Archive for the ‘Florida home insurance companies’ Category

Your Florida Home Insurance Company Might Not Survive

February 12, 2010

Despite three good years of mild Florida hurricane seasons, home insurance companies in the state have not improved their financial condition.  More companies could fail in this uncertain market.

Despite this recent period of mild hurricane seasons, the financial stability of many Florida home insurance companies is anything but stable.  More than 50% of the companies that are writing new business in Florida lost money during the past twelve months.  Three home insurance companies suffered a financial collapse and had to be taken over by the state.  One of the companies that failed wrote new business exclusively in the 12 most southern coastal counties in the state.  Why are these companies failing and why is it that so many companies are losing money?

For starters, Florida home insurance rates have been held artificially low by the state for the past three years by the legislators.  While it has been politically popular with voters to do this, low rates have contributed substantially to the poor finances of these companies.  Florida’s state run insurance company – the largest company in the state sets the benchmark for rates in the market.  Because it does not charge enough for the coverage it offers, private companies are forced to keep their rates lower – whether they are losing money or not.  Newly formed companies that take policies out of the state run insurance company have to price their policies at or below the state run company virtually guaranteeing that they will lose money from the start.

There has also been an increase in non-hurricane claims and reopened claims from prior hurricanes.  The tough economy is a factor because anyone who experiences a loss when times are tough is more likely to file a claim in the present environment.  At the present time, home insurance companies in Florida are also experiencing more fraudulent, suspicious claims.  This fraud can involve filing a claim during normal rain storms in order to get money to fix an outdated roof.  It could also include suspicious fire claims along with theft claims from home burglaries that include high value items the homeowner never owned.  Finally, there has been a rise in new and re-opened hurricane claims from the storms of 2004/2005 which led directly to the collapse of one company that had exhausted its reinsurance coverage.

Finally, investment returns are significantly down.  Homeowners insurance companies in Florida are always on the lookout for ways to earn a safe return on their excess cash.  That’s not easy for fund managers to do with the poor condition of the financial markets.  Rates of return on low and risk free investments are way down in this slumping economy with low interest rates.  Locating investments with high rates of return for purposes of investing surplus cash could result in too high of a risk level.  After all, it is unacceptable for your company to deny or delay your claim because it lost your money by investing in a risky stock market.

Your first reaction to the poor performance of these companies might be one of very little concern.  After all, why should you care if an insurance company makes money?

Even if you are the biggest hater of insurance companies ever born, it is still important for your company to make a reasonable profit – especially in years when there are not any hurricanes.  During those mild periods, these companies are supposed to earn a lot more in premium and have a lot less going out the door for claims.  The fact that this hasn’t happened for most companies should be sending out alarm bells across the state of Florida.

Politicians have told you that large insurance companies are evil and it is possible that some of them are.  But it is the newest, smallest home insurance companies that can’t make money in these mild non-hurricane years.  These companies are the future of Florida home insurance.  If they can’t make even a small profit during mild, non-hurricane years, you shouldn’t expect them to have the money to pay your next Florida hurricane claim.

If you are looking for a new homeowners insurance company, now is not the time to be buying based on price.  You have to do your research.  If you simply buy the lowest price policy, you’ll be the one struggling financially if your company goes out of business and has to be taken over by the state.

Michael Letcher is a Fortune 500 executive and a licensed CPA.  His on-line buyers guide can help you find, screen, and contact low cost Tampa homeowners insurance companies.  Learn about affordable Tampa home insurance in his free newsletter at =>


Florida Home Insurance Companies – More Failures on the Way?

January 5, 2010

The 2009 Florida hurricane season was quiet but there was no shortage of news from Florida home insurance companies.

For starters, almost half of all active homeowners insurance companies in Florida reported net losses in 2008 – a year in which no major storms hit.  Those losses continued for many companies into 2009.  Among the reasons for these losses include lower revenue due to inadequate Florida home insurance rates along with rising expenses.

As 2009 unfolded, two Florida home insurance companies failed and were placed in receivership by the state after their cash reserves fell below the required minimum levels.

Florida home insurance companies failing in non-hurricane years should send shockwaves across the state.  Why? Because if these companies can’t make money in non-hurricane years the odds increase dramatically that they will not be able to build up enough cash to pay your claim after a major Florida hurricane.

A closer inspection of the company that failed in the spring of 2009 reveals disturbing trends that could affect other Florida home insurance companies in the future.

