Flood insurance premiums can go up after April 1

WASHINGTON – March 5, 2015 – A bulletin released by the National Flood Insurance Program (NFIP) outlines changes in flood insurance rates after April 1, 2015, that are allowable under a law passed last year – the Homeowner Flood Insurance Affordability Act (HFIAA) that changed some details of the Biggert-Waters Act.

Both HFIAA and Biggert-Waters are complex documents, and it's important to note that it's difficult to know from general information how much a specific homeowner's flood insurance policy could change.

For more information on categories of homeowners and how they might be affected, download the complete NFIP bulletin posted online.

Key changes

An individual's rate premium cannot increase more than 18 percent; an "average rate class" of homeowners cannot have their premiums increase more than 15 percent.

Certain subsidized policyholders (those not currently paying the full actuarial rate) have mandatory rate increases.

Policies will have a new annual surcharge required under HFIAA.

New guidance will impact "substantially damaged and substantially improved structures," and there is additional rating guidance on Pre-Flood Insurance Rate Map (FIRM) structures.

There will be a new procedure for Properties Newly Mapped into the Special Flood Hazard Area and existing Preferred Risk Policy Eligibility Extension (PRP EE) policies.

The changes take effect April 1 for both new business and renewals.

According to the bulletin, the 18 percent cap on flood insurance increases has a few exceptions that include, but are not limited to, misratings and increases in the amount of insurance coverage.

Another exception: Premiums on subsidized policies will increase 25 percent for policies on non-primary residences, Severe Repetitive Loss properties, and substantially-damaged/substantially-improved properties.

A 25 percent premium increase on business properties will be implemented in 2016.

New surcharge

HFIAA also introduces a new mandatory surcharge on all new and renewed policies – $25 for primary residences and $250 for all other policies.

The surcharge and a Federal Policy Fee (FPF) aren't considered premiums, so they're not considered in the maximum 18 percent increase for any specific homeowners. As a result, the total amount charged a policyholder could exceed 18 percent in some cases.

Premiums – including the Reserve Fund Assessment but excluding the FPF and the new HFIAA- mandated surcharge – will increase an average of 9.9 percent for policies written or renewed on or after April 1, 2015.

When the FPF and the new HFIAA-mandated surcharge are included, the total amount charged to a policyholder could increase a maximum of 19.8 percent.

Source: Florida Realtors®  

Scott, Crist split on approach to property insurance

TALLAHASSEE, Fla. – Oct. 9, 2014 – The cost of property insurance is a major issue to many Florida homeowners and Realtors. A hurricane hasn't hit the state in nearly nine years, but that hasn't dampened property insurance rates.

The two candidates for governor facing a November election, Republican Rick Scott and Democrat Charlie Crist, approach the property insurance problem differently. The state has historically tried to keep property insurance rates low while simultaneously bringing more private insurers into the Florida market to reduce overall risk. Historically, a move to achieve one goal has had a negative impact on the other goal.

According to University of South Florida political-science professor Susan MacManus, voters' opinions about the property insurance challenge could be a deciding factor in the election, in part because observers expect a lower voter turnout in a non-presidential election. A recently released Sunshine State Survey, conducted by the University of South Florida and the A.C. Nielsen Company, found that property insurance is one of the top six "stressors" for homeowners in Florida, along with food and maintenance costs, health care, utility bills and the potential of no longer being employed. MacManus said the survey found that concerns about property insurance have risen since a prior survey in 2012.

Property insurance under Gov. Scott

During his four years serving as Florida's governor, Scott has maintained a free market approach to the industry. That approach includes efforts to attract more private insurers to Florida, push thousands of policyholders out of state-owned Citizens Property Insurance Corp. and reduce the items it covers.

The average annual premium for homeowners' policies has grown from $1,544 to $1,933 under Scott. Meanwhile, Citizens coverage has been reduced for many customers to just main buildings, leaving unprotected awnings, gazebos, Tiki huts, and most carports and screened-in pool enclosures, which are more vulnerable to damage in a hurricane.

"Homeowners are very attuned to that, and homeowners tend to vote," MacManus says.

The shift of policies from state-owned Citizens has accelerated in the past two years through large "take-outs," in which thousands of Citizens policies are offered to private carriers. Also, a new electronic clearinghouse forces first-time policies and renewals to go with a private firm if the rates are somewhat comparable. Through Aug. 30, 124,995 policies have exchanged hands through the "takeout" process this year. In 2013, 386,787 policies were shifted from Citizens to private insurers.

Property insurance under Crist

If elected, former governor Crist has said he will act to reverse the rate increases that have occurred under Scott's free-market watch.

While governor, Crist, then a Republican, backed a temporary freeze on Citizens rates and later a 10 percent cap on annual rate increases. Both were intended to help homeowners after a spate of hurricanes in 2004 and 2005 and during the recession. But they also helped lead to a shift of the state-backed insurer from being a refuge for those who couldn't find coverage into being the state's largest property-insurance company.

