Thursday, June 23, 2005

40 percent insurance rate hike for homeowners proposed

Source: Bradenton Herald

Cincinnati insurance company blames hurricanes for rise

MANATEE - For a two-county area that never received a direct hit during the 2004 hurricane season, local homeowners think a 40 percent hike in their homeowners insurance is way out of line.

State regulators held a public hearing Wednesday in Manatee County on a rate increase that Cincinnati Indemnity Co. and Cincinnati Insurance Co. is asking for.

About 100 policyholders attended or voiced their concerns of what they called an "unjustified" request for the insurance company's planned 36.7 percent statewide average on 13,478 policies that cover home and condo unit owners throughout Florida.

An officer with Cincinnati Insurance Co. said the rate hike is "simple arithmetic" and is needed to stay in business.

The 4,548 policyholders in Sarasota County would see the largest hike, a 40 percent increase. The 1,329 customers in Manatee County would see a 35.6 percent increase. Charlotte County's 136 policies would jump 35.4 percent.

Richard Alpher, a Palmer Ranch resident in Sarasota, said the increase is "exorbitant and unjustified."

"We had no major damage last year in Sarasota and have had no major storms in years," Alpher said. "Common sense tells you this company may be entitled to something, but not a 40 percent increase in Sarasota County."

Scott Gillian, government relations officer with Cincinnati Insurance Co., said the hike is necessary because for every $1 collected in the past five years in Florida alone, Cincinnati has paid out $2.17 for claims.

"We are in the business of paying out claims," Gillian said. "We need this to stay in business. It's simple arithmetic."

A $584 million profit

The companies' parent, Cincinnati Financial Corp., reported a record profit of $584 million last year. It said it has paid out $82 million in commercial and personal claims from the four hurricanes that crippled Florida in 2004.

"It's an outrageous request for a company who reported such big profits last year," said Bill McSweeney of Sarasota.

Sarasota resident Neal Daanh agreed.

"Why didn't you seek smaller rate increases over the last five years if you have been losing money?" Daanh said. "Instead you are throwing this on us all at once."

Gene Noble of Bradenton said that Cincinnati formerly issued policies with a guaranteed no rate increase period of three years and that the old practice must have contributed to this hike.

"All I can tell you is that was a marketing practice that went under review and is no longer in place," Gillian said.

Cincinnati Insurance Co. Assistant Secretary Hank Schmidt said each county is looked at individually and asked residents to keep in mind that half of all claims are non-hurricane related crimes, which led to Sarasota's 40 percent increase figure.

But resident Richard Alpher wanted no part of it.

"I know for a fact that Sarasota County has some of the lowest theft and crime rates in the entire state," Alpher said. "Since we had no hurricane damage, I find it hard to believe our 40 percent increase is estimated mostly from theft and fire claims."

What happens now?

The state's Office of Insurance Regulation requires public hearings when a proposed rate increase is more than 25 percent. The local hearing occurred because almost 44 percent of the company's Florida policyholders live in Manatee and Sarasota counties.

Cincinnati Insurance Co. has been in Florida since 1958 and is authorized to sell policies in every Florida county.

"No one is really writing new policies right now, so those of us who would like to shop around are held in a quicksand situation," said Paul Cherry of Sarasota. "Our only relief is to appeal for help."

Office of Insurance Regulation Commissioner Lee Roddenberry took all public comments and said a decision on the rate hike will be made at a later date. Policyholders, who wish to make a comment and have it inserted into the public record, are able to do so for 30 days.

The Office of Insurance Regulation will then decide whether the increase is justified or not, Roddenberry said.

"A lesser amount could be approved or the filing could be denied altogether," he said. "Those are the two most likely avenues."

If the hike gets approved, it would take effect Oct. 15 and would more than double any other rate increase approved in Florida in 2005.

Tom Gallagher, the state's chief financial officer, said Tuesday that the company has not justified the large increase.

Steve Burgess, Gallagher's consumer advocate, said the findings of an independent review prepared by a consultant has been submitted to the Office of Insurance Regulation and more detailed information will be submitted.

"The magnitude of this increase is not supported by the documentation of the companies' filings," Burgess said.

An analysis of the rate filing by AIS Risk Consultants Inc. states the company does not justify their reinsurance costs for Florida customers.

AIS said the carriers distribute 31.5 percent of their catastrophe reinsurance cost to Florida, even though the state accounts for just 3.01 percent of its premium.

What you can do

Cincinnati Insurance Co. policyholders who would like to comment for the record may contact Assistant General Counsel Clifford A. Taylor with the Office of Insurance Regulation at (850) 413-4142 or by e-mail at TaylorC@dfs.state.fl.us

How much?

Who will pay under the proposed rate increases:

36.7% average for 13,478 customers in Florida

40% for 4,548 customers in Sarasota County

35.6% for 1,329 customers in Manatee County

35.4% for 136 customers in Charlotte County

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