Homeowners take insurer to task
By Christina Rexrode, Times Staff Writer
Published September 20, 2006
Nationwide wants an average hike of 71
percent. At a public meeting, the company tastes residents' outrage.
GULFPORT - Nationwide Insurance Co. came to
town Tuesday afternoon and got an earful from residents infuriated by its
requested increase in homeowners insurance rates.
In July, the company's Florida unit asked
state regulators for permission to raise its homeowners rates an average of 71.4
percent, one of the biggest rate hikes sought by a major insurer this year.
Pinellas County customers could suffer more
than anyone: Rates in parts of the county could rise as much as 174.6 percent,
according to the company's recently revised request.
The Columbus, Ohio, insurance company says the
rate increases are necessary to continue providing coverage in Florida. The
state Office of the Insurance Consumer Advocate counters that the company is due
only a 19.9 percent increase.
"How in the name of God can you sleep at night
knowing what you're doing to the average people?" 75-year-old homeowner Imogene
Arnold asked a table of five Nationwide representatives at a public hearing at
the Gulfport Senior Center.
Then she turned to several representatives
from the state Office of Insurance Regulation. "Can't you do something?" she
asked, her voice cracking.
Arnold said she knows teachers who have had to
move back in with their parents and business owners who have lost their homes to
foreclosures because of insurance costs. She moved to Port Richey this year from
Arizona to be close to family after her husband died, but said she would have
stayed out West if she had known how much her homeowners insurance would cost.
Arnold said she pays $3,000 for a Citizens policy. In Arizona, she paid $550.
Though not everyone at Tuesday's hearing was a
Nationwide customer, every audience member who took the microphone voiced
frustration over what seems like a never-ending cycle of rate increases, and
expressed fear that the rates will drive them out of their homes.
About 50 residents showed up for the hearing,
which lasted almost four hours - so long that the state regulators missed their
flight back to Tallahassee.
Public hearings are required on all rate hikes
of more than 15 percent. The Gulfport meeting was the only one planned for this
rate request.
* * *
Nationwide says it has lost money on Florida
homeowners policies for three of the past six years.
Jeff Rommel, regional vice president of
Florida operations, said the company is not trying to recoup losses, but trying
to remain viable.
"We know this 71.4 percent is a very large
number. We know this creates a difficulty for many consumers," said Rommel.
"We're not in a position we want to be in."
He said that about two-thirds of the rate
increase is due to the cost of reinsurance, the coverage insurance companies buy
to help pay claims after a hurricane or other disaster. The rest he blamed on
the rising cost of the labor and supplies required for rebuilding, and on the
likelihood of sinkholes in the area.
* * *
State regulator Ken Ritzenthaler asked
Nationwide what will happen to insurance agents' commissions if the rate hike is
approved.
They'll increase proportionally, said
Nationwide representative Mindy Oosten, though Rommel said the company plans to
reduce commission dollars.
Still, that news didn't sit well with audience
members.
"We wanted to live and die here," said Mark
Johnson, 61, who attended the hearing with his wife. The air-conditioning
salesman is a fourth-generation Floridian, but his $4,500 premium through
Universal might force him to leave Gulfport and his home state, he said.
* * *
Steve Alexander of Florida's Office of
Insurance Consumer Advocate said Nationwide, by his calculations, is entitled to
an average rate increase of 19.9 percent.
One of his concerns: Nationwide buys
reinsurance from its parent company, Nationwide Mutual. "A parent or affiliate
could charge excess reinsurance premiums, buy the same coverage for less on the
global market and pocket the difference - a no-risk profit courtesy of Florida
consumers," he wrote in a report presented at the hearing.
Pat Cieskiewicz of Gulfport was alarmed to
hear of Nationwide's reinsurance set-up.
"Two-thirds of the rate increase is going to
reinsurance, and you're reinsuring with yourselves? Isn't that getting paid
twice?" she asked. She added that she had a Nationwide policy for 15 years, "and
the only time I heard from my agent was when they were not going to renew my
insurance."
Nationwide says its reinsurance costs are
dictated by what it could buy on the global market.
Alexander called Nationwide's planned
underwriting profit of 15 percent "unusually large." Steve Burgess, Florida's
insurance consumer advocate, said that profit would be in addition to the
company's earnings during years when it has a surplus in premiums. He suggested
3.7 percent as a reasonable profit margin.
Insuring homeowners in Florida, he said, is
"not as risky as one might be led to believe."
* * *
Nationwide stopped writing new policies in
Florida, except for company associates. Last year, it said it wouldn't renew
25,000 homeowners policies and 4,800 mobile home policies.
Regulators approved a 52 percent rate increase
for State Farm in July and increases up to 50 percent for Allstate in February.
In the past few years, state regulators have
approved nearly 70 percent of insurance rate filings.
Christina Rexrode can be reached at
crexrode@sptimes.com or (727)
893-8318.
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