By: Charles Elmore
Palm Beach Post
Whatever effect, if any, that Hurricane Sandy may eventually have on Florida insurance bills, premiums are already spiking for Fred Goetz and hundreds of thousands of his fellow residents.
In one stroke, his annual bill more than doubled to $8,707. Insurer Tower Hill said he did not qualify for discounts on features in his home designed to harden it against hurricanes.
Goetz, an IBM engineer before retiring in Palm Beach County, suspected “another ploy to allow the insurance companies to milk the homeowners in Florida, and it should come to a stop.”
About 300,000 customers of the state’s largest property insurer, Citizens, have been visited by a company-paid reinspection campaign. It has raised bills for three out of four of them, by an average of almost $600 a year. Some premiums have more than doubled.
Most people, confused and exasperated, don’t know what to do. But a few hardy souls are discovering it can pay to ask questions and get second opinions.
Fewer than 4 percent of Citizens customers, for example, have appealed inspection results. Yet nearly half of those who do — 46 percent — have seen at least partial credits restored, records show.
Goetz, one of IBM’s “Dirty Dozen” engineers who cooked up the original PC, proved to be a guy unwilling to take an eye-popping price hike lying down. He set out to grapple with the mystifying world of insurance jargon and sweltering attics, where something as seemingly minor as one extra nail in the roof joints can cut the bill in half.
“Designing and developing the first IBM PC was not only challenging but exciting,” said Goetz, 83. “Playing the games with the insurance companies is annoying, frustrating and I keep asking myself, ‘Why?’ It is very difficult to play the game, when the rules keep changing, and it is all one sided, and you never know what you have, as it can change any minute.”
In this game, the burden is on homeowner to act.
Leafing through the phone book, Goetz called around from his Delray Beach home for advice and estimates. One contractor told him it would cost up to $6,000 to do a makeover on his roof joints in a bid to recapture one of the key credits. He eventually found a contractor willing to do it for $385. He paid $50 for another reinspection.
Tower Hill canceled his policy after he declined to pay what they wanted, so he switched carriers to People’s Trust Insurance, which plans to send yet another inspector later this month. But as of last week he said his annual premium was back to $3,165. That’s a whopping savings of more than $5,500 a year if it holds up.
Strengthening homes against storms is one of the few ways Florida consumers can have any control over insurance costs, potentially limiting harm to lives and property, state insurance consumer advocate Robin Westcott has said. But industry officials contend discounts put in place during the administration of former Gov. Charlie Crist were often overly generous, and they maintain many people got credits that were not justified.
Insurers: Residents got deals
State officials have since tweaked the rules several times on discounts, as recently as February. Gov. Rick Scott has called for Citizens, the state-run insurer of last resort, to find ways to raise rates and push people to private insurers to reduce exposure risk. Premiums have gone up more than $180 million because of the reinspection campaign, and Citizens has cleared more than $130 million after expenses like paying inspection firms.
Tower Hill Insurance Co. officials say they have not paid inspectors to visit large numbers of homes in the way Citizens has, but in the course of business have reviewed credits claimed by individual homeowners such as Goetz.
And while consumers may view the loss of credits as a heart-stopping premium increase, people in the business often see it very differently. They see the process as frequently restoring rates closer where they should be, and the good news for homeowners is they got a bargain for a while.
“The silver lining is that the customers are somewhat lucky in that at least they have been paying reduced premiums, sometimes for years,” said Joel Curran, Tower Hill’s chief underwriting officer.
Lucky isn’t always the feeling Florida consumers get, though. Many ask what happened to the premiums they paid during the last seven years when no major storms hit Florida. Now, though grateful Sandy largely spared Florida, they turn a wary ear toward assurances from industry groups that the storm’s rampage through the northeast probably won’t push up their premiums much.
The suspicion relates to reinsurance — insurance that insurance companies buy. It could be cited later as justification to raise rates in Florida if companies say their reinsurance rates jumped because of billions paid in Sandy claims. Reinsurance accounts for up to 40 percent of the premium charged by some carriers in the state.
