No storms, but insurers keep socking it away

To Florida homeowners, it seems like there is only one thing worse than a bad storm to make them dread opening their insurance bills: Years of calm.

Private-sector insurers have long since collected more in premiums - nearly $40 billion through 2010 - than the $28.8 billion they paid in direct losses during and since the hurricanes of 2004 and 2005, industry data shows.

Yet consumers see no let-up in the push for higher premiums, and cutbacks in coverage and discounts.

"It makes me think they're gouging," said Tequesta resident Potsy Scoville. "It's absurd."

Insurers besides state-run Citizens paid about 33 cents in direct losses for every premium dollar collected between 2006 and 2010, according to data The Palm Beach Post requested from The Florida Catastrophic Storm Risk Center at Florida State University.

Taking a longer view, the private insurance industry in Florida sustained a lower loss ratio from 2000 to 2010 - 66 percent - than the 76 percent it rang up in the quarter-century from 1985 to 2010, data shows.

Insurers say the picture is far more complicated than such basic loss ratios, which do not take into account expenses such as reinsurance to cushion the risks carriers face in Florida.

But consumers wonder where this ride stops.

Scoville, a 70-year-old military veteran, said he filed no claims for the 2004-2005 storms but insurer USAA increased his premium 42 percent last year to about $4,800 because it said the potential cost to replace his house rose. He said he faces another hike of 35 percent this year related to storm-mitigation discounts.

"They have had a good run with no losses," Scoville said. "It is hard to understand."

A national industry group says things need to be kept in perspective.

"When there's no hurricane in Florida, the results look good," said Robert Hartwig, economist for the Insurance Information Institute in New York. But a repeat of the 2004 storm season in 2012 would erase the $10.5 billion difference between premiums and direct losses between 2004 and 2010, Hartwig said.

"Moreover, a repeat of Hurricane Andrew during the 2012 hurricane season, on the 20th anniversary of Andrew, would produce losses more than twice that $10.5 billion figure," he said.

Hartwig calculates insurers have operated in the red at least half of the past 26 years in Florida, allowing for what he calls reasonable operating expenses and profit margins.

"The reason why insurers are reluctant to operate and insure in Florida isn't because they're afraid to insure for hurricanes," Hartwig said. "It's because the state, especially under (former) Gov. (Charlie) Crist, actively suppressed rates."

That's a "myth," said J. Robert Hunter, director of insurance for the Consumer Federation of America. He is a former Texas insurance commissioner who served as a consultant to Florida regulators after Andrew and in 2007. "Saying rates are suppressed does not make it true."

The insurance industry has effectively transferred costs and risks to consumers through things such as higher deductibles, he said, while 1.5 million policyholders in Florida are now served by Citizens, the insurer of last resort.

Consumers remain besieged by "insurer attempts to unjustifiably increase rates or hollow out coverage," Hunter said.

The property and casualty insurance industry as a whole is "significantly overcapitalized," with well over $500 billion in surplus, more than triple 1991 levels, he said. It would still have $1.20 in surplus for every dollar in premiums even if it had to pay right now for all 10 of the most costly disasters in U.S. history, he said.

Florida Insurance Commissioner Kevin McCarty was not available for comment, but a spokesman said his office "vigilantly" reviews many factors, not just loss ratios.

"Some of these factors include industry trends, overhead costs, reinsurer costs, commissions, loss adjustment expenses, taxes, and other contingency factors," spokesman Jack McDermott said.

Gov. Rick Scott says he's worried about potential assessments and taxpayer liability for Citizens if a big storm hits. He has endorsed efforts to shrink Citizens by raising its rates and scaling back coverage with the idea of pushing more people to private-sector insurers.

One plan under consideration by state lawmakers this session would make it easier for lightly regulated "surplus lines" insurers to take over some Citizens policies and raise rates at will, unlike regular "admitted" carriers.