Story by STEVE TRAIMAN
“If you have looked at your insurance bills lately, you have probably seen increased costs on property and flood insurance. On the property or homeowner’s insurance side of rate increases, you are seeing rates rise for three primary reasons. On a national level, rates are rising due to an increase in claim costs and rising home value/construction costs. We also have a Florida factor that multiplies both of these increases. Claim inflation is occurring based on significantly increased claims costs over the past three years,” Jake Holehouse, head of H&H Insurance, St. Petersburg, commented for Paradise News, “Think about the average home and the cost of a new kitchen. In 2019 that kitchen was between $6,500-$20,000. Three years later the same kitchen costs $25,000- $60,000. When you compound that across a book of business as an insurance carrier it is a huge loss driver. “As an example, if we assume that an insurance company has 100,000 claims/ year with an expected loss cost of $15,000 per claim, they are expecting losses to be $1.5 billion. When claim costs increase to $45,000 per claim the new losses are $4.5 billion – creating a $3 billion shortfall that is passed on to consumers as rate increases.
“From a flood insurance standpoint, the Pinellas barrier islands are also seeing large rate increases right now. In October 2021, FEMA enacted Risk Rating 2.0 for all new business policies and all renewal policies on April 2022. This policy change has resulted in 200% to 1,000% rate increases. For renewal policies, policyholders are and will be seeing 18% annual increases until they reach their new Risk Rating 2.0 rate. The main challenge is that 99.9% of properties are in a flood zone so there is more demand than capacity. We have also seen increased rate pressure for slab on grade type homes within the private markets as the homes are the most likely to have damage. Elevated homes are also seeing increased rates under Risk Rating 2.0, but they have several private flood coverage options.
“Unfortunately, the overall outlook for Florida insurance is grim as a result of a manmade hurricane in the form of a litigation environment. This, on top of tough operating results with inflation and construction price increases takes this Category 3 to a Category 5 hurricane.”
Holehouse and his professional staff encourage all local home and business owners to contact the agency for a free no obligation consultation on insurance needs with a call to 727-498-5551 or 727-601-0988.
“Probably the biggest shock we have noticed when quoting flood insurance to our clients using FEMA’s NFIP new 2.0 rating system is the jump in premium for elevated homes,” Jim Everett, vice-president of Great Florida Insurance and Everett Financial Group LLC, told Paradise News, “For example, an elevated home in St. Pete Beach that had a flood insurance premium of $636, increased to over $11,000 with Rating 2.0. The primary driver for this is FEMA’s decision to consider the building’s value in the premium calculation. This is in spite of the fact that the maximum payout on a standard NFIP flood policy is $250,000.
“The other big shock that will take place over time is that Rating 2.0 eliminated grandfathering. Homes that were build pre-firm will have their flood insurance premiums increase by as much as 18% a year until they reach a full actuarial premium.
“A stark example of this change is my own house in Redington Shores. My home was built in 1955 and is concrete block construction and slab on grade. It is approximately four and a half feet below base flood elevation. My flood insurance is currently about $3,500 a year but will eventually increase to about $5,000/year as my grandfathered discount evaporates. The strange thing is if I were to spend $200,000 to elevate my home six and a half feet, to two feet over base flood elevation, my premium would still be about $5,000/year. There is no financial incentive for me to elevate my home to avoid flooding.
“Residents and businesses should contact their insurance agents to discuss their options for both property and flood insurance. Everett Financial Group, your local GreatFlorida independent insurance agency in Madeira Beach, is always delighted to help with any insurance needs. All of our employees are licensed insurance agents and are ready to assist our friends and neighbors. Call 727-437-3200 for a complimentary consultation,” concluded Everett.
“We’ve lost a minimum of five carriers due to insolvency,” Elissa Stenders, Principal Agent at Bentley DeNight Insurance, told Paradise News. “Several others are having their Demotech ratings withdrawn from the A or B rating to no rating at all, mostly due to unprecedented claim payouts.
“A handful of roofing companies with attorneys on staff are going door-to-door, calling, texting and using social media to convince homeowners they can get a new roof for just the cost of their deductible. Insurance wasn’t put in place to be a maintenance program on your home.”
“In my opinion, one of the largest reasons the homeowner’s insurance is increasing 30-60% is because these homeowners with 15 and 20-year-old roofs (that need to be replaced due to maintenance) are filing fraudulent claims due to ‘wind damage’. The insurance companies are over a barrel and paying the claims because they are coming from a licensed professional with a possible “lawsuit” attached to it. They know it would cost more to fight it in court.
“As agents, we only have a handful of property insurance carriers we can quote. Citizens has become the carrier of last resort for consumers due to their lower premiums and more accepting underwriter guidelines. The roofs still have to fall within a specific age range, but Citizens allows more coverage territory than the few other carriers that are still writing new business. They are being inundated with customers because their premiums are so reasonable compared to everyone else. “In regards to flood Insurance, homeowners need to know when their bill is due and make sure it’s paid by the due date. There is a 29-day grace period, but you should never wait that long. I recently saw a $875 premium increase to $7,500 because they paid their policy 30 days late. When they paid late it created a 30-day waiting period that kicked them into the new 2.0 Flood rating.
“This will not always be the case, but the properties that are located closer to the water are more in line for the higher rates. The 2.0 rating is done differently than previously and with my example you can tell it’s a much higher rating platform. When buying a new home, always check to see if the current owner has a Flood Insurance policy and see if you can assume their policy. In a lot of cases this will save you money.
“Here at Bentley DeNight Insurance, we are more than willing to answer any questions you may have. We are happy to compare or explain anything you may have questions on with a call to 727- 344-4500.”
To add insult to injury, the Florida Insurance Guaranty Association (FIGA) a not-for-profit that covers claims from defunct insurance companies got surcharges approved for all Florida insurance policies, adding another 2% increase to cover losses from bankruptcies of St. Johns, Avatar, Lighthouse, Weston and Southern Fidelity. The good news for home and business owners is that 2% is the max assessment FIGA can place on insurance companies in one year unless there is a hurricane in the state – then they can assess up to another 4%.
Keep your fingers crossed and hope the claims issue is dealt with while we still have property insurers.
[Editor’s Note: Special thanks to ABC Action News; Jake Holehouse, H&H Insurance; Jim Everett, Great Florida Insurance; and Elissa Stenders, BradleyDeNight Insurance, for their excellent input and comments.]
Steve Traiman is President of Creative Copy by Steve Traiman in St. Pete Beach, offering freelance business writing services. He can be reached via email at traimancreativecopy@gmail.com.