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New Homeowners Insurance Option Emerging

Do you have what it takes to qualify?

Ponte Vedra Recorder - 06/28/07
By Chuck Day

As tough as it's been to obtain of late, homeowners insurance still is bound by the laws of supply and demand.

Yes, familiar property insurance carriers have turned their backs on Florida residents, including those who have never ever filed a claim. But while they have departed, at least one new carrier sees opportunity continuing to knock in the Sunshine State. Since late January, Privilege Underwriters Reciprocal Exchange-"PURE,"as the new Plantation-based company likes to be called-has been more than happy to write policies for homeowners who qualify.

Therein lies the rub, however.

To qualify, one needs to own and occupy the home that is worth $1 million or more, covers at least 3,000 square feet, and is built to the state's comparatively stiff 2001 building codes.

Even in Ponte Vedra Beach, those standards are tougher to meet than one first imagines. Given current average per square footage costs of between $200 and $250 around the First Coast, for instance, a home would by definition have to cover 4,000 square feet to meet PURE's requirements, or be built with premium materials and contain many expensive features. Still, Chuck Powell of Advanced Insurance Underwriters has been writing "more than one new policy a week," since the coverage option was officially introduced in northeast Florida in mid-May.

One in 10

"We're writing everything we can quote, although on average it takes us about 10 inquiries to find one property that qualifies," said Powell. His is one of eight agents so far in Florida offering the policy and whose Ponte Vedra agency is PURE's exclusive representative in this part of the state.

That prospective clients occasionally plead for "exceptions" to the qualifying parameters tells Powell that demand for homeowner's policies remains high. Such pleas are rejected, he notes.

"There's also been a little initial skepticism about our legitimacy" in the face of what's been written about Florida's property insurance situation, the agent also allows. "But nothing's punched a hole in anything we're doing," Powell says.

PURE got an endorsement of sorts just last week when it received $17 million from the Florida's Insurance Capital Build-up Incentive Program. The fund is administered by the state Board of Administration, and will enlarge PURE's policyholder surplus "to more than $50 million," said company founder and president Ross Buchmueller.

In turn, that will allow the company to issue more policies, he added. At the same time, Powell noted, neither PURE's standards nor its demographic target will change.

That target is the foundation of the success the new company envisions. As a rule, high-end, luxury homes are better built and thus can better withstand Florida storms, which results in fewer claims.

In addition, homes built since 2001 must meet stiffer state building codes, such as having windows of impact-resistant glass and/or shutters. PURE will insure older homes, too, as long as they qualify.

In short, it's a segment that makes for an attractive market "of thousands of homeowners," observes Keith Self, PURE senior vice president of sales and marketing, who introduced the coverage to St. Johns County in May.

"We're offering a solution that these homeowners haven't been able to find," Self said then. "We're offering flexible policies, too, so our customers can purchase only the coverage they need at a competitive price."

Other coverage, too

As it sells homeowner's protection, the company is offering this clientele policies for luxury vehicles, jewels, and to cover personal liability up to limits of $10 million. PURE is also a member-owned, not-for-profit company, Self added. Not having to please "Wall Street investors" helps keep rates lower, he stressed.

How much lower has yet to be fully determined, since the product is so new. So far, though, Powell said he has been able to offer customers savings of up to 35 to 40 percent, compared to their previous policies.

PURE's own marketing information cites two cases from South Florida: In West Palm Beach premiums for $1.2 million in coverage dropped from $15,175 to $6,845, while in nearby Delray Beach premiums for $2.8 in coverage plunged from $32,637 to $18,812.

Still, PURE's long-term viability has yet to be confirmed. For one thing, of course, the company's simply too new, although its executives are veterans of the insurance business.

The critical factor, two veteran insurance brokers said, remains the same one-two punch that sent other carriers packing: Florida's weather and PURE's ability to obtain re-insurance.

"A key element is re-insurance, which is a complex, behind-the- scenes subject," appraises Chuck Bushong, owner of the Ponte Vedra insurance firm that bears his name. "Essentially, a company needs enough capital and re-insurance to cover claims if the wind blows, plus a management with experience in this market."

Capital is critical

Inadequate capital combined with multiple storms in 2004 and '05 took many companies down, and scared others off, Bushong adds. Beyond that, he says, PURE is seeking the same desirable market niche that every insurer eyes.

"They have a different way to skin the cat is all," Bushong adds. "If it's well-managed, though, it might well work fine."

Whether there are enough qualifying customers in northeast Florida is another question in Jim Browning's mind. Meeting a million-dollar threshold can be tough, since only the dwelling itself is what's appraised.

"You're beginning to see a similar kind of coverage for this segment from other carriers. The difference is the minimum value can start at, say, $600,000, rather than $1 million," says Jim Browning, president and owner of the Browning Agency.

The appearance of new homeowner's insurance options remains a positive sign for a business sector that needs one.

Help from Mother Nature would be another.

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