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Commentary, sarcasm and snide remarks from a Florida resident of over thirty years. Being a glutton for punishment is a requirement for residency here. Who am I? I've been called a moonbat by Michelle Malkin, a Right Wing Nut by Daily Kos, and middle of the road by Florida blog State of Sunshine. Tell me what you think.

Wednesday, July 19, 2006

Up, up, and away

The latest bad news for Florida homeowners.

Customers of State Farm Florida, the state’s second-largest insurer, will face an average 53 percent hike in their homeowners insurance later this year. But that’s down from the 79 percent the insurer wanted. Under pressure from regulators who had criticized the company’s proposal for a hefty 14.9 percent profit margin, the insurance giant backed off its earlier request and instead sought a 6.1 percent profit.

Though reduced, the premium rate hike still packs a wallop for customers in Palm Beach County and the Treasure Coast — some of whom will pay triple-digit percentage increases. Homeowners insurance rates in Palm Beach County will rise
as much as 73 percent, but some areas may see their rates drop as much 13 percent.

Rates will climb between 4.7 percent and 121 percent in Martin County, between 53 percent and 97 percent in St. Lucie County, and between 68 percent and 104 percent in Indian River County.

That means for every $1,000 they now pay in premiums, a State Farm Florida
customer will be paying up to an additional $730 in Palm Beach County; $47 to
$1,210 in Martin; $530 to $970 in St. Lucie; and $680 to $1,040 in Indian River.

It could be worse. State Farm Florida said last month that the 79 percent increase it sought in May would not be enough and withdrew its request. Instead company officials said they planned to ask for even more, because of the skyrocketing price of reinsurance, which is insurance for insurance companies.

So it came as a surprise when on Monday the company filed for a smaller rate hike, rather than a larger one.

Regulators said they wanted State Farm Florida to cut its increase to 53 percent. Most of that drop was due to lower profit margins, said Bob Lotane, spokesman for the Florida Office of Insurance Regulation. Regulators slashed the 14.9 percent sought and approved a 6.1 percent margin, Lotane said.

Typical profit margin for a homeowners insurance company is 3.7 percent.



Only a fifty percent increase. Why do I see few reasons to celebrate?

How does a Florida homeowner make ends meet? If you buy a new home today, you can be shelling out a quarter million or more. A 30-year mortgage at 6.25% means approximately $1500 monthly payments. Throw in $450 a month for homeowners insurance, $200 a month or more for property taxes.

It all adds up, and this is before other expenses like food, auto and utilities are added in.. The middle class here in Florida is going to shrink under this kind of pressure.

What’s the solution? You can’t force insurance companies to have lower rates. They’ll just stop selling policies in the state. The booming real estate market has slowed down. Deflation doesn’t seem likely. There are just no easy answers. Politicians will pander, and editorial writers will demand something be done. Except both haven’t a clue what if anything can be done.

Sometimes there are no solutions. Florida taxpayers will just have to pay.

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