State Site Raises Eyebrows on Insurance Rates in Face of Claims Citizens Charges too Little

11/9/2012
By: Charles Elmore
Palm Beach Post

As many as 24 other home insurers charge lower rates on average in Palm Beach County than state-run Citizens, according to a state website that some industry groups say can be useful but risks giving a "distorted" picture.

For a $300,000 home built in 2005, for example, 24 out of 27 competitors show lower average rates than Citizens in Palm Beach County, according to the Florida Office of Insurance Regulation's Choices website, designed to help consumers shop for home and car insurance. A $5,409 Citizens premium trails 24 competitors whose listed rates are as inexpensive as $2,142.

On its face, that might look a little embarrassing to folks insisting rates at the insurer of last resort are so bargain-basement low they make private competition all but impossible. Gov. Rick Scott has pushed for higher Citizens rates, calling them "artificially low."

Industry officials caution that rates on the website are averages over a wide area and can be misleading. Not every insurer listed may be writing new business at all - let alone in coastal areas where many Citizens customers tend to be. And rates near the coast are often far higher than those inland.

"Citizens has most of the coastal risk in Palm Beach County, and that's why its rates average out higher," said Lynne McChristian, Florida representative for the Insurance Information Institute. "Relaying the average rates in counties with large coastal exposure has a tendency to present a more distorted cost structure than you'd find in a county with largely inland properties."

Still, she said, the site can "point people in the right direction" for checking out options.

The website is intended to help consumers get started in their own research, state officials said.

"The premiums shown in Choices are not intended to be premiums that a particular consumer would be charged," said Amy Bogner, spokeswoman for the state's Office of Insurance Regulation. "Consumers should shop around for specific quotes and availability of policies and coverage."

One good thing about the site is that "it's alerting customers there may be other options out there," said Katie Webb, lobbyist for the Florida Property & Casualty Association. Keep in mind some agents from insurers no longer writing much new property business in South Florida, like State Farm and Allstate, may be able to put some customers in Citizens but can be limited in other carriers they work with, she said. Some smaller Florida insurers may work through different agents, she said.

Citizens remains Florida's largest insurer with 1.5 million customers, including 141,000 in Palm Beach County. The next biggest, Universal Property, had less than 7o,000 customers in the county as of June 30.

Florida Peninsula Insurance Co. of Boca Raton, No. 3 in the local market with about 18,000 customers, has agreed to take up to 45,000 Citizens customers statewide in an ongoing takeout program. CEO Roger Desjadon said it's fine by him if consumers want to use the website to shop around.

"If they have questions, they should call us," Desjadon said.

Even for an older home - built before 2001 -at least 10 competitors have lower average premiums than Citizens in Palm Beach County, the state site shows.

Direct comparisons of rates in coastal areas can tough to find, though at a workshop in July some Citizens rates surprised the company's own chairman by being higher than those of competitors.

Example cited at the workshop: A customer with a 35-year-old home in coastal Palm Beach County, insured for $225,000 and lacking storm-resistant discounts, pays $3,390 a year with Citizens, but at least one unidentified private insurer was offering coverage for $3,177.

Citizens staffers said in July a more comprehensive rate comparison was under way, but company officials did not respond this week to a request to provide that information.

"I think it is important to remember that the rating territories in Palm Beach are probably going to vary dramatically," state insurance consumer advocate Robin Westcott said.

Still, said state Rep. Mark Pafford, D-West Palm Beach, the rate comparison seems a little startling considering how often private insurers say they can't compete with Citizens.

"It seems to kind of fly in the face of the logic they use," he said.

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 Citizens vs. the competition

A state website shows 24 out of 27 competitors have lower average rates than state-run Citizens in Palm Beach County for a home built in 2005. At least 10 insurers show lower average rates than Citizens for a home built before 2001. Industry officials warn the numbers can be misleading because they are averages over a wide area, and rates tend to be higher near the coast where many Citizens customers are.

The example below shows rates for a $150,000 home constructed before 2001 in Palm Beach County, both without credits for storm-resistant building features and with maximum credits.

Company Name /Rate with no wind mitigation /Rate with maximum wind mitigation

1. Florida Family Insurance $2,806 $ 1,825

2. Frontline Homeowners/First Protective Ins. Co. $ 3,045 $ 1,539

3. Fidelity National Property & Casualty Ins. Co. $3,199 $ 1,633

4. Tower Hill Prime Ins. Co. $ 3,500 $ 1,356

5. Southern Fidelity Ins. Co. $ 3,606 $ 2,262

6. Tower Hill Preferred Ins. Co. $ 4,112 $ 1,762

7. American Traditions Ins. Co. $ 4,167 $ 1,955

8. Florida Peninsula Ins. Co. $ 4,258 $ 2,176

9. Southern Oak. Ins. Co. $ 4,373 $ 2,416

10. St. John's Insurance Co. $ 4,479 $ 2,485

11. Citizens Property Insurance Corp. $ 4,693 $ 2,741

Source: Florida Office of Insurance Regulation, http://www.floir.com/choices

Biggest property insurers in Palm Beach County

Insurer /Policies In Force /Local Market Share

1. Citizens Property Insurance Corp. 141,089 29.9%

2. Universal Property & Casualty 69,856 14.8%

3. Florida Peninsula Insurance Co. 18,009 3.8%

4. State Farm 14,886 3.2%

5. United Property & Casualty 14,499 3.1%

Source: Florida Office of Insurance Regulation, as of June 30, 2012