Climate is a tough one for the industry in Florida

Mar 31, 2008

Orlando Sentinel--Mar. 31, 2008

Anika Myers Palm
Sentinel staff writer

As credit rating service Fitch Ratings claimed the homeowners insurance market in Florida is so unstable that it would "collapse" if a major storm hits the state in 2008, state insurance regulators presented legislators with some facts and figures about insurance in the state.

The Office of Insurance Regulation’s presentation to the state Senate Banking and Insurance Committee this past week put in black-and-white what Florida homeowners have known all along — the cost to insure their homes is going up.

Excluding policies issued by state-backed Citizens Property Insurance, the average premium in the state rose $686 between 2003 and 2006.

And since January 2006, insurance regulators have given approval for 30 commercial and property insurers to offer policies in Florida — $3.4 billion in new capital.

The regulators also said it has taken them an average of 33 days to process insurance companies’ rate-request filings.

In its comments on Florida’s insurance climate, Fitch said the state’s significant risk of exposure to dangerous hurricanes and the role of state-backed entities such as Citizens make the business climate in the Sunshine State worse for insurance companies and can be a blow to the insurers’ credit ratings.

Why are costs rising?

On average, Floridians’ auto insurance and homeowners insurance costs are rising, but why?

According to a new study by the American Consumer Institute, it may well be because the insurance industry in Florida is one of the most highly regulated in the country. The consumer institute describes itself as an independent research organization.

The ACI study found that consumers living in highly regulated states pay hundreds of dollars each year more than consumers who live in states without rigorous regulation — $13.7 billion more.

"There is a correlation between excessive regulation and higher premiums, even when you control for coastal exposure, tornadoes" and income, said Steve Pociask, president of the Reston, Va.-based American Consumer Institute.

Fight heats up

The National Association of Mutual Insurance Companies last week slammed the National Association of Insurance Commissioners for a proposal asking insurance companies to address climate change.

The commissioners group’s Climate Change and Global Warming Task Force wants insurers to include their assessments of climate change and their response to it in their annual financial statements.

NAMIC, calling the proposal "a colossal disappointment," accused the commissioners of rubber-stamping the agenda of partisan interest groups.

The commissioners group is likely to respond and decide whether to move forward with the proposal during its quarterly meeting in Orlando, which concludes today.

Big challenges

Nine of 10 property-casualty claim officers nationally say increased competition is one of the biggest challenges facing the industry in 2008, according to a survey by Towers Perrin, the global management-services firm.

They also named industry consolidation and convergence as concerns, and said data analysis and technology are rapidly changing the way they do their jobs. The claims officers say they’re especially interested in using the analysis and technology to lower operating costs for their companies.

More than 80 percent of the respondents said attracting — and keeping — top-notch talent also is a major priority for their employers. Fewer than a third cited increased understanding of the business world as an issue that is important to them.

The survey included claims officers from property/casualty companies of several different sizes that provide commercial and personal lines coverage. The companies were surveyed in late 2007.