Florida Trial Lawyers President: Floridians at the mercy of private insurance companies

Aug 9, 2012

The following article was published in The Palm Beach Post on August 9, 2012:

Commentary:  Floridians at the mercy of private insurance companies

By Gary Farmer


Florida has not had a hurricane in six years, since Wilma hit in October 2005. No hurricanes mean no property losses from wind damage and thus no claims that require payments to homeowners.

Then why does State Farm Insurance Co. seek a “statewide average increase” of 14.9 percent? The simple and sad answer: Because it can. State Farm also wants to raise rates 49 percent on apartment and other renters, and an average of 27 percent on condo owners.

If approved, these huge increases would be effective Sept. 1 for new policies and Oct. 15 for renewals. The pending increases are in addition to approved increases for State Farm of 52 percent in 2006, 28 percent in 2009 and 20 percent in 2011.

State Farm is the second-largest private insurer in Florida, with 467,000 policyholders and almost 8 percent market share. State Farm and other large insurance companies have reduced their hurricane wind exposure and even threatened to leave the state. Of course, this is a bluff to get increased premiums and shed more risk in coastal communities. State Farm won’t leave Florida because it makes millions on property insurance and even more on auto insurance.

It shouldn’t surprise anyone that State Farm is asking for only a 14.9 percent average increase. Why? Because a full public hearing by the Office of Insurance Regulation is required only for increases of 15 percent or more. Accordingly, the Office of Insurance Regulation held a public hearing in Tallahassee on July 25, but only on the proposed 49 percent increase for renters. The jacked-up homeowners’ rates go into effect without any meaningful regulatory oversight. Only nine people attended the hearing. Wouldn’t it be prudent to hold three or four public hearings around the state at courthouses or colleges, to allow the people affected by this change to voice their comments?

In addition to these rate increases, State Farm and all residential property insurance companies can also get an additional 15 percent rate increase for “reinsurance” with an underwriting profit. Since Senate Bill 408, effective last summer, the 15 percent “reinsurance” premium increase is virtually guaranteed, even if the company is buying it from an affiliated company it owns or controls. State Farm, for example, invested $200 million in DaVinci Reinsurance Ltd., a Bermuda company. DaVinci premiums and profits are unregulated by Florida, and the company pays no U.S. taxes.

Besides getting to raise rates, insurers have the playing field tilted in their favor in other ways. SB 408 allows companies to:

  • Hold back full claims payments and require homeowners to advance money for dwelling repairs, even when they have purchased “replacement cost coverage” for an increased 25 percent premium;
  • Stop paying windstorm and hurricane claims after three years, even when there is latent mold or water damage, or structural damage that does not appear until after the deadline; and
  • Restrict sinkhole coverage and impose unfair and costly bureaucratic hurdles to get these claims paid.

So what should homeowners and renters do? Return full rate regulation to the Office of Insurance Regulation, so there will be public hearings for all rate filing increase above 10 percent. Ask for additional public hearings regarding the renters’ insurance and all other insurance rate increases. And tell the Office of Insurance Regulation to reject State Farm’s unreasonable price hikes.

Gary M. Farmer, Jr., is president of the Florida Justice Association, formerly the Academy of Florida Trial Lawyers.

View the original article here:  http://www.palmbeachpost.com/news/news/opinion/commentary-floridians-at-the-mercy-of-private-insu/nQDQQ/