‘Insane’ insurance market roils before storm season

May 23--Palm Beach County homeowner Justin Goldberg has a word for South Florida's insurance market: "Insane."

He has had six insurance companies in nine years, he said. With hurricane season looming June 1, he was forced to shop again because People's Trust Insurance Co. dumped him.

"It's stressful," Goldberg said. "I have a baby at home and a full-time job. I have to worry about getting a cancellation notice every year. I have to waste days of my life dealing with this."

Florida-based companies, many of them start-ups only a few years old, provide a growing marketplace of options in the wake of a major pullback by national insurers.

But homegrown companies also accounted for five of the seven carriers with the most complaints per capita among the top 30 insurers serving Palm Beach County, an analysis by The Palm Beach Post shows.

Boca Raton-based Florida Peninsula Insurance Co., state-run Citizens Property Insurance Corp. and Security First Insurance Co. of Ormond Beach racked up the highest complaint ratios, state data crunched by The Post for 2013 reveals. Top issues included claims mediation, denials and delays.

Florida Peninsula CEO Roger Desjadon said the numbers can be misleading. His company encourages customers to use mediation or neutral evaluation to review facts in a claim, so what are sometimes classified as complaints in state records can be a "misnomer," as he sees it.

The Florida Department of Financial Services "considers a complaint to include a claim dispute with an insurance company," state spokesman Chris Cate said. "Consumers that request mediation are typically disputing either the company's denial of a claim or the settlement of a claim; therefore, the department does consider requests for mediation as complaints against the company."

Only 14 complaints out of 378 were for "underpayment of claim," Desjadon noted: "That tells me the time, energy and resource we put into understanding and evaluating a claim gets us to the right result the vast majority of the time."

Security First's chief operating officer Werner Kruck said mediation requests increased his company's numbers as well but his company "takes seriously" any instances where customer expectations don't line up with results. For example, it has lowered rates for coverage of a home's contents but required insurance to full replacement cost, so there's no more confusion about coverage at a lower "cash value" price.

But not all homegrown insurers are getting it right financially. Florida regulators ordered Sunshine State Insurance Co. of Jacksonville, the state's 42nd largest insurer, not to take any new policies after the discovery of a "possible accounting error" involving reinsurance costs, state officials said. United Property and Casualty Insurance Co. of St. Petersburg, the state's eighth largest insurer and No. 3 in Palm Beach County, agreed to acquire Sunshine State May 15, officials said.

Don't blink in this market or you'll miss big changes. The sixth largest insurer in Palm Beach County, start-up Heritage Property & Casualty Insurance Co. of St. Petersburg, had no customers at all two years ago. It has grown to 133,000 statewide, partly with the aid of a lucrative deal to get up to $52 million to take up to 60,000 Citizens customers shortly after a $110,000 donation to Gov. Rick Scott's Let's Get to Work committee last year. Heritage netted about $30 million on the deal, Citizens officials said. Scott appoints Citizens directors and helps oversee its management.

Heritage recently told agents not to write new business in 18 South Florida ZIP codes, including two in Lake Worth, to manage its risk exposure.

Deerfield Beach-based People's Trust, formed in 2007, doubled in size since last July to about 115,000 customers, before CEO Mike Gold died in his sleep at age 60 in January. This spring it abruptly dropped about 2,800 customers, some of whom had signed up less than 90 days before. By April, the company said it was writing no new business in Palm Beach, Broward and Miami-Dade counties.

The cancellations affected less than 3 percent of its customers statewide and reflect "the company's commitment to appropriately manage future growth while ensuring protection and peace of mind of our policyholders," marketing director Genie O'Loughlin said.

There's no question it's a dynamic market even if not everyone is shopping by choice before hurricane season. Record numbers have left Citizens, with about 600,000 of its 1.5 million customers departing over the last two years. In Palm Beach County, Citizens remains the largest insurer, but it's down to about 100,000 customers from nearly 150,000.

Most homeowners are leaving Citizens either through transfer offers that are voluntary -- though some homeowners say offer letters make it sound financially risky to stay with Citizens -- or because they have no choice under a new clearinghouse created by state legislators. The clearinghouse, a computer system used by agents, automatically steers consumers to private companies offering comparably priced coverage in their area.

In the early going, Palm Beach County led the state in customers shut out of Citizens under the clearinghouse, with 19 percent of the state's total of 717 by March.

Transfer offers for up to 75,000 Citizens customers were approved for May. That's unusual because takeout activity is usually heaviest in the winter, not near hurricane season. Another 10,000 offers are set for July.

Still, there may be signs the exodus from Citizens is slowing. Only about 11,000 Citizens customers have taken transfer offers this month, a spokesman said.

Not every homeowner has a choice of companies, but for those who do, shopping in South Florida can involve more than just figuring out what competing policies cost. There's also the question of whether a company may drop them suddenly, deny or delay claims, or worse.

If private companies fail -- after a bad storm, say, or financial problems -- their claims are covered by the Florida Insurance Guaranty Association. That organization can assess insurance companies and policyholders statewide if necessary to cover costs. But its coverage limits, such as $300,000 to $500,000 for a home, may not match the full amount of the original policy.

Even short of major storms, unexpected disputes with big fire or water claims can put at risk life savings or what is often someone's largest investment, their home.

The state's largest private insurer, Universal Property and Casualty Insurance Co. of Fort Lauderdale, denied large claims and canceled policies based on information it said consumers left out of applications sometimes years before, The Post reported in a series of stories last year. It eventually agreed to check applications within 90 days. State legislators this spring reinforced rules to address the issue.

Universal received the lowest grade in the county's top 30 for financial strength from Weiss Ratings LLC of Jupiter, an "E+." Weiss cited concerns with money available to pay claims compared to the company's potential risk exposure.

Universal spokesman Travis Miller said the company's 2014 reinsurance program is its strongest ever, it has nearly doubled its surplus to $162 million over five years, and its Demotech rating is an A. "By implying that Weiss' ratings are reasoned, or even relevant, you are creating concerns among your readers that are unfounded," Miller said.

Weiss's highest grade among Florida-based insurers may come as a surprise. It is an A+ for Citizens, which has $7 billion in surplus available to pay claims.

At the same time, Citizens also ranks No. 2 in complaints relative to its number of customers. Many of the changes legislators approve each spring are designed to make it less and less palatable to consumers and encourage more of them to move to private insurers, such as reducing coverage of outbuildings or shrinking maximum coverage limits. Also, nearly 1,000 of its 2,961 complaints involved sinkholes, a bigger issue in western and central Florida than in Palm Beach County.

A group representing many of Florida's private insurers says state regulators require significant capital and reinsurance, or back-up coverage, to pay even catastrophic losses, so consumers should have confidence.

"Florida-based companies are among the only private insurers willing to write new policies in the state, and they are the best option to bring stability to the riskiest insurance market in the country," a statement from the The Florida Property & Casualty Association said. "We are on the right track to a healthier market."

All of the Florida domestics in the county's top 30 received at least an "A" rating from Demotech Inc. of Columbus, Ohio, which says it dives deep into records including reinsurance contracts to make sure companies can meet the standards.

But it feels like a never-ending drama to consumers like Goldberg, who lives just west of I-95 in Boca Raton.

"It's just been a non-stop battle," he said.

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