South Florida homeowners, brace yourselves for more bad news on the insurance front.
State Farm Insurance is asking to raise rates an average of 70 percent for home and condo owners — and nearly double what it charges owners of mobile homes. It also will stop covering windstorm damage for customers in the most storm-prone zones statewide.
Allstate Floridian will drop 120,000 home and condo policies, including 34,500 in Broward, Miami-Dade, and Palm Beach counties, starting Nov. 1.
The news is the latest blow for homeowners, who face increasingly higher prices and fewer choices in the insurance market. This comes on top of hefty surcharges to cover deficits in Citizens Property Insurance, the state-run insurance pool, and the Florida Hurricane Catastrophe Fund. These surcharges will add hundreds of dollars to insurance bills this year and in 2007.
State Farm, the state’s largest insurer, will shed some condo association policies and will no longer provide wind coverage for some 39,000 policies it has in the designated wind pool area — where private insurers are not required to cover hurricane losses — throughout the state. In South Florida, the wind pool area is roughly east of U.S. 1 in some areas and Interstate 95 in others.
Allstate customers can contact their agents Monday to see if their policies are affected.
The company has arranged for Royal Palm Insurance, a new insurer based in Ormond Beach, to offer coverage to the Allstate homeowners whose policies won’t be renewed.
Both of the big insurers tried to put a good face on the news.
State Farm said the higher rates and reducing its risk allow the company to stay in Florida and maybe write some new policies.
Allstate’s news release carried the headline “Allstate welcomes new insurer to Florida market,” referring to Royal Palm, and said those policyholders can continue to work with their current Allstate agents.
CALLS FOR VETO
Sen. Ron Klein, D-Boca Raton, bashed the insurers’ move.
“Allstate and State Farm’s attack on the homeowners of Florida exactly one week after the end of the legislative session and just two weeks before the start of hurricane season is outrageous,” Klein said.
Klein is calling on Gov. Jeb Bush to veto the massive insurance bill, which contains many reforms insurers lobbied aggressively for. He also called for a special session to deal with the state’s insurance crisis.
“This isn’t good news for consumers. But there will be more of the same because other companies will be filing for rate increases and seeking to shed policies,” said Jeff Grady, president of the Florida Association of Independent Agents.
Indeed, State Farm actually has asked for two rate hikes — one, an average 58.8 percent statewide, is for the increased cost of reinsurance, insurance that insurers buy to cover some of the losses they face after a major catastrophe.
The second hike — 12.7 percent statewide — is for expected higher storm costs this year.
The biggest projected increase is reserved for mobile homes: State Farm wants to raise rates on its roughly 30,000 policies an average 95.3 percent.
Allstate policyholders will get letters from Royal Palm Insurance as their policies come up for renewal after Nov. 1.
Deb Clouser, Allstate’s spokeswoman, stressed that this entire transition will take a year and won’t start until hurricane season is practically over.
The company expects about 80 percent of the homeowners and condo owners to accept the Royal Palm offer — about the same percentage that chose coverage last year with Universal Insurance Co. of North America, a Sarasota-based firm that agreed to offer coverage when Allstate dropped 95,000 homeowners.
If homeowners don’t accept Royal Palm’s offer or can’t find another insurer in the private market, they will end up with Citizens, whose rates are the highest in the state.
While Universal has been in business more than 25 years, Royal Palm was formed specially to take over these Allstate policies, said W. Lockwood Burt, a former state senator and Royal Palm’s chief executive.
Burt said Royal Palm has $65 million in capital and reinsurance in place for the coming hurricane season. The state approved its business plan April 1.
He said Royal Palm was willing to take on the Allstate policies because it was able to choose the policies and thus avoid older homes — which aren’t built to stricter building codes created after Hurricane Andrew — and ones located in risky coastal areas.
And while Allstate customers may not be affected by this change immediately, the company will be. It has worked out a kind of reinsurance agreement with Royal Palm, for the company to cover any losses on the policies it’s dropping between now and their renewal dates. Allstate agents will continue to service the policies and Allstate adjusters will handle any claims.