Property insurers seek steep rate increases in South Florida

Some of the largest insurance companies in South Florida are seeking rate hikes again, and homeowners are due for some nasty surprises at renewal time.

Deerfield Beach-based People’s Trust, which insured 54,267 single-family homes in the tri-county region at the end of 2016, is seeking a statewide average 14.5-percent rate hike for multi-peril homeowner coverage. South Florida homeowners will be hit hardest, with customers in Broward and Miami-Dade counties facing premium increases of hundreds of dollars.

People’s Trust’s business model is to charge discounted rates in exchange for customers agreeing to allow the company’s affiliated Rapid Response Team to handle repairs. But despite operating under the so-called direct repair model, the company has experienced increased losses from fraudulent water claims and litigation stemming from abuse of the Assignment of Benefits clause, the company said in a response to questions posed by the Sun Sentinel.

Rate increases “will be substantially higher in the tri-county area, where water claims and AOB fraud are most prevalent, and lower in other parts of the state,” the statement said.

For example, the cost for non-hurricane coverage of a single-family home in the Hialeah area of Dade County would increase from an average $1,138 to $1,758, while coverage of a home in the Fort Lauderdale and Hollywood areas of Broward County would jump from $1,064 to $1,740 on average, according to documents filed by the company with the Florida Office of Insurance Regulation.

Homeowners in non-coastal areas of Palm Beach County would see a smaller increase, from $958 to $1,326. Fewer abuses from assignment of benefits and water claims originate from Palm Beach County, according to statistics compiled recently by state-run Citizens Property Insurance Corp., which has been warning for several years about the growing threat of litigation to affordability of property insurance in South Florida.

Citizens recently increased its rates in the tri-county area between 8.9 percent and 10 percent for 2017 renewals.

People’s Trust’s average proposed increase is the highest of about a dozen filed since early December that remain under review by state regulators.

Florida Peninsula, based in Sarasota, operates a managed repair program in which customers get discounted rates in exchange for agreeing to choose from a pre-approved list of contractors.

But even that company, which insures 30,193 single-family homes in the tri-county region, says it is suffering heavy losses due to the assignment of benefits abuses. The company is seeking average rate hikes of 9 percent and 9.7 percent for customers of its “elite” and “preferred” insurance products.

“We are seeing rate-increase requests from Florida home insurers as a result of schemes involving lawsuits for profit, AOB abuses and fraud perpetrated by a small number of law firms and contractors, which is now increasing insurance costs for all of us,” a spokesman said by email on Friday.

Despite policy language binding customers to an insurer’s approved contractors, some, particularly in South Florida, call their own contractors and assign benefits to them anyway, People’s Trust spokeswoman Michelle Ubben said.

The company has revised its policy language to more clearly prohibit that ability, and the company hopes the tightened language will reduce losses so the proposed rate increases do not have to be fully implemented, Ubben said.

Increased litigation by contractor assignees – standing in the shoes of policyholders – and about a dozen law firms that represent them has drawn widespread blame from Florida insurers for increased losses and insurance rate hikes.

Although proposed changes to state law have failed over the past four years, several bills are currently pending review in Tallahassee, including one broadly supported by insurers and regulators that would prevent contractors working under assignments from claiming legal fees in suits against insurers.

But plaintiffs attorneys are again pushing back against proposals to change the status quo. Asked for comment about the latest rate increases, Jeff Porter, spokesman for the Florida Justice Association, said increased litigation results from insurers refusing to settle claims fairly.

“The culture of the insurance industry, especially Citizens, continues to drive claims into litigation rather than fair payment of meritorious claims,” he said in a statement. The association favors prohibiting insurers from factoring its defense attorney costs into base rates, he said.

Other insurers with pending rate hike requests include Federated National, with 36,589 tri-county multi-peril homeowner policies. The company is seeking a statewide average 6.5 percent increase, which would include non-wind coverage increases of up to 15.3 percent in Miami-Dade, 20.1 percent in Palm Beach County and 19 percent in western Broward County.

Tower Hill Prime Insurance Co., which insures 18,827 single-family homes in the tri-county region, is seeking an average 8.9-percent hike statewide. Tower Hill President Don Matz said not all increases in South Florida will exceed the state average, and said the requested hike wasn’t solely the fault of AOB abuses.

“It’s due to water losses, some AOB, and some weather losses – not hurricanes – but hail storms and tornadoes in other areas of the state,” Matz said.

Pending rate hikes

Below are insurance price increase requests for single-family homeowner multi-peril policies pending approval by the Florida Office of Insurance Regulation. Percentages are statewide average premium increases. State regulators have 90 days to approve or disapprove:

• St. Johns Insurance Co., 3.1 percent; 9,490 tri-county policies; filed Dec. 29
• Elements Property Insurance Co., 9.5 percent; 6,364 tri-county policies; filed Dec. 29
• Heritage Property & Casualty (Preferred Homeowners), 9.9 percent; 16,285* tri-county policies; filed Dec. 20
• Tower Hill Prime Insurance Co., 8.9 percent; 18,827 tri-county policies; filed Dec. 2
• Florida Peninsula (Preferred), 9.0 percent; (Elite), 9.7 percent; 30,193 tri-county policies; filed Jan. 11
• People’s Trust; 14.5 percent; 54,267 tri-county policies; filed Jan. 30
• American Integrity, 4.2 percent; 7,748 tri-county policies; filed Feb. 3
• Castle Key Insurance Co., 7.7 percent; 6,634 tri-county policies; filed Feb. 6;
• Castle Key Indemnity, 12 percent; 1,960 tri-county policies; filed Feb. 6
• Federated National, 6.5 percent; 36,589 tri-county policies; filed Feb. 17

* Heritage’s “preferred” policy count based on “earned house years” reported in rate case filing. In insurance terms, an earned house year is roughly equivalent to a single policy.

Source: Florida Realtors