"The choice could not be more clear," Crist told reporters while announcing his insurance plan last month. "A governor who took on the insurance industry and lowered rates so families had more in their checking accounts and at the end of the month? Or a governor who let insurance companies raise rates – over 25 percent so the companies and his campaign have more in the bank?"

Insurance risk

Scott spokesman Matt Moon says Crist's effort to hold down rates on Citizens also increased the liability risk for all homeowners. "Florida taxpayers were left on the hook for billions and homeowners were left with fewer options to protect their property," Moon said in a prepared statement. "Under Gov. Scott, Florida has done the exact opposite, reforming and shrinking Citizens Insurance while giving consumers more choice and competition to protect their home."

The insurance industry generally backs Scott, and their backing has translated into more dollars for Scott's reelection campaign. Since the start of 2013, Scott has received roughly $2 million in contributions from the property- and auto-insurance industry through his campaign. Over the same timeframe, Crist and a closely aligned political committee, Charlie Crist for Florida, have received about $75,000 from those with ties to the insurance industry.

Lynne McChristian with the Insurance Information Institute labeled the Scott model as "pay now," and Crist's model as "pay later."

"The pay-later model is the riskiest," McChristian says. "We can't change Florida's hurricane history, and no one believes this nine-year reprieve means a permanent end to major storms. … Forcing private insurers to roll rates back to where they may be actuarially unsound is definitely unfriendly to consumers. It gives consumers fewer choices because it can cause insurers to restrict how much risk they can take on."

A middle approach

Jay Neal, president and CEO of the Florida Association for Insurance Reform, said a non-political middle ground is needed between Crist simply rolling back rates and Scott wanting to further deregulate the industry.

"I think we'd be better off, overall, if the extremes were not the policy – if we found a way to lower rates, but do it in a way that is actually paid for, actually responsible," Neal said.

Neal contends rates could be lowered about 7 percent by reforming the reinsurance industry, which is heavily based offshore.

Meanwhile, Neal added that in a state where "there isn't a long-term approach," there is a need to keep regulations in place on the industry to ward off lobbyist attempts to give insurers unfair advantages over policyholders.

"There is a price that the industry pays for having anti-trust protection, and one (of those) is to have a state regulator ensure they're treating policyholders fairly," Neal says. "If we can help build sort of a middle approach, we'll have some stability. If you're out of balance, sooner or later someone is going to tug it back in the other direction, and that's where we have the pendulum effect. It never really stops, it just goes up the other end of the spectrum."

Renters need insurance – but few have it

NEW YORK – Sept. 26, 2014 – The number of renters has grown dramatically, yet few renters actually purchase insurance, according to the Insurance Information Institute (I.I.I.)

While 95 percent of homeowners insure their property, only 37 percent of renters have renters insurance, according to a 2014 I.I.I. poll conducted by ORC International.

"Renters insurance provides a very important financial safety net when there is a disaster," says Jeanne M. Salvatore, senior vice president and chief communications officer for the I.I.I. "And, renters insurance is relatively inexpensive – the average cost of a renter's policy is only $187 per year, or less than four dollars per week.

"Many renters are under the misperception that their landlord's insurance policy will reimburse them if their personal property is damaged or destroyed, but that's just not the case," says Salvatore.

Policies available to renters

Renters/tenants insurance

Renters insurance provides financial protection against damage to or loss of personal possessions due to hurricanes, fire, lightning, theft, explosion and other disasters listed in the policy. There is even coverage for water damage caused by burst pipes or a neighbor who forgets to shut off the water in the tub.

Coverage is available on either an actual cash value basis (depreciated value) or replacement cost (no deduction for depreciation). Renters insurance does not cover flooding and earthquake, but separate policies can be purchased for those events.

Renters insurance also provides coverage for additional living expenses if unable to live in a home due to an insured disaster. It also includes liability insurance if an accidental injury occurs and the renter is sued.

Flood insurance

Flood insurance is available through the National Flood Insurance Program (NFIP) and a few private insurance companies. It covers personal possessions on an actual cash value basis, generally up to about $100,000. More information is available at www.floodsmart.gov.

Earthquake coverage

While unlikely in Florida, renters can also purchase insurance for damage to their personal possessions due to earthquakes. Coverage is available either in the form of an endorsement or as a separate policy.

Umbrella liability

An umbrella liability policy can be a cost-effective option, kicking in when the limit on renters insurance has been reached. It also provides coverage for libel and slander. Umbrella policies generally cost about $150 to $300 per year and will also provide additional liability protection if you own a car, boat and even snowmobile.

Because a personal umbrella policy goes into effect after the underlying coverage is exhausted, most insurers will require specific underlying limits on policies.

Floater or endorsement for expensive items

Sometimes expensive jewelry, collectibles, musical instruments or even high-end sports equipment would be covered by a floater or endorsement to a renters policy. This provides broader coverage for risks such as "mysterious disappearance."