Home insurance premiums could double in five years under bill

Homeowners, some already hit with double-digit property insurance rate hikes in recent years, could see premiums more than double in five years. They also could lose their right to file claims for late-surfacing damage or suffer more home damage while they save up to make repairs.
Those are possible outcomes predicted by some homeowners, local leaders and a major home builders group from the sweeping property insurance bill that hit Gov. Rick Scott's desk Wednesday. The governor has until May 26 to decide whether to sign it into law or veto it.
Supporters of the bill, including insurers, say the bill could strengthen the state's property insurance market and draw more private insurers to Florida — a key goal for Scott and other state leaders who want policyholders to have more insurance options. Many homeowners in South Florida have only the option of insuring their homes with state-backed Citizens Property Insurance.
Insurers report premiums are not keeping pace with their costs, including expenses for sinkhole claims.

Opponents say the bill reverses changes that were made when problems surfaced after the 2004 and 2005 hurricanes: Premiums doubled and tripled in some cases, and homeowners had trouble finding contractors willing to repair their homes if they could not pay the costs upfront.

Rate hikes

One provision allows insurers to increase premiums up to 15 percent a year for costs and profits related to reinsurance, insurance for insurers. That means a $1,000 premium could double after five years to $2,011, as the increases compound. The provision drew the most fire before the Senate approved the bill last week.

Another provision allows insurers to charge customers for advertising costs and agent commissions — without direct or indirect interference from regulators.

Those parts of the bill are meant to ease the burden on insurers, allowing them to get rate increases for expenses including those they may not control. The less regulation, the more likely insurers are to stay in or come to Florida, say lawmakers who support the bill.
Mickey Berk, a retired business owner in Coral Springs, said he'd like more insurance companies to choose from, but not if it means another rate hike. His annual homeowners insurance premium went up 20 percent in March, to $6,000.

"Somehow it seems if we have a hurricane, we get hit. When we don't have hurricanes, we get hit anyway. I don't know where it stops," he said. It has been more than five years since Florida suffered a direct strike from a hurricane.

Arnold Ruskin, a retired accountant in Margate, said he managed to lower the premium for his condominium unit insurance last year to $550 by getting less coverage and increasing the deductible. But his insurer informed him a few weeks ago the premium will increase to $715 when it's up for renewal.

"I don't think the state understands the problems [facing people] living on fixed incomes. Gasoline is high, food is high, and they keep giving these insurance companies new" benefits, he said.

Claims payments

Critics also worry that if the bill becomes law, some policyholders won't receive claims payments for home repairs. The bill would shorten the time policyholders have to file or reopen claims to two years for sinkhole claims and three years for hurricane claims — from five years currently.

Supporters of the bill say homeowners should know whether their property is damaged within a few years of a disaster.

Thousands of homeowners who filed claims for Hurricane Wilma did so years after the storm. Some said they did not know they could challenge their insurers' decision to deny claims or pay less than the contractors' estimate. Others said they did not know how extensive the damage was until years later.

Some policyholders avoid filing sinkhole claims when they first notice cracks in their homes' walls and foundation because they don't know how serious the damage is. They know if they file a claim, insurers are required to report the problem to county officials, diminishing the home's value.

Under the bill, if the ground under policyholders' homes continues to settle and the damage worsens after two years, homeowners would be out of luck.

Less up-front money

Another provision would require insurers to pay upfront only part of a claim to repair damage to a home. Insurers initially would pay what they estimate as the depreciated value of the home, less the deductible. As repairs are made and expenses incurred, they would pay the rest.

Lawmakers say the measure is aimed to ensure repairs are made, rather than homeowners pocketing the money.

That could make it difficult, and in some cases impossible, for policyholders to repair the home.

As it is, many contractors are reluctant to take on construction jobs that involve an insurer because it usually takes longer to get paid — if the insurer approves the claims, said Doug Buck, director of legislative affairs for the Florida Home Builders Association.

The bill would make the work even less appealing. "The homeowner will probably be asked by a contractor to cover it out of his or her own savings," Buck said. That means the damage to the policyholder's home could get worse while he or she saves up for the repair or waits for a contractor.

Harry Dressler, a Tamarac city commissioner and a former senior vice president of financial services firm Morgan Stanley, said this change could be hard on homeowners who are underwater, or owe more than their homes are worth. "You could be contributing to a major increase in defaults [as people say], 'Why am I paying the mortgage or why am I going to borrow money to pay for repairs? I'll pass,'" he said.

Consumers who want to weigh in on the bill, SB408, can contact the governor's office at 850-488-7146 or at flgov.com/contact.
Source http://www.sun-sentinel.com/