Florida's insurance regulator said today that, depending on the policyholder's location, property insurers will be required to cut their premium rates from 10.2 percent to 52.8 percent.
The cutbacks announced by Insurance Commissioner Kevin McCarty are the result of recently enacted property insurance discounts that insurers are required to pass along to policyholders.
In reaction, one insurance trade group praised the commissioner's expedited release of rates, but said they are only a stopgap measure to remedy Florida's insurance problems.
Under the legislation, passed during the recent Special Session of the Florida Legislature, the Office of Insurance Regulation is required to calculate the Presumed Factors which establish how much savings the insurance reforms should yield for policyholders in various regions around the state.
Insurers were expected to realize savings through a provision allowing the Florida Hurricane Catastrophe Fund to provide low cost reinsurance for primary carriers.
Mr. McCarty's rate announcement included some props for Republican Gov. Charlie Crist whom he said had delivered on a promise to lower rates. State residents, said Mr. Crist "can take comfort that relief is on the way."
The commissioner explained that the Presumed Factor savings that insurance companies must file with his office are to be applied to the hurricane premium and not to the entire premium of the policy.
He noted, however that in many parts of the state the hurricane portion of the premium represents a substantial or even the majority percentage of the total policy premium.
Mr. McCarty's announcement said for homeowners policies the discounts in region 1, which contains some zip codes in north Florida and the Panhandle, will be decreased by 10.2 percent of the total policy premium.
In region 25, which contains some zip codes in Miami-Dade, the discounts will range to a decrease of 52.8 percent of the total policy premium.
Similar rate savings were released by the Office for manufactured homes, condominium units, apartment and condominium buildings and for renters' insurance policies.
The announcement noted that those numbers are average savings. Policyholders, it was explained, could see differing savings for a variety of reasons.
These include the insurer already having an approved rate increase in the pipeline that will not appear until the policy's renewal date. Also, some insurers have capped increases in some territories and do not have all costs reflected in current pricing.
All Florida residential insurers are required to file new rates by March 15 to become effective for new or renewal policies beginning June 1 and on the renewal date of the policy.
Insurers are also required to make a second filing which will "true up" the savings used by the insurer in the initial filing to reflect actual reinsurance savings. That filing can be made no later than Sept. 30.
OIR said that the catastrophe fund could provide cheaper reinsurance through the elimination of profit margins incorporated into the rates of private reinsurers, as well as the FHCF receiving favorable tax treatment from the IRS.
The OIR hired Consumer Federation of America Insurance Director J. Robert Hunter as a consulting actuary to help determine the rate reductions and consultant Paul Walther, a reinsurance specialist.
William Stander, assistant vice president and regional manager for the Property Casualty Insurers Association of America (PCI) released a statement saying the group commends the commissioner for expedited release of the discount rates.
"Today's announcement will allow companies to move forward with delivering the cost savings Florida residents have been asking for while also preparing for the next hurricane season.
"However, while these savings will have an immediate impact on Florida homeowners, we remain concerned that these short-term fixes will not prevent long-term headaches for consumers," said Mr. Stander.
According to PCI the state insurance regulation needs to "move beyond band-aid measures to a more balanced, long lasting approach. PCI called for:
o An emphasis on mitigation measures for safer homes which to help reduce losses.
o Actions that spur competition and expand the private insurance system.
o Provisions for lower, fair rates for all policyholders
o A stable insurance market that is there when the claim needs to be paid.
This article updated 3:14 p.m.
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