Born in Florida

Born in Florida

Homeowners Choice Inc., created by Floridians to help the state's homeowners, is building a growing customer base.

Entrepreneur Paresh Patel still gets a few angry telephone calls, even though he is a Floridian trying to help other Florida homeowners.

They are former customers of other major national property and casualty insurers, who were suddenly dropped after 30 years, then picked up by the state's insurance pool, Citizens Property Insurance Corp., then by Patel's Clearwater company, Homeowners Choice Inc.

Citizens is the state's homeowners' insurance safety net. The Legislature created it in 2002 to offer property coverage to Floridians without private insurance options.

The policholders want to know if HCI will dump them, too. Patel, 46, the company chairman, assures them it won't.

Why? Because Patel and his fellow board members have invested millions in the company - Patel is the second-biggest shareholder - they live in Florida and want to see it and its customers succeed.

"We're running a company here and our money is at stake," Patel says.

Patel is a Cambridge-educated electrical engineer and investor who has lived in Florida for 24 years. He was the founder and is a board member at Northstar Bank in Tampa.

About two years ago, Patel and three other Northstar board members, Marty Traber, Mark Berset and Greg Politis were looking at the insurance crisis in Florida, with companies leaving the state, and saw it as a business opportunity.

They eventually raised nearly $13 million in capital from 76 investors and got a license from the state in May to start Homeowners Choice. It booked its first business in July.

In a vote of confidence, since then, no one has sold their shares. In fact, the board has bought more.

To get the company on more stable footing, in July, he took the company public on Nasdaq. The IPO was oversubscribed and raised $11.7 million.

It used the money, for the company's infrastructure and it has gone from 20,000 policy holders in July to about 70,000 policy holders this month, collecting about $130 million from premiums on an annualized basis. That puts it in the top 15 insurers in the state.

More than 90% of its policies are from Citizens, the state insurance pool, with about 1.1 million policy holders. Homeowners Choice rates are 5% lower.

HCI's strategy is the same one Patel and his investors came up with two years ago: Have a stable, Florida-based company providing homeowner's insurance at an affordable rate.

So far, things have gone according to plan and something interesting has happened.

Two years ago, insurers were fleeing Florida. Today, there are at least 10 people who want to start insurance companies.

If the state's insurance market were a pie, a quarter of it would be Citizens, the state pool. The second piece would be large nationals. The third is owned by Florida divisions of national insurers, called "pups." The fourth piece is small up-and-coming companies such as Homeowners Choice.

The pieces for Citizens, the nationals and the pups are shrinking, while the independents' slice is growing and is at about 30%.

How can HCI successfully do business in Florida while larger companies are complaining that the state and its hurricanes make doing business difficult? By being careful.

"We set out a business model and our rates are below Citizen's," Patel says. "We're very careful with policy selection."

Those include policy holders on the beach. But HCI makes sure their premiums are enough to cover their risks.

The company's biggest challenge has been managing its growth.

His biggest lesson as chairman is knowing that it is possible to run a business and have investors, employees and policyholders who can feel good about its direction.

"Business can be a win-win proposition," Patel says.

- Dave Szymanski