Eleven days ago, Chief Financial Officer Jeff Atwater asked a question that is on many Floridians’ minds: When will the cost of property insurance start coming down?
We had big increases in 2006 after the bad storm years of 2004 and 2005. State Farm, for example, got 52 percent more. Since then, however, we’ve had five years in which no named storms hit the state — here’s hoping this is the sixth — and two years of minor storm damage. Yet most rates have kept rising.
Mr. Atwater asked the question of Insurance Commissioner Kevin McCarty, whose office approves rates and who reports to Mr. Atwater and Gov. Rick Scott. Since the cost of reinsurance — what companies buy to insure themselves — has come down, and since the companies have blamed reinsurance costs for higher rates, Mr. Atwater wondered why rates aren’t lower.
Mr. McCarty’s response sounded as if it came from the insurance industry excuse factory: To guard against catastrophic damage, some companies are buying more reinsurance while it’s cheaper. Reinsurance costs have come down only recently, so rates don’t yet reflect the drop. Every company’s costs are different. Some companies asked for smaller increases over time, not at once.
Straight answers on insurance are hard to come by. We asked the Office of Insurance Regulation how much rates have gone up each year on average since 2006. We got annual lists of how much each company had asked for, and the regulators’ decision. But the listings don’t say how many policies each filing covered, and in some cases the same company made as many as eight filings.
In an email, Director of Property & Casualty Product Review Sandra Starnes said: “It is very difficult to answer the questions that you have raised. In order to determine the average rate change approved on a statewide basis, you would need information that the Office does not have.”
Private companies can raise rates as much as 15 percent without a full hearing. There are lots of requests just below that level. Some companies have multiple subsidiaries that move money around, which means that regulators must dig deep into the financials when reviewing rate requests. Is that happening? There’s a follow-up for Mr. Atwater.
Insurance Consumer Advocate Robin Westcott, whom Mr. Atwater appointed, believes that new competition is driving down the cost of reinsurance. “I think more savings are coming,” Ms. Westcott said, and could be reflected in rate decreases of 5 percent to 8 percent.
Perhaps, but we have seen insurers seek every way around rate relief. Rates seem to go up whether storms come or not.
On Tuesday in Tampa, state-run Citizens will make its case for increases of between 7.3 percent and 11.5 percent. The people running Citizens have said that most of its customers are at or near rates that would allow the company to pay claims. So why the increase? If rates just keep rising, the Florida real estate market will be in trouble, and so will Florida.