Insurance: It's a jungle out there
|Sandy Mattick is waiting to find out if her Pine Avenue General Store will qualify for wind coverage in a new state program for small commercial businesses that was implemented Sept. 15. Her store, located at 307 Pine Ave., Anna Maria, has been without wind coverage since her policy expired in July and the company refused to renew the coverage. Islander Photo: Molly McCartney
Anna Maria Island store owner Sandy Mattick has been waiting since mid-July to find out if she qualifies for the new state wind insurance program established especially for small commercial businesses like hers.
The answer she gets could well affect the rest of us living on Anna Maria Island. That's because many small business like hers that make life on the island unique may not be able to survive in today's insurance jungle.
"Hurricane season may be over by the time I know if I am eligible and if I can afford it," said Mattick, who operates the Pine Avenue General Store at 307 Pine Ave., Anna Maria.
Mattick, who has been without wind coverage since her policy expired July 9, says she hopes to obtain the coverage approved Friday, Sept. 15, by the Florida Property and Casualty Joint Underwriting Association.
This is the same coverage that the PCJUA had hoped to make available as early as Sept. 1. But the approval process required by state law resulted in a 15-day delay.
In a Tallahassee press conference intended to explain the new program, PCJUA interim director Dan Sumner said the annual premium for wind insurance would be $1.49 per $100 of coverage for commercial non-residential property owners who qualify. That works out to $14,900 for $1 million worth of insurance, although the actual premium could be higher or lower, depending on adjustments for such things as building materials, distance from coast and other variables.
Mattick is worried that those rates are going to be too expensive for her. "I was paying $871 before for $210,000 coverage, including $150,000 for the building and $60,000 for the contents," she said.
Now it would appear, she said, that the PCJUA policy for that amount of coverage will cost three and a half times that much, or about $3,129.
Mattick said she has been in regular communication with her insurance agent and hopes to learn more this week about the availability and affordability of the new wind policy.
One irony for Mattick is that the state has retained ICAT Specialty to handle its new policies. "That is the company I had before - the one that terminated my policy in July," she said.
ICAT Specialty, a subsidiary of a Colorado-based insurance company, will receive an 11 percent fee for handling PCJUA policies.
Any claims for wind damage from PCJUA policyholders would be paid from two sources. The first would be the premium payments. If the premiums turned out to be insufficient, PCJUA would pay the deficit by assessing Florida's commercial property insurers.
While Mattick is waiting to hear from her insurance agent, the Florida insurance crisis continues.
Rate increase coming
On Sept. 14, the board of the state-run Citizens Property Insurance Corporation approved a 2 percent surcharge on all Florida policyholder premiums to help cover the $1.7 billion deficit that Citizens incurred in the 2005 hurricane season.
The assessment would have been closer to 12 percent, if it hadn't been for a one-time $715 million appropriation from the Florida Legislature intended to help reduce the deficit, according to a press release from Citizens.
A policyholder who now pays $1,000 a year for coverage can expect to pay an additional $20.70, once the 2 percent assessment takes effect, according to Bob Ricker, president of Citizens.
He said the remaining deficit will be "made up through an emergency assessment that will be spread over a 10-year period."
Both of these assessments must be approved by the state Office of Insurance Regulation before they are implemented.
Citizens, which now has 1.2 million policyholders in Florida, is a state-sponsored insurance program of last resort for owners of residential property. Owners of commercial non-residential property may qualify for Citizens if their property is within the state designated wind pool areas.
Florida insurance chief goes to D.C.
Florida Insurance Commissioner Kevin McCarty, the state's top insurance official, testified before a congressional subcommittee in Washington, D.C., on Sept. 13 and "strongly" endorsed the immediate creation of a national commission on catastrophe preparation.
McCarty told the subcommittee that the "cost of catastrophic insurance has undergone an unprecedented rise, and shows no signs of abating any time in the foreseeable future."
Furthermore, he said, the market is financing all of the catastrophic risk it cares to under current conditions. He said the availability of capital to support catastrophic risk insurance is more uncertain than it has been and "this uncertainty will also remain."
In his comments before the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises of the House Committee on Financial Services, McCarty also tackled the controversial issue of regulation.
"Much has been written about the impact of regulation on the affordability and pricing of insurance," he said.
But in fact, he said, "insurance companies, not regulators, develop the rates and rating systems in 49 of 50 states. The role of state regulators is to review the rates to ensure they are actuarially sound. Their goal is not to tell an insurer what to charge, but rather to verify that consumers are not being charged rates that are excessive, inadequate, or unfairly discriminatory."
McCarty pointed out that South Carolina, a state that wasn't directly impacted by the 2004-05 hurricanes, is "seeing the same sort of market behavior as the rest of the coastal states, yet South Carolina's rate review system ... is a model held up by the industry as being a model for so-called competitive rating."
To comment on the insurance crisis, e-mail or mail your comments about insurance to Rep. Bill Galvano, who has been leading the effort to find solutions to the insurance crisis. E-mail your comments to him at email@example.com or mail to 1023 Manatee Ave. W., Suite 715, Bradenton FL 34205.
The Islander wants to hear from you about your insurance problem and your ideas for solutions. E-mail firstname.lastname@example.org or mail to 5404 Marina Drive, Holmes Beach FL 34217.
Nightmare: Search for wind insurance
Obtaining one of the new commercial wind policies from the Florida Property and Casualty Joint Underwriting Association can be a nightmare for a small business owner, who must follow a series of strict legal requirements to qualify.
For starters, he or she has to find a PCJUA-appointed insurance agent. That agent must submit applications for coverage to three Florida-licensed insurance companies and at least one surplus-lines carrier. If the three Florida insurers reject the applicant and if the surplus carrier either rejects the applicant or offers a policy that costS 25 percent more than PCJUA premiums, the agent can take the next step and apply to the Florida Market Assistance Plan, a state clearinghouse that will try to find wind insurance for the applicant.
If FMAP fails to find coverage for the applicant within 10 days, the agent can write a PCJUA wind policy for up to $1 million for structural coverage, up to $750,000 for contents coverage, and up to $250,000 for business interruption coverage.
There is an automatic 5-percent deductible for the coverage. An applicant has the option of choosing a 10- or 15-percent deductible for a lower rate.
The PCJUA wind coverage is available only to commercial non-residential property owners whose property is worth $1 million or less and who are unable to find wind insurance from any other source.