New way of predicting storms may mean higher insurance

Saturday, June 7, 2008

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New standards for hurricane risk modeling could increase insurance costs for Florida homeowners.

TALLAHASSEE (Bay News 9) -- After two quiet hurricane seasons, many Floridians believe that property insurance rates are due to come down.

Rates skyrocketed after the hurricane seasons of 2004 and 2005. State lawmakers have tried to bring them down, but with little luck. Now a reduction in insurance rates may be even less likely, thanks to a new, controversial way of predicting the future.

Hurricane risk modeling is a way of looking back in time to estimate how many storms can be expected in the future. Traditionally, risk modeling used to look back 100 years to set rates. Now, re-insurers only look back over the past 10 years. This approach is illegal for Florida insurers, but not for their international re-insurers.

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State regulators said that, while the have the authority to crack down on Florida insurers, they have no such power over global re-insurers. What's more, while they do have the ability to deny rate increases to state insurers, they can only do so if those insurers can prove that their own bills are not going up.

Ed Domansky, with the Florida Office of Insurance Regulation, said that, either way, homeowners are the ones left paying the price.

"If an insurance company ends up having to pay more for reinsurance, there's a good likelihood that they would need to find a way to pass these costs along to their policyholders," he said.

The hurricane seasons of 2004 and 2005 sent insurance rates in Florida sky-high.

On the other hand, lobbyists for the insurance industry say the change is justified because storm seasons can be so unpredictable.

"We're in a period right now where, not only do you normally have a hurricane every year, you have a bunch of hurricanes every year, so they're trying to figure out what their rates ought to be to reflect that," said Sam Miller of the Florida Insurance Council. "Now, in Florida, it's like, 'We're just not going to let you take that approach.'"

For homeowners like Joeann Vesecky, who lives in her dream home on the Florida Panhandle, the prospect of paying even more money for insurance is a nightmare. Her own rates have doubled over the last five years.

"I've just gone along with it, considering it goes along with the cost of an ice cream cone," she said. "Used to be a nickel, and now you pay $1.50 for a single-dip ice cream cone. So, it's all relative to the times."

She said she has just one request for those who insure Florida homeowners.

"Let's be fair to our people here in Florida."