Your Insurance Being Cancelled?

Insurance Company Record Profits Are Set To Be Adjusted

LABELLE, FL.  -- Homeowners and all other property insurance buyers in Florida are finding surprises in their mailboxes this week as more and more insurance policies are being "non-renewed" or cancelled. Allstate began sending out thousands of notices locally amending their non-renewal dates.  At the end of last year, Allstate sent out notices notifying customers that their home insurance would not be renewed, but Florida lawmakers and the Governor changed that by putting a moratorium in effect that prevented insurance companies from such acts.

The new regulations say the companies had to file with the state by March 15 in order to have new rates in effect as of June 1 and to give customers 100 days notice of any non-renewal. Thus, the reason for Allstate and others now sending out their non-renewal notices to customers which gives an extension of coverage until about the end of June.

Florida's Financial Services Commission of the Office of Insurance Regulations put out this month a report outlining the recent insurance crisis and how the state is dealing with the issues to force the insurance companies to be more fair to customers in rating risk and insurance policy premium charges.

Companies Made Record Profits

According to the new report "the industry has engaged in a corporate strategy of reducing risk and raising premiums for residential property...This has allowed the industry to achieve record profits despite the recent hurricane activity." In 2004 the industry set a "record by netting an after tax profit of $40.5 billion. In 2005 even after major hurricanes, "the industry posted a profit of $48.8 billion -- a new record." In 2006 with no major hurricanes coupled with premium increases the industry set yet another profit record, "estimated to be $68.1 billion."  The report says this "equates to $524 for every man, woman and child living in the United States, or $1,574 per household." The loss ratio that companies paid out nationwide in claims from 1996 to 2006 was only 64.7% of the money collected in premiums. In Florida, the paid out rate was substantially the same, only 66.5%

Crisis Created By Insurance Companies

The report says the current insurance crisis in not a result of insufficient premiums or a collapsing marketplace but "has been created by the actions of the insurance companies which have coupled rate increases with reduced availability."

The report summarizes the amounts that companies must reduce rates for customers for the hurricane insurance coverage portion of Florida's insurance policies. Hurricane coverage is about 50% of the total premium in recent policies. The amounts vary from zip code to zip code, but generally the report found companies writing policies along the coast were overcharging and have mandated reductions as much as 53% in hurricane coverage premiums. Statewide the average is 24%. In Glades and Hendry county the reduction is about 21%.

The Commission found that "reinsurance" that U.S. companies bought from off-shore insurance companies was making up about 40% of the average policy premium and now the state has made new rules to make this cost become lower for insurance companies who are to pass the savings to customers. The state will offer companies "reinsurance" through the state at much lower costs. The new rate filings the companies had to make to the state this month must include the savings companies will make even if they do not purchase the insurance from the state.

The bottom line: customers should see some rate reductions in the hurricane coverage of insurance policies for any policy written beginning June 1.

For the complete document:  Financial Services Commission Report