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Why property-insurance rates are skyrocketing, how to fight back

9:03 p.m. EST, April 14, 2012|Scott Maxwell, TAKING NAMES


Mike Costner's home in Indian River County has withstood every hurricane to hit Florida since 1952. So he was perplexed to see his homeowners-insurance premiums go up — by more than 50 percent this year alone.

"Sticker shock," Costner said, "has turned into getting tasered."

Costner is not alone.

Osceola County resident Dan Pearson told me his rates jumped 34 percent. Brevard's Linda Seals' went up 50 percent. Winter Springs' John Secor saw his double in the past two years.

And Orlando resident Scott Maxwell got news of a $700 increase just last week.

Fortunately for Maxwell (that's me), I found a way to shave that bill down by $1,000.

Fortunately for you, I'm going to tell you how.

But first, let's talk a bit about why Central Floridians are seeing massive increases — higher than most of the state. And most of America.

First, you have to accept that we live in a disaster-prone state. Insurance companies like to point that out.

But it's always been that way. Florida hasn't moved.

Instead, the skyrocketing rates are the result of a confluence of things: shoddy decisions and poor planning by the politicians; big profits and financial games played by the insurance companies; and the new way the industry has decided to assign risk — a major shakedown for those of us in Central Florida.

Let's start with the insurance companies.

Every year, they cry poor mouth — whether hurricanes come through or not.

Don't be fooled. Most insurance companies still make out quite well.

In fact, the Sarasota Herald-Tribune won a Pulitzer Prize for a series of articles about how the entire industry "is, at every level, rigged against consumers."

The series cited companies shipping money out of state, secretive rate manipulations and some companies that were so financially weak, they couldn't make all their payments if they had to.

But I wanted to hear from the industry itself.

So I reached out to Locke Burt, the president of Security First Insurance — the company that tried to jack up my premiums $700.

Burt claims his industry is a victim as well. And in some regards, he's right.

The state, for instance, really messed things up with Citizens Property Insurance — the state-run insurer that provides subsidized insurance to higher-risk homes.

I could write an entire column on why Citizens is a mess. But the short version is that we inlanders subsidize the premiums for coastal dwellers, including owners of second-homes on South Beach.

It's nonsensical and unfair. I have no interest in subsidizing second homes of oceanfront mansion-dwellers. And it's insane that this alleged "insurer of last resort" is now the biggest insurer in Florida.

Still, Burt said the thing that most affects your rates is the cost of "reinsurance," which companies like his buy to cover their own losses (basically, insurance for insurance companies). "We spend 40 percent of every penny we get on re-insurance," Burt said.

And reinsurance costs are skyrocketing, largely because the industry decided to reassess the way it calculates storm risk, concluding that inland Florida rates need to go way up.

Said Burt: "That affected Central Florida in very bad ways."

He pointed me to a chart that predicted reinsurance increases of 20 percent, 40 percent, 80 percent and more, depending upon the county and ZIP code.

In other words, things will probably get worse.

There are even more factors at play. Fraud is on the rise. Sinkhole claims are up. And rates are going back up, now that a subsidy, courtesy of Charlie Crist and the Legislature, is running out.

Still, most everyone involved in the game — the insurers, the reinsurers, the politicians — all make money off Florida's insurance market … at your expense.

So what do you do about it?

In the long term, elect different politicians.

But for now: Shop around.

I know that sounds simple. But way too many people get hitched to one company — and just keep on paying. That's a big mistake.

When Security First told me my rates were going up $700, I called my independent agent.

In less than an hour, she found a rate that was not only lower than what Security First wanted next year, but $300 lower than what we paid this year.

And that was for slightly better coverage with one of the state's bigger carriers.

So I told Burt I was firing him.

Burt was pleasant enough about it — and not really surprised either. He said different companies target different demographics, and that his offers the cheapest rates to those who live in homes much newer than mine.

So maybe the folks in Baldwin Park will be very happy with Burt.

As for me, I'm much happier with someone else.

But you know what? I'm certainly not wedded to them. If the rates go up, I'll shop around again.

And you should do the same in looking out for your own family.

Because, as Florida's track record clearly shows, no one else will.

Home Insurance – How to get better rates (and learn more)
Get involved, The rest of the story, Uncategorized — posted by scottmaxwell on April, 15 2012 3:11 PM

So I’m getting a lot of email from readers today.

And much of it is coming from readers who want to know specifically how I saved $1,000 — with which company and the name of my agent.

I’m also hearing from a handful of insurance execs trying to make the case that they are the victim in all this.

So I’m here to help — arm you with the facts and the ability to save.

My case

First of all, I dropped Security First and ended up going with St. Johns. For $1,000 less than what Security First wanted, St. Johns (which is the fifth-largest provider in the state) is actually giving us MORE coverage.

The easy way for you to research things

But you may not get the same results. You can shop around for yourself though – (and I have to thanks State Rep. Scott Plakon for reminding me of this site this morning) — at Florida’s rate-shopping site: http://www.floir.com/choices/. Here, you can choose whether you have a new home (2001 or newer) or older one — and then see which is right for you.

There you will see that Security First CEO Locke Burt had it right when he told me that his company was better for newer homes. While the site lists St. Johns as older for better homes like mine, it has Security First near the top for newer ones.

Two major warnings:

1) Price isn’t everything. If a firm is new, an upstart or without enough assets, it could be stretched beyond abilities in the case of a major hit. You should check the company’s financial ledger. (I did.) Or consult with an independent agent who’s familiar with the companies. (I did that, too.)

2) If you are with State Farm or All State (Castle Key), you should shop around — immediately. On the state’s site you will see that both of those companies offered among the highest/worst rates for both newer AND older houses in Orange County. Not everyone can switch. But if I had either one of those, I’d certainly check around.

(And since many of you asked for the name of my independent agent, her name is Lori at Birchell Insurance. We’re relatively newly together. So I can’t give her a lifelong testimonial. But I can say she did real well, real fast last week.)

The insurance industry’s “not our fault” claim

Now, as for the insurance execs who want to argue that everybody else is to blame but them:


I know Florida politicians screwed things up. And I — and this newspaper — have documented that in spades, particularly with regards to Citizens. We’ve also highlighted Charlie Crist’s short-term cash infusion into the cat-fund, which only temporarily lowered rates (which are now rising).

Also, the reinsurers and longterm forecasters certainly play a role. (You global-warming deniers should be extra mad, because one of the main reasons your rates are going up in Central Florida is that they have decided that inland Florida will be subject to more major hurricanes in the future.)

But most of those trying to tell you that the insurance companies are the “poor, poor me’s” in all this is selling you a bill of goods. And if you don’t believe that, allow me to give you a reading assignment.

Check out the Sarasota Herald-Tribune’s Pulitzer-Prize winning series on the insurance industry.  This extraordinarily well-researched series looks at many of the factors involved — including weak insurers, the reinsurance market, Citizens, etc.

Pay particularly attention to this story: “How insurers make millions on the side - Today, nearly half of Florida’s home insurance is provided by companies whose primary profit comes not from insuring homes but from diverting premiums into a host of side ventures.”

In some cases, you’ll see they ship money out of state and then claim: “Oh my goodness, look how little money we have left.”

The series also noted how overhead costs for Fla. Insurance companies are “50 percent higher … than the national average” — and that ”Even while complaining of losses, Florida insurers from 2006 through 2008 paid $38 million in bonuses and $32 million in other perks to 180 of their officers.”

There are obviously some good and bad players in this business – like all. But be before you bust out the Kleenexes, you might want to read that series.

There ya go. Now consider yourself armed with facts, resources and more. Go forth and save!

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