Mobile Homes, Mobile Market

As we enter the last half of the 2009 hurricane season, the state of Florida has a significant number of mobile homes/manufactured housing at risk. A U.S. Census Bureau report titled Structural and Occupancy Characteristics of Housing: 2000, notes that Florida has over 800,000 of these homes. Tom Zuttel of the Office of Insurance Regulation (OIR) reported that less than half (344,593) were insured as of Dec. 31, 2008. Those homes carried total insured values of $27,974,430,478, and accounted for $344,661,566 in premium.

OIR statistics also show that the top writer in the state is Citizens Property Insurance Corp., with 87,646 mobile/manufactured homes. Citizens’ Public Information Manger John Kuczwanski said that as of June 30, 2009, Citizens’ total in-force mobile/manufactured home policy count is 186,904, including all renters’ and owners’ policies. The next four companies in order of in-force policies are Foremost Insurance Co. (50,640), Foremost Property & Casualty (37,368), Safeway Property Insurance Co. (31,774), and American Traditions Insurance Co. (25,553).

Omega Insurance Company, State Farm, American Southern Home, Modern USA, and Florida Farm Bureau General Insurance Company round out the top ten. Those ten account for 88 percent of the policies in force and structure values respectively, and 89 percent of the premium written. All told, there were 28 different entities writing mobile/manufactured homes in 2008 in Florida.

While it would appear that insurance options are plentiful, owners of these homes may actually have a limited number of choices available to them, depending on the age of the home, location, and condition. Age is a key qualifier, and newer-built homes are considered better quality and therefore better risks. Carriers are very selective when writing business on homes built prior to 1994, the year when significant changes regarding structural standards were implemented.

Lisa Miller, consultant to American Integrity Insurance, said, “Manufactured homes constructed prior to July 13, 1994, or not built in compliance with American Society of Civil Engineers Standard ANSI/ASCE 7-88 will require evidence of compliance with current Florida statutory anchoring and building requirements.”

As is the case with most difficult property risks in Florida, Citizens is the primary option for older manufactured housing. Citizens currently provides coverage for homes built in 1994 and prior, but there are limitations. “Homes that are over 35 years old, even if they are well maintained, are extremely difficult if not impossible to place. Underwriting requirements almost always limit or exclude our ability to write those homes,” said Dana Syens, agency principal of Commercial Coverages in Daytona Beach. Citizens is trying to offer another alternative. “In 2006, the Florida Legislature passed SB1980 to require Citizens to offer actual cash value on manufactured homes built prior to 1994,” Kuczwanski said. “Citizens has not been able to implement this change as rates have been frozen for several years, but Citizens has a filing in to OIR that will become effective as quickly as possible on or after Jan 1, 2010.”

Inspections Are Critical

Retail agents can help their mobile/manufactured homeowner clients obtain coverage by educating or reminding them to make sure they have proper and timely maintenance and reviews.

“Manufactured homeowners should get tune-up inspections regularly to have their tie-downs and anchoring checked frequently since these processes have greatly improved in recent years,” Miller said. “Inspections should always be done by a licensed inspector experienced with manufactured housing.”

Rob Wilson, COO of Safeway Property Insurance Co. in Gainesville, agreed that pride of ownership and proper maintenance is a key component in his company’s underwriting criteria.

Wilson encourages homeowners looking to improve or maintain their homes, especially older ones, to make sure they are working with reputable and knowledgeable professionals regarding any repairs and maintenance. He also stressed that “all homes should be anchored and secured with purpose-built tie-downs.”

Location of the home is another critical factor in determining underwriting acceptability. The majority of carriers prefer to write homes in select adult (age 55+) parks. Newer homes in parks that are not on a carrier’s approved list are problematic and may need to be placed in the non-standard market. Homes on private property regardless of age are capable of being written, but have a more limited number of markets available. “The majority of our book of business is in one of two locations — retirement parks and private property,” Wilson said. “If the risk is on private property, we do require an acceptable inspection.”

Even with evidence of updating, older homes face major issues with coverage. “Sometimes, for pre-1994 homes, all that is available is a DP-1, which of course has no replacement cost on the home or the contents,” said Syens. “Also on these homes, limits up to $100,000 can be obtained fairly easily, but limits higher than that are only available from a limited number of carriers.”

For newer homes, Wilson reported that, “We have the ability to write wind coverage on selected risks, and can write coverage excluding wind if property is on the coast. We allocate our aggregates throughout the state as you would expect.” Safeway will consider wind coverage if the property is at least one mile from the coast. Contents coverage is included in the policy and “other coverage” includes attached structures; adjacent structures coverage is also available. Like most carriers writing manufactured homes, Safeway offers $100,000 liability limits on most risks. Miller said that, “American Integrity writes an H03 product. Additions such as screen rooms may be added to our policy. The H03 program includes liability, but does not include flood. Our policies include wind; we will write excluding wind if the customer provides proof of wind coverage and meets the other underwriting requirements.”

Into the Future

The future of this market is not unlike the market for site-built homes, and much is determined by the outcome of the current and future storm seasons. According to Wilson, “The storm seasons of 2004 and 2005 were challenging. Fortunately, we were well prepared. We had a reasonable spread in our portfolio, appropriate reinsurance arrangements, and did a good and effective job of claims handling.”

In addition to the wind season, the market is impacted by many other factors. Miller noted that, “Rate suppression, increasing claim costs, and misapplication of wind mitigation credits in some instances all create problems.”

Wilson sees a set of problems to work through that many other property underwriters and carriers face writing Florida business. “The biggest impact on our market is very similar to what the property market in general experiences — working with issues involving the catastrophe fund, Citizens, and the reinsurance market.”

For her part, Syens would like to see rates stabilize, but her expectation is that “there will likely be a rate increase, as companies have advised that reinsurance costs are up.”

Wilson is looking for more of the same. “The current market in Florida is relatively competitive right now,” he said. “Of course, things can change rapidly. The property market in Florida is very tenuous — each year brings its own uncertainties.”