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Date of Issue: March 08, 2007

Insurance: Your average savings could be up to 34 percent

insurance pic
Florida Insurance Commissioner Kevin McCarty with state Rep. Bill Galvano at the August 2006 hearing on insurance at the Anna Maria Elementary School Auditorium.

State officials now predict that Florida’s new insurance law will save many residential property owners on or near Anna Maria Island an average of 32 to 34 percent on their homeowner insurance bills.

That compares to an average savings of 24 percent for all of Florida, and an average savings of 21 to 34 percent for Manatee County.

Island property owners near high-risk coastal areas will see bigger reductions than inland property owners because the coastal premiums typically have been higher, officials said.

Policyholders can look for the lower premium rates beginning June 1, as policies come up for renewal and as new policies are issued, officials said.

In announcing the rate reduction predictions at a March 1 press conference in Tallahassee, Insurance Commissioner Kevin McCarty said that policyholders are benefiting from the state’s expanded reinsurance program, which was approved during a special legislative session in January. Under the expanded program, insurance companies can buy reinsurance from the state at prices that are sharply lower than the private market. The law requires insurers to pass their savings on to policyholders.

"Gov. Crist promised Floridians lower insurance rates, and he has delivered," McCarty said. "Floridians have been forced to make difficult economic decisions due to rising insurance premiums. They can take comfort that relief is on the way."

Actual savings will vary, depending on the type of coverage, the location of the property and the insurance company.

And there is one large group of policyholders who won’t qualify for any rate reductions resulting from the lower-priced reinsurance program, officials said. They said that Citizens Property Insurance Corp., the state’s insurer of last resort, does not buy reinsurance from the state and therefore won’t be making reductions.

But Citizens policyholders will get rate relief this year from another section of the new law, which eliminated the big rate increases that had been scheduled to take place in January and March. Citizens also is working on a plan that will lead to rate cuts averaging 10 to 20 percent for its policyholders.

State Farm Florida has access to reinsurance from its parent company at a lower price than the private market. As a result, the average rate reduction for State Farm customers will be only about 7 percent.

The biggest beneficiaries of the rate reductions tied to the state reinsurance program are those policyholders who are insured through one of the 280-plus standard insurance companies licensed to do business in Florida.

Here are some examples of the possible average savings for residential property owners on or near Anna Maria Island, as a result of the state reinsurance program:

  • Homeowners: 32.5 to 34.5 percent average savings.
  • Renters insuring personal contents: 29.8 percent to 33.6 percent.
  • Condominium unit owners insuring their contents: 25.2 to 28.5 percent.
  • Manufactured home owners: 39.9 to 42.6.
  • Condominium and apartment buildings: 32.6 to 34.9 percent.

These averages were released in a 25-page report prepared by the state insurance office in cooperation with a team of consultants, including consumer advocate J. Robert Hunter.

The report summarized the methods used in calculating the potential savings for policyholders and gave an overview of the need for legislative action.

"Florida has been at the epicenter of the coastal insurance crisis for well over a decade," the report said.

Last year, during public hearings, including one held at the Anna Maria Elementary School auditorium, "home and business owners offered compelling testimony cataloguing 10-fold rate increases," the report said.

The rising cost of reinsurance for insurance companies was cited in the report as one of the primary components fueling the rate increases. "Reinsurance costs for the 2006 hurricane season for one major Florida insurer more than tripled, compared with the same period in 2005," the report said.

Profits have been going up as well, the report said.

"Clearly insurers have reaped windfall profits in some lines of insurance that have offset any losses in residential and commercial property insurance in recent years," the report said.

And in another slap at the industry, the report declared:

"The insurance crisis experienced by Floridians is not a result of insufficient premiums or a collapsing insurance marketplace. Instead the crisis has been created by the actions of insurance companies which have coupled rate increases with reduced availability.

"These actions have created a crisis of affordability and availability in Florida, as well as placed more pressure on Citizens Property Insurance Corp. to accept risk. These are the factors that prompted the governor and the Florida Legislature to enact changes to the insurance market during the 2007 Special Legislative Session."

 

Insurance: average savings on total premium

Computed by the Florida Office of Insurance Regulation
ZIP
Code
Homeowner Renter Condo Unit
Owners
Manufactured
Homes

Condo and
Apartment

Overall
Savings
34210 32.5% 29.8% 25.2% 39.9% 32.6% 32.3%
34215, 34218 34.5% 31.1% 25.3% 42.6% 34.9% 34.2%
34216, 34217, 34228 33.4% 33.6% 28.5% 41.1% 33.5% 33.3%
Statewide Average 23.9% 20.3% 25.0% 26.9% 28.7% 24.3%