Eye of the Storm Homeowners Tangle with 'Frankenstein's Insurance Monster'

Article excerpt

When it comes to the property insurance business in Florida,

there are two eras: before Hurricane Andrew and after Hurricane

Andrew.

Before Andrew, insurance companies fought for your business.

After Andrew, insurance companies fight to get rid of your business.

Before Andrew, property owners had a dozen or more private

insurance companies to choose from in Florida.

After Andrew, property owners are lucky to find any private

carriers that will take them.

Before Andrew, insurance rates in Florida were low, low, low.

After Andrew, insurance rates are much, much higher and still rising.

But hey, you say, Andrew hit way back in 1992, more than 400

miles south of here. Why should we care?

The $16.5 billion in insured losses Andrew caused occurred

mainly in South Florida, that's true. But the storm turned the

property insurance market upside down throughout Florida -- even

in quiet Duval County.

Only eight hurricanes have hit Northeast Florida since 1900,

none of them considered major storms.

So why are we paying for South Florida's troubles? That's what

Roseann Schonfeld wanted to know when her company decided not to

renew her policy.

Schonfeld is co-owner of the Big Cat Cafe on Beach Boulevard, a

sandwich shop.

She and her husband, Leonard, own a home in Baymeadows, far from

the coast.

Following Andrew and two claims totaling less than $2,000, their

insurer, Auto Owners, decided not to renew coverage.

But Schonfeld wasn't too concerned -- someone would surely pick

them up.

She called at least 10 different agents -- some independent,

some exclusive representatives of a single insurance company --

without success. She then learned the meaning of three important

letters: JUA. That stands for joint underwriting association.

The state Legislature created the JUA, formally known as the

Florida Residential Property & Casualty Joint Underwriting

Association, following Hurricane Andrew.

Nine carriers became insolvent in Florida after the storm

because of huge claims, while others stopped doing business in

the state.

As a result, tens of thousands of homeowners found themselves

without coverage. The biggest concentration of JUA customers has

been in Dade and Broward counties, but about 25,000 local

residents are covered through the "insurer of last resort" --

including the Schonfelds.

"I was very surprised I didn't find anybody else to insure me,"

she said.

At the time, it wasn't such a bad deal. The coverage wasn't as

flexible, but it was cheap -- in some cases cheaper than

insurance available in the private market.

Low premiums and high demand resulted in the creation of

Frankenstein's insurance monster.

The JUA recently surpassed 800,000 policies. It is and has been

the third biggest property insurer in the state behind State

Farm and Allstate.

That would be fine if the state wanted to be in the insurance

business. It doesn't. In addition, the JUA doesn't have much

cash -- if the big one hits, the fund will assess private

carriers already operating in the state to pay for claims.

And there have been threats that those carriers will fight

assessments.

J. Scott Johnson is vice president in charge of public and

industry relations for the 1,200-member Florida Association of

Insurance Agents.

"It's so big," he said of the JUA, "that if that worst-case

storm happens, it would devastate some insurance companies. …