Year in Review: August 2013, Insurance rates continue to rise

The Longboat Observer reviews the top stories of 2013.

“There’s a price we pay for living on an island such as this.”

Town Manager Dave Bullock has used that line before, mostly to warn people about preparing for hurricane season.

But the price Longboaters pay continues to rise in other forms as well, including the price they pay to insure their homes.

Longboat Key property owners who don’t live here full time and don’t use their island home as their primary residence are seeing 25% increases in their flood insurance policies this year. And because more than half of Longboat Key properties are second homes, it’s affecting more than half of the Key’s 6,088 year-round estimated population.

Federal Emergency Management Association’s (FEMA) National Flood Insurance Program (NFIP) went through an overhaul after Superstorm Sandy ripped through the Northeast last year and wreaked havoc to that area and for the NFIP, which is responsible for paying out claims.

In July 2012, Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012, which calls on FEMA and other agencies to make a number of changes to the way the NFIP is run.

“FEMA had $3 billion in flood losses and had to figure out what to do next,” said George Ceshker, who owns the Longboat Key branch of Secur-All Insurance.

FEMA began to tighten up areas it covers and went through a series of evaluations for certain coastal areas, including Longboat Key, which led the program to stop insuring homes built before 1975 (those that have policies are still insured at a higher premium) and raising rates 25% for second homes.

“The federal government felt it was insuring high-risk places at the cost of all general taxpayers and felt it needed to tighten criteria so all taxpayers aren’t subsidizing a sliver of expensive coastal land,” Bullock said.
Marilyn Hoyt, a Sleepy Lagoon resident for 41 years, has watched her flood insurance policy increase from $200 a year when she first bought her home, to more than $1,000 a year.

“And this is my only home,” Hoyt said. “I can’t imagine what those with second homes are seeing.”

Couple that with wind policies that have risen 15% to 25% in the last two years alone, and the price to insure properties on the Key is becoming costlier every year.

Mayor Jim Brown knows all about the rising cost of insurance.

In fall 2011, Brown’s house was insured for $9,600 a year through a Texas-based insurance company.
“No small sum, but it was somewhat affordable for my property,” Brown said.

But, when the company notified Brown it would no longer insure his property, he was forced to attain insurance with Citizens Property Insurance Corp., the state’s insurer of last resort, for $10,100.

There was only one problem.

Brown’s mortgage company forgot to send the annual payment on time, and Citizens abruptly canceled his policy in February 2012.

Brown’s policy quickly went from somewhat affordable to downright expensive.

After receiving two quotes for more then $55,000, Brown was able to find a better rate with a company for $28,000 a year. He is also still in the middle of a legal dispute with his mortgage company to pay for the insurance increase that was a direct result of the company’s failure to make the insurance payment.

“I realize my situation is different, but the bottom line is everyone’s insurance is going up dramatically and it’s going to cause a real-estate problem on coastal areas like Longboat Key,” Brown said. “If people can’t buy real estate on Longboat Key or other coastal communities because they’re scared of insurance costs, we’re going to stop being able to sell our houses out here.”

Bruce Myer, a Coldwell Banker Longboat Key real-estate agent, said sales could become an issue as insurance costs continue to rise.

“The crux of it for buyers comes down to the age of the home and what an insurance company is willing to cover at what price,” Myer said.

Ceshker said insurance costs have risen dramatically in the last 18 months.

“Florida wants to get out of the insurance business and they are raising Citizen rates to depopulate their policies and make the company unattractive,” Ceshker said. “The easiest way to do that is raising rates, especially on high-value homes like right here on Longboat Key.”

Ceshker says the move is two-fold.

“The good part is it’s allowing other companies to come back into Florida with more attractive rates,” Ceshker said. “At the end of the day, having more companies with competitive rates will bring prices down.”

The downside is the rates continue to rise before they can become competitive again.

Those with Key homes built before 2002 that meet all hurricane standards can still obtain policies for $7,500 a year for a home valued at $1 million, Ceshker said.

The best way to make sure policies are competitive, Ceshker said, is to review policies with your insurance agent.

Hoyt said complaints about rising insurance premiums are rising on the Key.

Brown said the town is keeping a close eye on the issue, as well.

“It’s frightening and frustrating,” Brown said. “We need to make people aware of what’s happening and make sure they have the best rate possible so they aren’t being taken advantage of by their insurance company.”

Update: Congress adjourned for the year without passing legislation that would have slowed flood insurance rate increases. State lawmakers introduced a bill Dec. 17 to encourage the private sector to write flood-insurance properties in Florida to compete with the National Flood Insurance Program.