the 1.7 million to 1.8 million forecast earlier in 2007. Citizens, by law, can’t begin to charge actuarially sound rates until at least 2009.

Representatives of private insurers continue to be dazed by the public thrashing they’ve gotten from Gov. Charlie Crist, their abandonment by a presumably friendly Republican Legislature and, with a few exceptions, by other industries. “I’ve been surprised by the lack of support. It may be industries being concerned about being the next target of our activist governor,” says William Stander, assistant vice president and regional manager for the Property Casualty Insurers Association of America in Tallahassee. Says Sam Miller, executive vice president of the Florida Insurance Council, of the industry’s view of the state: “I think folks outside Florida, the bigger companies anyway, are astounded at the war going on down here.”

The Trends Large insurers continuing to shed policies A fifth consecutive annual decline in workers’ comp rates, down 18.4% this year — bringing the total decrease since 2003 legislatively mandated reforms to more than 50% A rise in Citizens Property Insurance’ surplus, which will reach $2.4 billion before hurricane season starts in June Projected softening of liability rates this year Falling commission income for insurance agents as workers’ comp and liability rates fall Lower reinsurance costs — thus lower premiums for homeowners — after two years without storms

This month, Stander’s group will unveil proposals to the Legislature to rate homes so that buyers know their hurricane risk, expand government programs to harden homes and offer low-interest loans to cover larger deductibles to encourage homeowners to take the risk of upping deductibles. While some propose having the state take over all wind coverage [“Re-reforming Insurance,” November, FloridaTrend.com], others instead suggest an opposite approach: Have the state test unregulated rates in the commercial property market to see if it leads to more competition and lower rates.

The new companies taking business, meanwhile, concern some. “I think it’s great we’re seeing so many companies come in, but I’m a little concerned about how they’re capitalized,” says the state’s insurance consumer advocate, Bob Milligan. “They’re thinly capitalized no matter how you slice it.”