Sandy flooding might not affect us
“Hurricane Sandy may have some impact on reinsurance rates, but keep in mind that despite the widespread devastation, much of the damage was related to flooding, which is covered by the federal government’s National Flood Insurance Program,” said Lynne McChristian, Florida representative of the Insurance Information Institute. “Reinsurers had historically high amounts of capital available this year, with strong earnings so far.”
As for inspections in Florida, McChristian said asking questions and exploring options can be wise, but recommended homeowners focus on improved safety, not just lower premiums.
Yet the fact remains for many Floridians, the killing of mitigation credits is the biggest single shock to the the family budget these days. And they may not find a whole lot of help when they try to make sense of inspection reports or call the insurer.
“The insurance company says you’re guilty until proven innocent,” said Robert Braid, site supervisor in Boca Raton for Merit Insurance Reconstruction, which helped Goetz.
Inspectors paid by the insurer don’t necessarily have a lot of incentives to mention small things that can make a big difference, he said.
For instance, a homeowner can lose discounts if just one “glazed opening” — meaning windows, certain doors and skylights — is judged to lack qualifying protection, even if the rest are good to go. The cost of fixing up that one opening might be well worth the premium savings.
Nearly one in two got credits back
Take a look at the 2,246 Citizens customers who got credits restored by March 31, the latest available data from the company. Of those, 86 percent got credits back “as a result of the policyholder providing new documentation hitherto not submitted to Citizens,” a Citizens spokeswoman said. In other cases, Citizens acknowledged errors by the company or its vendors. In 11 percent of appeals, homeowners got full credits restored.
Some people may think it’s too late to do anything, but Citizens will send another inspector within 12 months of an inspection at no charge if there was obstructed attic access or the homeowner made property improvements. Another inspection may not even be required if the homeowner provides documents, a spokeswoman said.
Whether it’s Citizens or another insurer, sometimes big money can ride on little things. Examples: locating the right municipal permit or other document, moving boxes in a closet so an inspector can get into the attic, or getting a manufacturer to certify a shutter, door or window if, for instance, a sticker has peeled off or been painted over.
Braid cautioned not every homeowner can expect big savings by challenging an inspection or attempting fixes. Paying for improvements can get expensive fast, depending on factors such as a home’s age and configuration. The homeowner has to decide if the cost is worth it. After all that, the insurer still might not agree. And there’s always the risk the state could change the standards again.
Still, a stalwart few are discovering it can be worth the trouble to find out.
“Sometimes, one extra nail in the clip can make a big difference,” Braid said. “It can cut the premium in half.”
An insurance inspection made your bill shoot up — and maybe your blood pressure too. What next?
Get the facts. Obtain a copy of the inspection report if you don’t already have it. Ask your agent or insurer.
Know your options. Learn about appeals options. Less than 4 percent of Citizens customers challenged reinspection results through March 31, for example, but 46 percent of those who did saw least partial credits restored.
Do your homework. In 86 percent of successful Citizens appeals, additional documentation from the homeowner helped get credits back. Find out if, say, a permit or manufacturer’s certification might make a difference.
Consider third-party help. Another set of eyeballs — ones not paid by your insurer — can advise on appeal chances or possible fixes to capture discounts. It’s up to you to vet advisers and decide if any money spent is likely to pay off. Shop around. Example option: $50 review offered through Lake Worth-based Florida Association for Insurance Reform.
Higher bills after Citzens reinspections
—Citizens premiums rose $180.6 million overall through Sept. 30 because of the campaign
—298,124 homes and businesses reinspected—Average premium increase: $581.56, or 23.2 percent
—73 percent saw a premium increase after company inspections, 8 percent saw a decrease, rest unchanged
—Citizens cleared $132.7 million after paying inspectors and other expensesSource: Citizens Property Insurance Corp.