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Date of Issue: December 21, 2006

Insurance: Marketing games on Anna Maria Island

hb permit pic
After Carol and Ed Kerr’s standard homeowner’s insurance on their Key Royale home, pictured above, was canceled in December, they were offered a policy with less coverage at a higher rate. Islander Photo: Molly McCartney

Anna Maria Islanders are learning that in the wild and weird Florida insurance industry, companies have developed subtle ways to raise prices while cutting coverage.

They can do this, it seems, without bothering to ask state regulators for permission to raise rates.

Consider how Universal Property and Casualty has marketed its homeowner policies to Carol and Edward Kerr.

The Kerrs took out a standard homeowner's policy with Universal six years ago when they bought a retirement home on Key Royale in Holmes Beach. They've had no damage and no claims. But a few weeks ago they received a notice that their policy was being canceled.

Carol Kerr, who has a marketing background, immediately began to make phone calls to figure out what had happened and what to do about insurance coverage. She talked to insurance agents on and off the Island and to the customer service section of Universal, which is based in Fort Lauderdale.

"What Universal told me was that they are trimming up to 5 percent a year of their policyholders," Kerr said. She concluded that the company wanted to leave Anna Maria Island and the hurricane risk here.

"Then I found out that Universal would take us back ... but give us less coverage for more money," she said.

The difference, she said, was that Universal had two kinds of policies for single-family homeowners: an HO3 form like the one that the Kerrs previously had in effect, and a more expensive HO8 form that includes less coverage.

Kerr was baffled by the distinction that Universal made between her former HO3 policy and the HO8, which Universal was offering. To get more facts, she dug deeper into the story she was getting from the company.

Eventually she managed to get through to the head of customer service at Universal.

"I asked a lot of questions. I asked what would happen if we sold our house.... What options would the new owner have, and I was told that the new owner would be eligible for an HO3. That's when I went ballistic. Because they would penalize me, after being a good customer for six years, restrict me to an HO8, and they would reward a new customer with an HO3. This is not right. I don't get it."


No response

Universal officials, including its president, Bradley Meier, failed to return The Islander's phone calls.

The company insures about 49,000 policyholders in Florida, including many on Anna Maria Island. But A.M. Best, which reports on the condition of insurance companies and rates them for consumers, does not formally track Universal's operations. And a spokesman for the Florida Insurance Council, which represents about 250 companies, said that Universal does not belong to that organization and he had no information on their operations or policies.

Local insurance agents who are familiar with Universal and its various homeowners policies were also puzzled by the company's handling of the Kerr matter.

"Honestly, that doesn't make sense," according to the personal lines manager of one insurance office. "Why would they non-renew a policy and then allow them to come back on a different policy form?"

John Laurie, a Bradenton agent who serves as a technical advisor to the governor's select task force on insurance reform, did offer one clue that he thought might explain the Universal offer to switch the Kerrs to an HO8 policy after canceling their HO3.

 "Be aware, more and more companies are going to an HO8, especially for older homes in order to reduce their exposure," Laurie said.


How old is this old house?

Exactly what is the basis that companies use to decide which homes are too old to qualify for an HO3 but eligible for an HO8?

That's up to each company to decide, according to the Florida Office of Insurance Regulation. "Each company can file its own underwriting guidelines, and the guidelines can vary from one to another," a department spokesperson said.

Local insurance agents say the insurance industry traditionally has been willing to write an HO3 homeowner's policy for a house built during the past 40 years. If the house is older than 40 years, it is insured with an HO8 policy that includes less coverage for a higher premium.

One agent said that Universal used the 40-year rule until about two months ago. "Universal guidelines now require that the house can't be more than 30 years old to qualify for an HO3," the agent said.

The Kerrs' home was built 34 years ago.

The age of the house is listed on the policy that the Kerrs had with Universal. But the couple said that no one mentioned that as an issue in any of the conversations they have had with Universal or with the various agents they have questioned.

In the final bizarre twist to the Kerrs' story, they found that they qualified for an HO3 homeowners policy from Citizens Property Insurance Corp, the state's insurer of last resort, because their HO3 policy with Universal had been canceled. The couple bought Citizens because it was the best deal for the best possible coverage.


The price of Florida sunshine

"You can only speculate about what is going on," says Ed Kerr, a retired retail store owner from South Carolina.

"But I do know this," he added. "We had a big house in South Carolina with 3.5 acres and the insurance cost about $800 a year - about one-fourth of what we are paying here for this house with only about 1,600 square feet. And that is a heck of a price to pay for Florida sunshine."

Kerr said that he couldn't understand why there had not been more of a public outcry over the Florida insurance crisis, the shrinking coverage and the skyrocketing premiums for homeowners as well as businesses.

"Everyone complains but it keeps on going on.... I'm surprised that this isn't like the Boston Tea Party."


Available insurance forms

According to Wikipedia, the Internet's free encyclopedia, a private New Jersey company called the Insurance Services Office developed eight standard forms for home insurance in the early 1970s. The forms have been amended over the years.

Wikipedia says the most common policy form today is the HO3 for homes, followed by the HO4 for renters and the HO5 for condo owners. The HO8 policy is described as "older home" insurance.

For more information about these policy forms, go to Wikipedia on the Internet at