News / Business
Florida Homeowners Insurance Industry Faces Big Problem
"Florida Home Insurance Carriers On The Move"
As part of a bold risk management strategy, Nationwide Insurance Co. of Florida announced that it would not renew about 60,000 Florida homeowners insurance policies in Florida in 2010, reducing the number of policies in Florida to about 275,000. The company is a subsidiary of Nationwide Mutual Insurance Co.
"This reduction is representative of the tough times faced by insurers from both the natural environment and the regulatory environment in the state of Florida", noted Agnew of Premier Homeowners Insurance. State insurance commissioner Kevin McCarty has sounded a warning bell to lawmakers that some insurance companies could be put out of business if a major hurricane were to hit Florida.
McCarty asserts that insurers risk loss of $2.1 trillion within Florida state borders. Losses of this size could easily bankrupt the largest of insurance companies. With this increased risk, insurers are fighting for better ways to afford coverage to policyholders. A bill was introduced this year that would allow consumers to purchase policies issued by insurers with unregulated rates. This bill was vetoed, but it would have allowed insurers to charge higher premiums than currently allowed, potentially softening the blow of large losses during hurricane season.
Oddly, there is an apparent political move in the Florida to push one of the largest property/casualty insurers in the country out of Florida. The move is primarily comprised of the insurance department’s efforts to deny State Farm’s requests for rate increases in order to allow them to avoid a capital loss due to Florida’s hurricanes.
Another insurer is currently enjoying a rate increase that was approved by the state insurance department. Citizens Property Insurance will be increasing Florida house insurance rates by 10 percent this coming year, but the company is currently going through solvency issues that this increase will not be able to resolve.
As if a tough regulatory environment and exposure to hurricanes were not enough, Florida property insurers now face a brewing storm over issues involving substandard drywall from China. The issues with this drywall stem from sulfur odors that the product emits as it ages, causing homes to become unlivable. Insurers in Florida have become aware of the issues when some policyholders began to submit claims for the replacement of the bad wallboard when the problems became evident. This type of claim is typically not covered under a homeowner's insurance policy, so these claims were denied, giving rise to a lot of hard feelings between policyholders and insurers. Insurers then added insult to injury by non-renewing policies where known drywall problems existed placing homeowners in a difficult position if they have a mortgage on the property, as mortgage companies require that the home be insured. This again gave rise to resentment among policyholders as well as criticism from lawmakers.
"Florida property insurance faces many challenges now as the regulatory environment changes. Current economic woes as well as a slew of failures involving companies in the financial industry have placed the insurance industry under the microscope with both consumers and lawmakers carefully scrutinizing the moves of insurance companies operating in Florida", said Agnew.
