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Insurer files for rate hike, claim fee

Nationwide seeks a 28 percent rate increase. A 20 percent surcharge on most claims is effective Feb. 1.

By JEFF HARRINGTON
Published January 27, 2005

Florida homeowners covered by Nationwide Insurance Co. are facing a double whammy: a possible double-digit rate hike plus a 20 percent surcharge on their premium if they file certain types of claims.

On Monday, the Columbus, Ohio, insurer filed with Florida regulators to raise its homeowners rates an average of 28.3 percent, the latest in a barrage of rate increases after the four-hurricane season. Florida's Office of Insurance Regulation is reviewing the request.

Separately, Nationwide, Florida's fourth-largest insurer, began notifying state customers this month that a 20 percent surcharge will be added to their premiums for each nonweather-related claim they file. Once applied, the surcharge will remain for three renewal periods.

A form letter sent to customers was not specific about the types of claims that would trigger the surcharge, but most would. Nationwide spokesman Eric Hardgrove confirmed the surcharge will be applied to claims from theft, vandalism, fire, a burst water pipe or sinkholes, among others.

There are only five types of claims that will not count against homeowners toward a surcharge: losses from a hurricane or other catastrophe; weather-related claims; guest medical payments; accidental death claims; and claims in which Nationwide can be reimbursed from "an at fault party."

The surcharge, part of a gradual rollout nationwide, is effective Feb. 1 in Florida.

The insurer describes the plan as a way to offer the lowest rate to claims-free customers. But when asked why Nationwide opted to add a surcharge for those who make a claim rather than a discount to policyholders without a claim, Hardgrove said he couldn't answer for competitive reasons.

Allan Schwartz of New Port Richey, who has never filed a claim in his five years as a Nationwide policyholder, said Wednesday he was furious at what he sees as an act of intimidation by the insurance giant.

"What is the purpose of insurance if God forbid I have a claim other than the ones they list (as exempt)?" he said. "Am I supposed to be afraid of submitting a claim?"

Hardgrove's response: "We're not instituting this as a penalty. We're instituting this as a way for us to do business competitively in the state of Florida.

"We're not trying to discourage people from filing claims," he continued.

Moreover, Hardgrove said, Nationwide isn't the first to include claims history as an underwriting criteria for charging policyholders. "A majority of our competitors have had similar programs," he said.

Sam Miller of the Florida Insurance Council, a group representing most insurers in the state, said he did not know of a similar surcharge being imposed by others "but that's not to mean it's not out there."

State regulators were likewise at a loss to cite a similar case.

Regardless if there is a precedent, that's of little consolation to Schwartz, who was fuming at Nationwide for raising his premium 51 percent in September when he heard about the surcharge. Another rate increase is adding injury to insult to injury.

"Again?" he said when told of the latest filing. "That's amazing. And the state's going to give it to them."

Valerie Beynon, spokeswoman for the Office of Insurance Regulation, said the surcharge plan was approved by the state in October and the rate request will be reviewed within 60 days.

If approved, the higher rates would go into effect in July.

Nationwide joins more than 20 other Florida insurers, including No. 1 State Farm and No. 2 Citizens Property Insurance, which have filed for rate increases since the hurricanes. Hardgrove referred to the filing for justifying the increase. However, Beynon said the filing is vague on outlining reasons.

Nationwide is the seventh-largest property and casualty insurer in the country; it is fourth-largest in Florida with about 300,000 policies statewide.

Jeff Harrington can be reached at harrington@sptimes.com or 813 226-3407.

[Last modified January 27, 2005, 00:40:21]