Florida homeowners are grappling with a familiar nightmare this time of year, and it's not fear of a major hurricane.
Once more, property owners enter hurricane season threatened with paying higher insurance rates — particularly if they're with state-run Citizens Property Insurance — even though Florida has been spared major storm damage for eight years.
The argument over higher rates is sharply divided.
Advocates say, several hurricane-free seasons aside, many Florida homeowners are still paying less than they should for hurricane exposure, especially on the coast. Moreover, other factors are pushing up rates: a surge in other types of property claims such as water damage; fraud; and higher property replacement costs.
Balderdash, say opponents of higher rates. The cost of reinsurance, an added layer of coverage that insurance companies buy, is going down so insurers should pass on those savings. Both the state's hurricane catastrophe fund and Citizens' reserves have built up billions of dollars in reserve to handle the next mega-storm. And property insurers have already stopped standard coverage of such high-claim risks as mold and sinkholes.
Fueled by the support of Gov. Rick Scott and the Republican-controlled Legislature, the higher-rate camp has been winning the day up to now.
But some are betting those days are numbered.
It's hardly an anti-insurance climate in Tallahassee, but the influence of insurance lobbyists has slipped. Legislators have not supported a push to let Citizens Property Insurance, the insurer of last resort, increase its rates more aggressively than the current cap of 10 percent on average per year.
Florida insurance consumer advocate Robin Smith Westcott predicts any rate increases ahead will be marginal. "Rates are about where they should be," she said.
Not long ago, nearly every Florida-based property insurer was operating in the red. "A lot of these companies are now making money," Westcott said.
The one notable exception on rates, she said, is Citizens Property Insurance, which has far greater exposure to hurricane damage than any private insurer.
Citizens, which covers those who cannot find insurance on the open market, has authority to assess every property owner statewide if it does not have enough money to cover claims after a major storm.
Citizens has been allowed to continue raising its rates up to 10 percent on average annually, with or without a hurricane.
Bill Newton, executive director of the Florida Consumer Action Network, said the lower cost of reinsurance this year and next should be enough to push down rates. But that won't happen, he said, without any pressure on insurance companies.
"In the private market there's no significant competition to undercut the prices," he said. "You need little companies to come in and undercut the big guy and sell for lower prices. That pressure isn't there."
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Citizens has provided some check on rates, Newton said, but he believes regulators could have done more to support property owners. Instead, regulators have been sympathetic to the industry line that insurers need to buy even more reinsurance — and then pass on those costs through higher rates.
Citizens has bolstered its reserves to the point it can handle the magnitude of a storm occurring once in every 60 years, and many still aren't satisfied, Newton said.
Industry backers don't believe rates should be slashed.
Lynne McChristian of the Insurance Information Institute says the current insurance problem is widely misunderstood.
It's not the hurricane portion of premiums that's driving rates upward, she said. The problem is a jump in other types of claims, particularly those tied to water damage like broken pipes or burst water heaters. At the same time, prices are up sharply for materials like hardwood and gypsum, which is used for drywall.
And what of the argument that Citizens has enough in reserves to handle a Hurricane Andrew-type storm?
What worries McChristian is what comes next: "The day after an Andrew-type storm, Citizens won't have the money to handle whatever Mother Nature might throw at the state the next day, the next month or even the next year."