PROPERTY INSURANCE COMPANIES GO BANKRUPT AS POLICYHOLDERS FIGHT FOR NEW COVERAGE

Many Floridians are seeing their home insurance companies fail. JIRSAK/Shutterstock

Tens of thousands of Floridians are scrambling to insure their properties as a number of state businesses go into liquidation. As a result, many people are choosing a policy of last resort at Citizens, which recently announced it would raise its rates.

Plantation Key resident Kim Harrington was one of 20,000 Weston policyholders who were alerted they had all but 30 days to find a new insurance policy. The insurance company went into liquidation on August 8. Harrington said she was in disbelief.

“I don’t have extra funds to double pay for my storm. I just thought it couldn’t be real. Nothing that bad can really happen,” Harrington said. “The email said if you don’t do anything, you won’t have insurance, then your mortgage company will select a carrier that’s not preferred, and then you’ll be in big trouble.

“The email says you have to deal with it, you have to pay again and apply again,” she continued. “Not only that, he said I needed to get a new roof inspection and wind attenuation, which I was already fully covered by the now defunct company. I thought it was a big mistake when I got the email.

Weston was placed in receivership after the Florida Office of Insurance Regulation (OIR) determined the company to be insolvent. The OIR said there were sufficient grounds to initiate delinquency proceedings.

“The company has ceased issuing new insurance coverage and, pursuant to applicable law and court orders, Weston’s policies are void effective 12:01 a.m. September 7, 2022; unless otherwise terminated prior to that date,” reads a message on Weston’s website.

Since last February, five insurers have been declared insolvent. Joining Weston are Southern Fidelity Insurance Co., Lighthouse Property Insurance Corp., Avatar Property & Casualty Insurance Co., and St. John’s Insurance Co. Some 80,000 Floridians had policies with Southern Fidelity, 27,000 with Lighthouse, 37,000 with Avatar Property & Casualty and 160,000 with St. John’s.

Mel Montagne, president of Fair Insurance Rates in Monroe (FIRM), said the unavailability or unaffordability of reinsurance for insurance companies and fraud are two causes that lead to insolvency issues.

“It’s something we don’t have here, it’s fraud. But it’s happening on the mainland. This has been a huge problem for all carriers not in Monroe County. »

A growing property insurance crisis in Florida caused state lawmakers to return to the capital in May for a special session. Within three days, the House and Senate approved legislation authorizing a $2 billion reinsurance fund for insurance companies. Known as the Reinsurance Program to help policyholders, insurers can purchase insurance to protect against risk. A stipulation of the program required insurance companies to reduce rates for policyholders.

For some insurance companies, the program was either too small or too late, Montagne said. Insurance problems continued in the months that followed, leaving many policyholders, including Harrington, to revert to Citizens coverage. As of August 2020, Citizens had a total of 499,056 fonts. A year later, that number has grown to 687,078. Last August, Citizens said it had 1.02 million policies.

“Citizens was the only company I could use,” Harrington said. “I already applied, paid and got new coverage. But I had to scramble to find the funds.

Citizens Property Insurance Corporation was authorized by the state legislature in 2002 to provide property insurance protection to people who are entitled to obtain coverage in the private market but are unable to do so. Citizens was created from the merger of the Florida Residential Property and Casualty Joint Underwriting Association and the Florida Windstorm Underwriting Association (FWUA), which was formed in 1972 as an insurer of last resort to provide wind-only coverage in Monroe County.

A not-for-profit company, Citizens is funded by policyholder premiums. However, Florida law also requires citizens to levy premiums on most Florida policyholders if they experience a deficit following a devastating storm or series of storms.

Montagne said the rest of the state continues to deal with unaffordable insurance “with all the fraud coming home to roost.” This forces viable insurance companies to ask for double-digit increases to avoid losses.

Monroe County residents insured through citizens are feeling some of those effects thanks to the rate increases. Recently, the OIR approved a series of rate increases for citizen policyholders that range from 6.4% to 10.7% depending on the length of coverage. The most common type of insurance, known as comprehensive home insurance, rose 6.4%. Montagne said those fares could be even higher once fees and surcharges are added.

“Our good friends at Citizens have insured us for the wind and the X-Wind policy. We have never had to deal with the issue of awarding benefits and lawyers here. But that doesn’t really stop the rate increases coming from citizens every year to the tune of 9% and 10%, that’s what they tell you is the increase. It is an increase in the base rate. By the time that bill hits your mailbox, it’s probably 12% or 13% after all fees, surcharges and garbage are added. »

FIRM offers a Home Insurance User’s Guide on firmkeys.org to help consumers make home insurance choices in Monroe County.

Kristan F. Talley