Insurers in Florida have asked for another property rate hike for 2011 and more than 100 companies' increases have been approved -- despite another year without a major hurricane.
As a result, more than 4 million homeowners are about to get hit -- some with up to 30 percent increases to their property insurance rates. "And rightfully so. Living in a damage prone area, geographically we should pay more than those living in the middle of South Dakota," said Tim Shaw, CEO of the Tim Shaw Insurance Group.
Shaw says he welcomes the increases. He calls the current insurance rates a "strangle hold" on companies that offer Florida homeowners premiums.
Last year, the top 20 state insurers lost $111 million in profits.
Shaw says he says he blames reinsurance -- insurance for insurance companies to cover catastrophic events like the Haitian earthquake, oil spill and a European windstorm. "When they have an increase in catastrophic losses -- money goes out of that pool. Got to get it back somehow - raise reinsurance rates," Shaw said. An average premium in Lee County last year was $1,700. Of that $1,100 went to reinsurance.
And what's worse is that premiums are based on a home's replacement value not its market value. As the value of your home falls, its replacement value stays the same.
"We've never seen a gap so huge," Shaw said. "The insurance companies have to look at the cost to replace your house. In the event of a loss, you'll want us to replace your house -- not buy you another at a discounted rate and say, ‘Here you go take this.' That doesn't work."
The hikes are expected to impact more than 4 million Florida homeowners.