To begin with this company faced a significant number of new and reopened claims from Hurricane Wilma – a storm that struck Florida nearly four years ago in October of 2005.  These claims contributed to the ultimate collapse of this company because its backup reinsurance from 2005 was exhausted, leaving this small company on the hook to pay these claims from its own surplus.

In addition, this company had a large number of policies in many of Florida’s southern, most hurricane prone counties in the state.  To its credit, it also had helped many in these counties by its willingness to cover older homes.

What are the lessons from the two Florida homeowners insurance companies that failed this year?

Even if your company meets the minimum capital and reinsurance requirements in the State of Florida it can still fail for many reasons including unexpected reopened claims from prior years and inadequate risk diversification across both Florida and into other states.

Here are the things you should look for when considering a new Florida home insurance company.

The majority of the companies still writing new home insurance in Florida are based in the state.  Look for companies that are diversifying their policy base across most of the 67 counties in Florida so that they have balanced their exposure in the southern coastal counties with policies written in the northern interior counties.

Try to find companies that are looking to expand their home insurance business into other states.  Some of the Florida home insurance companies formed in the mid 1990’s are starting to do this and this is a very encouraging trend.  Companies that distribute their risk into other parts of the country will have improved odds of surviving the next round of hurricanes.

Learn as much as you can about the company’s customer service and claims processing.  If a company you are considering has outsourced this work find out what their customer service history is and how many complaints they have received relative to others in the industry.

Finally, find out how much surplus the company has available to pay claims and check on their ratings with the major financial rating services.  Many Florida home insurance companies being granted premium rate increases should be able to show that they can grow their surplus over time – particularly if Florida continues to have below average hurricane activity.

You should take note of those Florida home insurance companies that were able to stay profitable in 2008 and 2009 when many other companies lost money – together with those that demonstrate the ability to use higher rates going forward to increase their surplus.

In this brave new world of newly formed start-up Florida insurance companies, doing this research will give you the best chance of being paid quickly and fairly after the next round of Florida hurricanes.


Michael Letcher is a corporate executive and a licensed CPA.  His on-line buyers guide can help you find an affordable Florida home owner insurance company for your home.  Get his free newsletter at =>

Florida Homeowners Insurance Companies – Don’t Hate Them All

January 3, 2010

Being mad at Florida home insurance companies has become commonplace after many large companies started exiting the state after Hurricane Andrew – something that has continued thru today.  After Florida’s 2004/2005 hurricanes, companies raised their rates and continued to cancel policies.

But there are now two distinct groups of home insurance companies in Florida.  The first group of companies consists of well known national names such as State Farm Florida, Allstate Floridian, and Nationwide Insurance Company of Florida among others.  The second group consists of recently formed Florida based companies that have commenced operations in the past 15 years – many since the end of 2005.

In this brave new world of big companies leaving and new companies entering the Florida property insurance market, it is the second group of recently formed companies that we should be giving a break.  Here’s why:

After the 2007 legislation, it was the recently formed companies that actually reduced homeowners insurance rates in Florida as a response to this legislation while many of the national companies stubbornly pursued rate increases.

It is the newer companies that are continuing to write new business in Florida while the long established national companies continue to drop and cancel Florida home insurance policies.

The Florida based start-ups are more willing to consider insuring older Florida homes and properties near the coast – risks that the national companies abandoned years ago and continue to shed.

Finally, these newer start up companies deserve a chance to build up their capital reserves and to expand responsibly.  They are our future if there is any hope of Florida taxpayers and policyholders avoiding massive special assessments that we could face if Citizens Property Insurance Corporation or the Florida Hurricane Catastrophe Fund ever come up short.

Some of the more recently formed companies have begun to expand their risks across Florida and into other states as well.  This risk diversification is a good thing that will reduce the chances of one particular company going broke after a major hurricane.

Finally, from a policy perspective, the State of Florida needs to take a new look at how it considers request to increase rates.  At the present time the system is not working property – the larger companies bailing out on the state are still getting higher rates or smaller decreases than the newer companies that are taking more and more of Florida’s hurricane risk.

Companies that can demonstrate that they are growing their policy base and those that can show a track record of covering older and coastal homes should be permitted more pricing power and granted higher rate increases than the companies that are bailing out.

