February 22, 2008 by vlemx
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South Florida shopping
February 17, 2008 by vlemxThe prolonged slump in Florida’s housing market has been blamed on a variety of factors, including prices that shot up too quickly, overbuilding, and problems in the subprime lending market.
Another factor frequently cited has been soaring home insurance rates after three hurricanes struck the state in the summer of 2004, and Florida lawmakers even spent part of the 2007 legislative session trying to find ways to bring those costs down.
Is that still the case today? At least one business group in Four Corners thinks the answer is no, and that for savvy insurance shoppers, the time is right for some major savings on their home insurance costs.
“I’ve seen outrageously low prices on homeowners insurance,” said Kevin Delaney. “If you think your homeowners insurance is too high, get out there and shop. There are tons of insurance companies out there with different rates.”
Delaney is the owner of Great Florida Insurance, a Four Corners company on U.S. 27 that offers auto, home, business, health and life insurance.
He’s also a member of the Four Corners Business Networking Group, made up of local business owners in Four Corners who work in or are connected to the field of real estate, including Realtors, insurance agents, property managers, financial planners, and mortgage and loan providers.
The group meets once a month, and met on Feb. 6 at USA Vacation Homes at the Polo Park development.
As part of the general discussion, the group focused on insurance and its impact on the housing market.
As Delaney noted, there is no longer a sense that homeowners in Central Florida are being weighed down by outrageous property insurance costs.
Delaney said from his own experience as an insurance agent, prices are falling, and homeowners should take the time to shop and price their policies.
“What I see are dramatic price reductions with a number of companies,” he said, noting that he recently helped the buyer of an $180,000 house find coverage offering a $256 annual premium.
The only homeowners still facing escalating costs, he said, are those with manufactured homes, particularly older ones that have not been modernized to withstand strong winds.
The cost of insuring an older manufactured home is still high, and that has impacted the sale of these products, Delaney said.
“There’s a ton of manufactured homes out there, but no one is buying them, because they’re considered high risk – which they are,” Delaney said.
“The hurricanes come along, and they’re the first ones to go.”
Hurricanes Charlie, Frances and Jeanne struck Florida in August and September 2004, causing considerable damage to more than just the coastal regions of the state.
Communities like Poinciana and Haines City sustained heavy damage from the punishing winds brought by the storms.
In 2005, Central Florida was spared any more storms, although hurricanes did strike the coasts of South Florida and the Panhandle, causing more damage to homes and businesses there.
STORM EFFECTS LINGER
The impact of those storms proved to be enduring, and not just for homeowners struggling for months or even years to find a contractor to handle repairs on their property.
Insurance companies responded to the two stormy summers by dropping policies or raising rates in many cases.
Allstate dropped 95,000 policies in Florida, State Farm Insurance won regulatory approval to raise rates by 8.6 percent, and Nationwide Mutual Insurance dropped 35,000 Florida customers, opted not to write new policies in the state, and won approval for a 21 percent rate hike.
Across the state, real estate transactions got cancelled because the buyers were unable to find insurance companies to write a new policies.
All this prompted Gary Landry, vice president of the Florida Insurance Council – Florida’s largest insurance trade association – to note, “We don’t have an insurance crisis. We have a hurricane crisis. What is driving all of this is hurricanes. We have not yet figured out how to stop hurricanes from hitting. If we can do that, insurance rates will go down.”
Paul Dudley, who runs Florida Villa Services Inc. on U.S. 192 and belongs to the business networking group, noted that insurance rates went up out of concerns that there might be more hurricanes after 2004, bringing more costly claims for insurers to cover.
“That was always the question – if a hurricane comes along, do they have enough funds to pay out claims,” he said.
After calm storm seasons in 2006 and 2007, Delaney said that’s actually becoming the case.
He said insurance providers are increasingly doing well as a result.
“I asked a few of them, what kinds of margins are you making,” Delaney said.
“Because there has not been a hurricane in three years, they’re making very big profits.”
Delaney said home buyers who feel their property insurance is too high shouldn’t fall into the trap of assuming that all insurance agents will charge the same amount.
“There’s a market out there for everybody,” he said.
“It’s just a matter of hunting them down. You’ve got to investigate the company and make sure they’ve got a good rating.”
In fact, Delaney said a bigger problem for the insurance industry is fraud, not soaring prices.
He noted that Florida’s chief financial officer, Alex Sink, has gotten aggressive about cracking down on insurance fraud, a move that Delaney applauded.
“When it comes to insurance, you can get arrested for the smallest thing,” he said, noting a recent spate of arrests in this field.
“I was very surprised at what some of them did,” he said.
“There’s theft, and putting in false claims.”
These fraud cases hurt the entire industry, he noted, causing reverberations that negatively impact real estate, housing construction, loan providers and anyone else working in that field.
“Construction is very costly for a lot of people,” Delaney noted, and cited cases of contractors who have landed expensive projects, then opted not to cover workers compensation costs for its employees.
That enabled the contractors to fraudulently save thousands of dollars by not following the law, giving them an unfair advantage over legitimate contractors who pay all workers comp costs.
“At the end of the day, honesty is still the best policy, but I feel bad for the legitimate contractors out there who are trying to do an honest job, and are losing money because they’re being honest,” Delaney said.
CONTRACTORS FAIL
An Flamand, president of USA Vacation Homes, said another problem is contractors that run into problems, and then simply close their doors and then start up a new business under a new name.
“People have lost their deposits because these guys just go out of business,” she said.
Despite these challenges, Delaney said that overall, insurance is not any more expensive in Florida than any other state.
“Liability coverage is cheap here,” he said.
Matthew L. Bell, a certified public accountant based in Lake Wales, said that’s not only true, but sometimes a problem, because some Floridians simply hunt for the cheapest plans, and don’t realize that by spending a bit more or by updating their policies as they get older, they can get more comprehensive coverage.
“When you’re in college, what did you do?” he said. “You got the cheapest coverage you could get.”
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