Most South Florida customers of Heritage Property & Casualty Insurance Co. will pay 15 percent average rate increases to renew their policies beginning Dec. 1, if state regulators approve.
Heritage, the third-largest insurer in the tri-county region with 96,139 personal residential policies at the end of March, this month filed for approval to increase rates an average 9.9 percent statewide to insure houses and condos transferred from state-run Citizens Property Insurance Corp. Roughly 75 percent of all Heritage policies were assumed through efforts to depopulate Citizens.
Rates for single-family homes would increase an average 15 percent in all tri-county territories except the Hialeah section of Miami-Dade County, according to the Sept. 9 filing with the Florida Office of Insurance Regulation.
For Heritage customers, the good news is that the latest filing seeks less than the 14.9 percent average statewide increase requested by the company in April. That request, which proposed increases as high as 25 percent in the tri-county region, was withdrawn in July.
At the time, Heritage President Richard Widdicombe said the company was unable to reach an agreement with state regulators over ways to reduce claims costs inflated by unscrupulous repair contractors and their attorneys.
Increased water damage losses and related lawsuits remain a problem for the company, Widdicombe said Wednesday. “It’s a continuation of what everyone’s been talking about. Losses continue to escalate and we have to do something about it,” he said.
The insurer’s new request seeks to limit losses with a $10,000 coverage cap for water damage not related to roofs or hurricanes. Homeowners, in exchange, would get a 25 percent rate credit for the non-hurricane portion of their policies.
The cap and credit would be voluntary for owners of homes 40 years and younger and mandatory for homes over 40 years old. As a result, many policyholders would see overall premiums decrease about 2 percent, he said.
Many insurance companies that sell policies in Florida have requested rate increases this year, citing increased losses from inflated water damage claims.
Citizens, which sounded the first warnings about water damage scams several years ago, is seeking increases averaging 8.9 percent to 9.1 percent in South Florida and 6.9 percent statewide.
Sawgrass Mutual secured approval in August for a state average 9.8 percent increase. Increases were also approved for Ark Royal (5.1 percent), Federated National (5.5 percent), Prepared (8.7 percent), Florida Family (4.8 percent) and Olympus (7 percent).
Requests were still pending Wednesday for Tower Hill Signature (10.7 percent), Universal Insurance Co. (4.6 percent), Anchor (14.9 percent) and Cypress (7.4 percent), among others.
About 64,282 — or 25 percent — of Heritage’s 257,131 policies were not obtained through Citizens but instead written on a voluntary basis, according to the company’s 2015 annual report.
Those policies won’t be affected by the proposed rate increase requested this month but in a smaller rate increase request that will likely be filed in February, Widdicombe said.
Heritage sharply curtailed its Citizens takeouts and stopped writing new policies altogether in the tri-county area earlier in the year, he said. Only over the past couple months has the company resumed offering new policies to a “very select” number of homeowners through a small number of agents.
Dulce Suarez-Resnick, vice president of sales and marketing for NCF Insurance Associates on West Flagler Street in Miami, said Heritage has refused since April to write any new policies for tri-county properties through her company.
She said she understands why that might be necessary. “One can say it’s a prudent measure. They need to get the rate increase. They were growing too fast, and then found themselves with too many claims, too much exposure,” she said.
Heritage grew rapidly after its 2012 formation by aggressively taking over Citizens policies. Maybe the growth was too rapid, Widdicombe acknowledged Wednesday.
“Had we known what this [assignment of benefits] issue was going to turn into, we would have been much more dialed back on it,” he said. “We thought we had a good program for water-loss response. We had our own trucks that would get to the homes and suck up the water and make sure everybody was in good shape.”
Instead, more than 50 percent of water damage claims are represented by attorneys, he said. Bills for $60,000 are submitted for damages that should cost no more than $5,000, and the company ends up settling rather than paying lawyers to fight, he said.
Despite the increased claims losses, the Clearwater-based company is in no danger of going bankrupt.
Heritage reported net income of $18.4 million for the second quarter of 2016, down $7 million compared with the same quarter the previous year, according to its most recent earnings report. That followed a $22.7 million earnings decline in the first quarter, largely due to losses from a series of tornadoes last winter.
Now the company has to ward off “surplus erosion” and spend more money for reinsurance, Widdicombe said. “That’s just not healthy. You’re supposed to build your surplus up.”