This is not to say that the newer companies are perfect.  They have opportunities to improve too – especially in the area of customer service as they try to operate with leaner staffs and to take advantage of pooled customer support centers.

However, the next time you are part of a discussion where hatred is being focused on all home insurance companies in Florida, be careful not to paint all of them with the same broad brush.  Many of the newer companies are covering your higher risk homes, taking steps to reduce costs and your premiums, and assuming risks that used to be part of Citizens Property Insurance.

Give these newer companies credit for assisting Florida during this challenging period.  The more of these companies that can be created and built up with a decent base of premiums and capital, the better it will be for all of Florida in the long run.


Michael Letcher is a former Bank of America and W.R. Grace executive and a licensed CPA.  His on-line buyers guide can help you find affordable homeowners insurance Tampa.  Find out the secrets to low cost Florida insurance in his free newsletter at =>

Great Florida Home Insurance Companies – Is it Possible to Find One?

January 2, 2010

Many of the best Florida home insurance companies began to exit the state after Hurricane Andrew in 1992.  Additional companies left Florida after the hurricanes of 2004 and 2005.  Today only a few name brand companies are left and for the most part don’t write any new business.  What was once a great list of over 500 companies is now a short list of about 40 brand new start up companies that most people have never heard of.

With all of the chaos in the Florida property insurance market, what is the best way for you to find the best Florida home insurance companies?

For starters, it’s never been more important to have coverage with a private company – staying away from the bureaucracy of Citizens Property Insurance Corporation.  While Florida’s state run insurance company of last resort, is charging below market rates and competing with the private market, there are plenty of storm clouds on the horizon.

Citizens Insurance Florida has stated that its premiums are not high enough to cover the risks that it is taking.  Consequently, the company must borrow even before hurricanes hit in order to have enough cash available to pay claims.  It has enough cash to take care of smaller hurricane claims but a major hurricane would force Citizens into an unfriendly bond market where it would attempt to borrow to pay your claim.  If you are a policyholder of Citizens Property Insurance, you’ll be facing higher special assessments than those who have home insurance coverage in the private market after a major storm.  Finally, Citizens has not exactly been the poster child of fast and fair claim payments following major hurricanes.

When considering Florida’s private home insurance market, companies that you are considering should have most or all of the following:

Longevity – companies that have been around longer simply have more experience and better developed systems to write policies and process claims.

Financial Stability – high financial ratings, a large surplus to pay claims, and backup reinsurance from companies that also have high ratings.

Risk Diversification – a core portfolio of policies with an appropriate mix of newer, interior homes offset by older homes closer to the coast.  The policy base of the company should be distributed geographically around most counties in Florida – not just concentrated near the coast in South Florida counties.  Finally it is better to find a company that has expanded its policy base to other states in addition to Florida.

Customer Service – the company must have an outstanding customer service reputation and a record of fast and fair claims processing.  In other words when you call them someone quickly answers the phone.  If you have a billing question, they have the right people and systems to help you.  Following a hurricane, it means that an adjuster will come to visit your home quickly and to assess the damages.  And when he leaves, the company quickly values your damages and sends you a check.

Here’s how you can assess whether the Florida home insurance company you are evaluating can satisfy your expectations in these areas:

Find out when the company was first licensed.  Try to find a company that was formed before the hurricanes of 2004.

Find out the company’s NAIC (National Association of Insurance Commissioners) code and use it to investigate the company’s financial ratings with AM Best and Demotech.  Ask how much surplus the company has available to pay its claims.  Don’t bother trying to assess the quality of the company’s reinsurance – the ratings from Best and Demotech take that into consideration.

Ask your Florida insurance agent about each company’s policy diversification across Florida and into other states as well.  Find out what you can about the type of risks the company is writing.  As a general rule, home insurance companies in Florida that have taken out policies from Citizens have a higher risk policy base that must be offset against newer homes that are located in the interior counties of Florida.  Finally, ask your agent about complaints that have been filed against the company in the past few years.  Eliminate any company with a large number of complaints relative to their share of the insurance premium written.

Even if you only do have of the due diligence suggested above, you’ll be far ahead of the typical Florida home insurance consumer in finding a great home insurance company for your needs.


Michael Letcher is a former Fortune 500 executive with W. R. Grace and Bank of America and a CPA.  His on-line database will help you to find, screen, and contact a Florida homeowner insurance company to meet your needs.  Find out the secrets to affordable home insurance in his free newsletter at =>