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Hurricane Season Highlights Insurance Problems

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BY CARL ORTH

SUNCOAST NEWS ASSISTANT EDITOR

Published: May 31, 2008

NEW PORT RICHEY - Change isn't blowing in the wind for homeowner insurance changes that local leaders wanted made before the 2008 Atlantic hurricane season opens tomorrow.

Greg Armstrong, president of the West Pasco Board of Realtors, recently spent a week in Washington, D.C., lobbying for a national catastrophic fund but the proposal stalled.

That's bad news as well to Virginia Stevans, president of Having Affordable Coverage. Based in New Port Richey, HAC is a grass-roots group that fights property insurance rate increases.

Stevans also remains critical of changes made by Citizens Property Insurance Corp., Florida's insurer of last resort, to exclude from homeowner coverage damage such as cracks in houses caused by settling foundations.

"It didn't lower our rates, it lowered our coverage," Stevans said.

Armstrong traveled to the nation's capitol with his realty industry counterparts from Pinellas, Hernando and Hillsborough counties. Armstrong said senators had yanked the bill that would create the national catastrophic fund off the floor because of a perceived lack of votes to pass it.

"We've got an uphill battle on that one," Armstrong said about the catastrophe fund.

Oddly enough, Armstrong observed, a key senator from Alabama opposes the measure.

Another key Republican in the Senate, John McCain of Arizona, his party's likely presidential nominee this year, has said he would only favor a regional disaster fund covering just the Southeast.

The catastrophe fund would function similar to the existing federal flood insurance program, Armstrong explained. He believes the fund could stabilize homeowner insurance for residents.

The risk would be spread out among all states, Armstrong added, which he thinks makes sense since 48 states are prone to disasters of one type or another, including hurricanes, earthquakes or floods.

"The tendency with insurance companies (now) has been to narrow down the risk so they can charge more," Armstrong thinks. "That's not necessarily in the best interest of the public."

"We absolutely support a national 'cat' fund," Stevans the HAC leader said.

She had saved an article from Time magazine in June 2007 which said 153 million Americans - about half the country's population - live within 50 miles of a coastline. Recent earthquakes in China and a cyclone in Myanmar emphasize how most places around the globe are vulnerable to natural disasters.

A nationwide catastrophe fund makes sense to Stevans. But President Bush had threatened to veto any such legislation, which might help explain the slow progress on the bill in Congress, she speculated.

Meanwhile, Stevans believes changes in Citizens policies only patch many homeowner insurance problems.

"I think everybody thinks it's fixed," Stevans commented because rates went down for residents who accepted the reduced coverage.

Few, if any, regulations exist to prevent some private insurers from dramatically inflating premiums, Stevans added. "Why does Florida allow unregulated companies?"

Greg Giordano, chief legislative assistant to state Sen. Mike Fasano, R-New Port Richey, elaborated on the "surplus lines companies." They are not regulated by the state, Giordano said.

Such companies might deal with residents whose homes even Citizens is reluctant to cover, he noted.

Private insurers that take over existing Citizens policies, however, do answer to state regulators, Giordano said. Regulators must give permission for any rate changes in those instances.

"Citizens was never intended to become the only insurer" in Florida, Giordano remarked. Citizens rates have been frozen by the Legislature through July 1, 2009, he noted.

Stevans cautioned residents to examine policies carefully. "You really, really need to read the fine print," she said.

For example, Stevans claimed some private companies might exclude flooding damage inside a home from a burst water pipe if the pipe is more than 20 years old.

Carl Orth can be reached at 727-815-1068 or corth@suncoastnews.com.

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