N.J.'s rising tide of insurance costsBy TIMOTHY PUKO Staff Writer, (609) 272-7275
Press of Atlantic City
Published: Sunday, October 15, 2006
Dave and Jackie Keubler used to own a vacation house in Florida. In just three years, their homeowners-insurance premium doubled to $4,000, forcing them to sell last year.
One year later, after Hurricanes Katrina and Rita hammered the Gulf Coast and the foundations of the insurance industry, the Keublers are finding the same price hikes in New Jersey. Premiums have more than doubled this past year for properties in Ocean County that Dave Keubler and his business partner, Darren Bucemi, own.
“That gets you, actually, crap coverage,” Keubler said, leaning back from the dinner table in his Ship Bottom home.
The Keublers and others around the country are suffering through the insurance industry's attempt to survive after being rocked by the costliest natural disaster in U.S. history. Insurance costs are on the rise in coastal areas in the South and East, including the coastal areas of New Jersey. Some of the traditional insurers are backing out of those storm-vulnerable areas.
The trend is having a mixed effect on southern New Jersey residents, with some holding fast to policies they have had for years and others using a competitive market to try to find cheaper rates. But even for the fortunate ones, there is still an undercurrent of fear.
More companies are refusing to write new policies for shore neighborhoods, as State Farm, New Jersey's largest homeowners policy provider, did starting last month. As a result, consumers know they may end up paying twice as much for half the coverage.
“If (my insurer) cancels on me for some reason, I'm going to have a tough time getting insurance,” said Curtis McDaniel, who has owned a bayside home in Upper Township's Strathmere Beach section for 31 years. “I've called the local agents around and they don't even talk to you.”
McDaniel is like many Strathmere Beach residents who said last week that their premiums have been steady or forced to rise only in accordance with a property revaluation. McDaniel paid about $900 this year to Farmer's Mutual Insurance Company, an increase of just $50. But none of the residents has filed a claim recently, either.
Local insurance agents said Keubler's case is more of a worst-case scenario, with most of the highest premium increases coming between 10 percent and 12 percent. AllState's homeowners premiums jumped almost 7 percent in New Jersey, spokesman Walter Tomasheski said. Comparatively, it has made only 2 percent average yearly increases statewide since 2001.
McDaniel's fear of losing coverage is a larger problem facing area residents. Many home insurers refuse to write new policies in zip codes within 10 miles of the coast, said Michelle Orme, the officer manager at Shore Agency in Absecon.
“Since Hurricane Andrew (in 1992) there haven't been many companies writing along the Eastern Seaboard,” she said. “Then Katrina really blew a lot of companies out of the area, in the way of homeowners policies.”
Potential for disaster, reconstruction costs and higher rates from reinsurers have made the business of insuring shore properties unappealing.
As traditional homeowners-policy providers have pulled out of the market, consumers are forced to seek out surplus lines from Lloyd's of London and similar companies that will insure riskier ventures for the right price.
“Lloyd's of London is more expensive, their coverage isn't as good, and, at claim time, they play hardball,” said Andrew Anderson, an owner of Anderson Insurance Agency and president of the Professional Insurance Agents of New Jersey.
When Tony Pullella wanted to insure his oceanfront home in Brigantine a decade ago, Lloyd's of London was his only option. He was told he lived in a “V zone,” V standing for high wind velocity, and the quote it gave him was $10,000 per year.
Until this year, Pullella used the state's basic insurance plan. Recently, he was able to buy a surplus line for about $3,500, which he called affordable.
The value of Pullella's property, assessed at about $800,000 in 2005, puts him in a high-value market that some insurers have seen as an appealing niche in recent years, said Barbara Lee of Glenn Insurance in Absecon.
As this market has become competitive, the state's basic plan has become more expensive. In the past year, about 11 percent of the homeowners who had resorted to the state plan dropped it. Many of those residents have found standard homeowners policies that were not much more expensive than the state's backup plan, Lee said.
Many owners of homes that insurers shy away from can afford to deal with the higher costs of surplus lines, both lenders and insurers said. The higher policy prices sometimes prove to be only a fraction of a percent of a multi-million-dollar investment.
Higher premiums and the difficulty of obtaining insurance in certain areas only add to residents' worries about a growing property-tax problem. If they have to continually pay higher premiums to cover the higher values of their reassessed homes, many residents interviewed last week said it will only be harder for middle class families to pay to maintain a home in shore communities.
“It's like they're pushing the middle class out and bringing the rich in,” Jackie Keubler said.
“Yeah,” Dave Keubler said. “Who can afford it?”
To e-mail Timothy Puko at The Press:tpuko@pressofac.com
