Florida CFO: Why Aren’t Insurance Rates Dropping?

August 9, 2013

Florida Chief Financial Officer Jeff Atwater wants to know why homeowner insurance rates aren’t dropping.

Atwater sent a letter Wednesday to Florida’s insurance commissioner, Kevin McCarty, noting that one of the main costs for insurers has been going down this year. He asked McCarty why those savings weren’t being passed along to consumers.

Atwater is one of the state officials with the power to hire and fire the insurance commissioner.

In his letter, Atwater wrote that trade journals have reported recently that the cost of reinsurance has come down an average of 15 to 20 percent. Insurers purchase reinsurance from an out-of-state or foreign company to provide the insurer financial backing in case of major claims.

Atwater said Floridians need answers and they need to see their insurance bills coming down.

“If insurance companies can justifiably raise rates on Florida families because the reinsurance market drives their costs up, they can certainly lower the costs for Florida families when reinsurance prices fall,” Atwater wrote.

A spokeswoman for McCarty said his office was working on a response.

Annual reports prepared by Florida’s Office of Insurance Regulation show that the department has been approving more than 100 rate hike requests a year since 2009, including requests to raise rates by double-digits.

But McCarty in late May said he expected insurance rates to stabilize in the coming year.

The reasons for Florida’s steadily-increasing rates are varied and have triggered endless argument, especially among state lawmakers and others in the last two decades.

Industry officials argue that insurers in the past did not charge adequate rates to deal with the real risk of covering homes in hurricane-prone Florida. The fragile nature of the market has been exposed by storms such as Hurricane Andrew in 1992, a Category 5 storm that destroyed much of the South Florida city of Homestead, and the series of storms that battered the state in 2004 and 2005.

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