Florida Insurance Update
A consultant met with Gov Crist and the Florida cabinet on Wednesday regarding the legislation that was passed in January expanding the reinsurance market for companies in Florida. This was intended to give insurers more options and lower cost reinsurance (which is the coverage insurers purchase for themselves and the main factor behind insurance increases in recent years) and to pass on the savings to Florida property owners.
But the savings have not been as expected so far…
A previous estimate of 24 percent represented the average insurance rate reduction property owners should be realizing, so far it is only half of that. A major contributing factor is the fact that some companies are simply increasing their profit margin, not cutting their policy costs to their policy holders. It seems to be the smaller companies and Florida based companies who are complying while the larger national companies are reluctant to. Some of the large companies claim they are locked into contracts themselves and cannot negotiate better deals for reinsurance. This is puzzling however because they usually purchase their reinsurance from their own subsidiaries. So are they saying they cant negotiate with themselves???
The consultant said that the insurance industry as a whole can easily cut their rates as over the last three years companies have enjoyed profits of $150 billion, or roughly $525 for every man, woman and child in America. And all this was accomplished after paying billions in hurricane claims.
The true test will be seen after September 30th, the date when insurance companies are required to submit filings regarding their compliance with the new laws. At this point with only 10 days left to the deadline only about 90 of some 300 companies have filed.
This is certainly an issue that we as investors and property owners need to stay informed on. Have your policies dropped by the 24 percent estimates? I encourage all to leave a comment on this topic to let others know if your rates have dropped.
Peter J Barnett
With contributions from an Associated Press report.
