Today, as Florida homeowners continue with the cleanup from their second big hurricane in less than a month, they are finding that they are bearing a greater share of the cost themselves than they would have in the past.
As part of the restructuring that induced insurers to remain in the Florida market after heavy claim losses from Hurricane Andrew more than a decade ago, insurers now include hurricane or windstorm deductibles in their policies. They can go as high as 5 percent of the home's value in high-risk areas. Thus, the homeowner would have to pay the first $12,500 in repairs on a $250,000 house.
Floodwaters from Hurricane Frances surround the Fort Pierce, Fla., home of Dana Fatula, right. Most homeowner's insurance policies exclude flood damage.
(Jim Rassol -- South Florida Sun-sentinal Via AP)
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The state also set up the Florida Hurricane Catastrophe Fund, a state-run reinsurance mechanism into which insurers pay premiums and against which they can make claims when their own losses exceed certain thresholds . In the event the fund is unable to meet its obligations, it can issue bonds to be repaid with future premium revenue.
The tightening in Florida is an extreme example of what is a nationwide movement by the insurance industry to try to limit losses as property values rise and the potential cost of catastrophes such as fires and storms increases. A loss of investment income in slack financial markets has added to the profit pressure insurers feel.
Robert Rusbuldt, chief executive of the Independent Insurance Agents & Brokers of America, said the homeowner's insurance market in the Washington area has been fairly stable, despite some severe storms in the past few years.
But on Maryland's Eastern Shore, and other areas close to the water, some carriers are refusing to write policies because of the potential for wind damage, said Pamela Randi Johnson, the state's associate insurance commissioner for property and casualty. The state is looking into setting up a wind damage pool to cover that risk so that carriers will be encouraged to resume insuring in those areas.
She also said that some insurers have adopted special wind/hail deductibles like Florida's, which are a percentage of the policy, rather than a flat dollar amount. For example, Johnson said, if a house is insured for $100,000, the wind or hail damage deductible would be $2,000 instead of, say, $250.
Some carriers in Virginia have similar provisions.
The District has some special problems, such as the terrorism risk, in writing commercial insurance. One solution would be "pooling" the risk, as Florida has done.
"I think pooling arrangements are a good idea, but the District of Columbia is too small," said D.C. Insurance Commissioner Lawrence H. Mirel. "A regional pool would be good but that takes federal legislation," he said.
