New computer model could hike property insurance rates

TAMPA, Fla. - TAMPA, Fla. - Homeowners in Florida should brace for an increase in their property insurance rates.

A new computer model showing possible risks of a hurricane indicate the storms may cause more damage than previously expected, particularly farther inland.

The model comes from a company called Risk Management Solutions, one of the largest producers of hurricane computer models in the country. Insurance companies utilize models like this to set insurance rates.

The data from Risk Management Solutions specifically shows areas farther inland could be more at risk than previously believed.

The previously-held belief was hurricanes would break up after reaching land. While it is still believed that is the case, the model indicates it could take longer for that to happen, increasing damage projections inland.

Claire Souch, vice president for RMS’s model communications, said the company relied on extensive wind data to come to their conclusions. This is the company’s first update to their model since 2003. She said there have been significant improvements in research since then.

According to Bill Netwon, executive director of the Florida Consumer Action Network, Risk Management Solutions used research on Hurricane Charley -- which caused damage as far inland as Orlando in 2005 – to justify their findings.

“They’ve gone and looked in detail at (Hurricane) Charley and found some things they thought indicated there could be more damage than they were saying before,” Newton said.

Souch confirmed Charley was one storm used in the data, but said a number of other storms were researched as well.

Newton believes insurance companies could use the models as a justification for raising property insurance rates.

That sentiment was echoed at a recent conference in New York, during which an executive for Standard and Poors suggested the new model would raise insurance rates on inland properties.

Newton does not trust the findings of the models. He said Risk Management Solutions would not have to justify their findings publicly, because much of the model’s data is allowed to stay confidential.

“They’re what we call black-box models. They’re secrets. They put numbers in one side, rate increases come out the other and ‘What’s in between?’” he asked. “We don’t know.”

Souch disagrees. While some parts of the model and the methodology are kept secret from the public, the Florida Commission on Hurricane Loss Projection Methodology, an independent panel of experts evaluating computer models, has full access to the model, she said.

According to Souch, the panel conducts an extensive review of the model before it is approved for us by insurance companies.