TALLAHASSEE, Fla. – March 18, 2009 – Walter Baker is reeling from sticker shock: The insured value of his Lake Worth home has nearly tripled to $300,000, a jump that increased his windstorm insurance premium with Citizens Property Insurance Corp. from $1,300 to $3,000.
"I don't think this is right," Baker said of the 130 percent increase on his 2,200-square-foot home.
Citizens officials and insurance regulators say they feel the pain of homeowners like Baker, but after years of allowing insured values for some properties to languish, the state's largest insurer is playing catch-up. Earlier this year, Citizens began the yearlong process of scrutinizing property values for 350,000 coastal properties that get their wind-only coverage from the state-run carrier.
Unlike private insurers, Citizens didn't automatically raise property values each year as policies renewed -- leaving many policyholders underinsured. After the severe hurricane seasons of 2004 and 2005, Citizens paid many claims that totaled more than the insured value of properties that were destroyed by storms.
"While it may feel a bit painful for someone to see their replacement value go up, Citizens is a subsidized entity," said Jeff Grady, president of the Florida Association of Insurance Agents. "Everyone has a stake in seeing that those values are right." Thanks to a rate freeze that took effect in 2006 and lasts through this year, Citizens policyholders have enjoyed a respite from big jumps in their bills. But homeowners like Baker are seeing premiums soar anyway as the insured value of their property is reassessed.
"Citizens is just reassessing the premium based on the value of the property," not trying to circumvent the rate caps, said Ed Domansky, spokesman for the Florida Office of Insurance Regulation.
"This is in no way a way around the rate freeze," said Citizens spokesman John Kuczwanski. "It is an effort for us to collect premiums on the actual risk we insure." The changes affect Citizens' wind-only policies, which are available in specific close-to-the-coast neighborhoods where private insurers won't cover hurricane damage. That includes areas east of Interstate 95 in southern and central Palm Beach County, east of Alternate A1A north of PGA Boulevard in northern Palm Beach County, and within 1,000 feet of the ocean in St. Lucie County.
Citizens has about 42,000 wind-only customers in Palm Beach County and 1,300 in St. Lucie County. It does not offer wind-only policies in Martin County.
Many policyholders are seeing little change to their replacement values, said Mark Horne, a Nationwide Insurance agent in Greenacres. That's because the insured value of properties bought or refinanced in the past five years or so is close to today's insured value.
But for homeowners like Walter Baker, who bought in the 1990s and didn't refinance, the increase is a steep one.
"For many of these policies, no one has looked at the replacement value for 10 years," Horne said. As a result, he said, "a small percentage of policyholders are being affected in a big way." Homeowners who think that their replacement values have gone too high can appeal by pointing to a lower estimate on their policies for fire and theft, or they can pay for an appraisal, Kuczwanski said.
Ultimately, though, raising insured values is a matter of fairness for the state's fragile insurance system, observers say. If Citizens has a shortfall, it's forced to impose an assessment on the state's policyholders to plug the gap.
"When you're talking about Citizens, what's good for the few isn't necessarily good for the many," said Sean Shaw, the state's insurance consumer advocate. "I hate to see anyone get a big premium increase, but I also hate to risk a statewide assessment if a big storm comes."
Copyright © 2009, The Palm Beach Post, Fla., Jeff Ostrowski. Distributed by McClatchy-Tribune Information Services.
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