Chief Financial Officer Jeff Atwater is asking for state insurance regulators to explain why property insurance companies don't seem to be passing along their cost savings to consumers.
At the heart of the issue is the drop in the cost of re-insurance, which has dropped in price after a series of legislative reforms. Atwater asked the same question to Florida Insurance Commissioner Kevin McCarty in an August letter. McCarty responded in a letter, and at a recent Cabinet meeting, and said that rather than reduce the cost of premiums for consumers, insurers were purchasing more re-insurance.
Now, Atwater wants better answers and he is asking McCarty to prepare a report by Dec. 18.
"My question to you is simple: 'Why have rates not come down?',” Atwater writes. Here's his letter: Download 10.29.2013 Letter to McCarty Regarding Property Insurance Costs (1)
As I expressed in our recent meeting, I remain very concerned that property insurance companies are not passing along the reinsurance cost savings they are experiencing to Florida homeowners. Therefore, I request that you analyze Florida’s insurance companies to ensure they are treating Floridians fairly.
Year after year, insurance companies have been telling their customers and the Legislature that the “simple” explanation for the higher rates they are charging was due to reinsurance costs going up. Furthermore, they made representations that if reinsurance rates were to fall they would pass those savings along to their customers. But now that insurance companies are experiencing a significant decrease in the cost of their reinsurance, they are not lowering rates for consumers.
I am well aware of the need for insurers to carry adequate reinsurance and that the Florida Statutes allow insurers to purchase enough reinsurance to cover a 1 in 250 year storm. You have told me, however, that companies have rarely if ever purchased reinsurance to cover a 1 in 250 year storm.
If companies historically did not believe they needed more reinsurance and your office was not mandating that they acquire more reinsurance, then please tell me how they are now deploying the savings they are receiving from lower reinsurance costs. My question to you is simple: “Why have rates not come down?”
I am asking that you oversee an analysis that provides Floridians an accurate representation of how much insurers are saving, how they are utilizing these savings and how customers are benefiting. My request is not suggesting insurers should put themselves at any greater risk or not acquire the appropriate level of reinsurance. Our goal should be to ensure rates are fair and companies are sound.
Such an analysis will require a significant review of data but I believe that Floridians are due such an assessment. Please provide me your analysis by December 18. If you believe this timetable is not manageable let me know.