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 =>
http://www.homeinsurancebuyers.org
Citizens Property Insurance Florida 