But many homeowners seeking property and casualty (p&c) insurance have been frustrated by a lack of availability. And many p&c insurers are frustrated by the state insurance department's resistance to their efforts to increase premiums sharply and reduce exposure.
"If we get indications that the Department [of Insurance] is willing to grant rate adequacy, we will be willing to participate in the market," says C. Thomas Starr II, a vice president of Nationwide Insurance. "If it appears we are going to be stonewalled or not have the rate increases that the models indicate are adequate, quite frankly, we're not going to be able to participate in the market."
Some insurance jobs in Florida have been eliminated through acquisitions and consolidations. State Farm has announced plans to move an unspecified number of jobs from its regional office at Winter Haven to Atlanta. American General, a Houston-based financial services company, bought Independent Insurance Group of Jacksonville last year and announced plans to shift 700 jobs to its Nashville subsidiary, American General Life and Accident Insurance.
Modest Employment Growth
Yet there was a modest net gain in statewide insurance employment during a recent 12-month period. The number of Floridians employed by the insurance industry rose to 110,900 in October, up 1.8% from the same month in 1994.
Among the insurance companies expanding their Florida payrolls is Nationwide, which has announced plans for 240 new jobs at its service center in Gainesville, boosting total employment there to about 880. The new jobs are being transferred to Gainesville from Nationwide offices at Annapolis, Md.; Raleigh, N.C.; and Lynchburg, Va.
The general mood of optimism among insurers -- other than those who cover structures built close to the shoreline -- is reflected by T. O'Neal Douglas, chairman and chief executive officer of American Heritage Life Insurance Co. in Jacksonville. "I think we're going to have a continuation of good earnings," Douglas says. "We've had a long string of good earnings, and we've increased dividends for 25 consecutive years, and there's no reason why we can't continue to do that."
Of course, it's much easier for insurance companies to make money when a roaring bull market is inflating the value of their financial surplus and reserves. So the direction of the stock and bond markets in 1996 will have a major impact on the industry.
The workers' compensation insurance business, a basket case a few years ago, is also enjoying a remarkable renaissance, thanks largely to administrative reforms and managed-care requirements passed by the Legislature in 1993. Just a few years ago, for example, workers' compensation insurance was a money-losing business in Florida. Now, however, many insurance companies say they are making money on workers' comp.
"We think we're in great shape," says Fred Hunt, president of the risk and insurance solutions group of RISCORP, a workers' compensation insurer based in Sarasota. "We've been able to maintain our independence. We own our own company. We don't answer to anybody in Boston or Milwaukee or anywhere else. We're just about where we want to be. We're real excited about our position as we enter 1996. We have 650 employees statewide, about 465 in Sarasota, and that is continuing to increase monthly."
But state lawmakers have yet to resolve the biggest issue confronting the insurance industry in Florida -- the future of troubled homeowners insurance, which trails only auto and life insurance in volume of premiums written in the state.
The Post-Andrew Crisis
Politicians continue to struggle to devise solutions to the homeowners insurance crisis triggered by Hurricane Andrew, which devastated southern Dade County in August 1992, leaving behind a record $16 billion in insured damages. Staggered by losses far greater than they had anticipated, many p&c insurers announced plans to pull out of the state.
"You can add up our losses for the last four or five years; I could operate in this state for probably the next 30 years and never make a dime," says Nationwide's Starr. Insurance companies generally are willing to write new p&c policies in areas that are considered low-risk, but they want to shun the high-risk Miami-Fort Lauderdale and Tampa Bay areas.
Allstate ultimately wants to cut its potential maximum exposure from $4.5 billion to $1 billion. To do that, the company would have to cancel 400,000 of its 900,000 homeowners policies in Florida, mostly in South Florida, says Insurance Commissioner Bill Nelson. "Think of the chaos that would result if Allstate dropped 400,000 policies all at once," he says. "Florida would become an insurance pariah."
In response to insurers' threats to pull out of Florida's homeowners insurance market, state lawmakers have imposed a moratorium on such withdrawals, due to expire in November. Lawmakers also created an academic task force to propose comprehensive solutions to the homeowners insurance crisis. The task force has come up with 15 recommendations to be considered by the 1996 Legislature when it convenes in March. Insurance executives object strenuously to task-force proposals that would extend the moratorium, if necessary, to prop up the homeowners insurance market. Nor do they like a proposal to ban companies that refuse to write homeowners coverage from selling other types of policies in Florida.
"Why in the world would we want to take these other lines that are healthy and throw them into the cauldron with the property lines?" asks Leslie Chapman-Henderson, media relations manager in Florida for Allstate.
The Fast-Growing JUA
Another trend encouraging p&c insurers to abandon Florida is the explosive growth of the state-run Florida Residential Property and Casualty Joint Underwriting Association (JUA), an insurer-of-last-resort established after Hurricane Andrew for homeowners who can't find property coverage elsewhere. The estimated number of JUA policies in force stood at 822,000 in October, up 33% from a year earlier, making the JUA the third-largest source of property casualty insurance in the state after State Farm and Allstate.
Private insurers inclined to cancel, or not renew, property and casualty coverage have been encouraged to do so by the surging growth of the JUA. This is largely because private insurers are legally liable for the state-run carrier's losses. Insurance Commissioner Nelson hopes to hold down the growth of the JUA by providing private insurers with incentives to take ownership of policies written by the JUA. Unfortunately, this measure fails to address the core cause of the crisis, which is that for political reasons, p&c insurance remains under-priced in Florida.
Starr, the Nationwide Insurance executive, says the insurance industry's biggest problem in Florida is inadequate rates for homeowners insurance. Claiming that Texas homeowners pay twice as much for their coverage as their Florida counterparts, he says Nationwide needs to raise its rates by 61%. But that depends on Nelson, the state's top insurance regulator, who last year trimmed a 59% rate hike requested by Allstate to just 19.7%.