Insurance Information Institute: September 2010 Media Update

Oct 5, 2010


Weekly insurance related media recaps from the Insurance Information Institute (“III”) are outlined below for the month of September 2010 (click on the hyperlinks to access the referenced information):

Week of September 26-October 1

  • South Florida Sun Sentinel columnist Mike Mayo writes that the worst part of storm season is the insurance bill. Mr. Mayo’s column centered on the recent approval by the Office of Insurance Regulation (“OIR”) to raise rates for Citizens Property Insurance Corporation (“Citizens”). The following material relates to the vulnerability that Citizens’ customers have to assessments of up to 45 percent:
  • Several Florida newspapers covered the OIR’s approval of Citizens’ rate increase, noting that the approved rate was higher than what was requested – at 10.3 percent, rather than 9.7 percent. (News outlets stated that the OIR produced a 12-page spread sheet with a county-by-county breakdown of the new rates; however, the spreadsheet is not currently on the OIR’s Web site. Additionally, regulators say the spreadsheet they distributed to media did not include costs associated with the cash buildup of the Florida Hurricane Catastrophe Fund, so actual increases could add a few percentage points to the overall rate.

Below is a sample of some of the news stories on Citizens’ increasing rates.

o   A Bradenton Herald article mentioned that some policyholders will see a decrease in premiums of 3.4 percent – if they exclude catastrophic coverage for sinkholes and hurricanes.   In coastal parts of Manatee County, rates will decrease by 14 percent for mobile home policies excluding catastrophic coverage, while non-coastal mobile home policies will decrease by 17.3 percent in parts of Manatee County and in Sarasota County.

o   Premiums for most home and condo unit owners in South Florida will increase next year by up to 10 percent, with some condo unit owners with multi-peril policies getting a decrease, according to a South Florida Sun Sentinel article on Citizens stating that  condo unit owners with windstorm-only coverage will see increases of up to 10 percent, as will renters.  Many of the rate hikes for homeowners can be attributed to a 30 percent base rate increase approved for sinkhole and windstorm coverage.  The OIR said the increase for catastrophe coverage is partly offset by decreases in other parts of policyholders’ rates.

o   In the Florida Keys, most Citizens policyholders will see an increase of 11.2 percent, according to an article in the online Keynoter.   A Palm Beach Post article explains that rates will drop for those who live east of Federal Highway, while wind-only policies will rise about 10 percent.

o   The St. Petersburg Times reported that Tampa Bay area policyholders avoided double-digit increases and that premiums will fall 3.4 percent, on average.   The St. Pete Times also reported that Citizens staffers are meeting (on October 1, 2010) to analyze the OIR’s orders  in an effort to to better understand the discrepancies in rates, which Citizens officials explained are tied to changes in the way it calculates rates.  Previously, Citizens compared the rates of the top 20 insurance providers in every county and set its rates higher to encourage homeowners to shop the private market.  Last year, it began gradually adjusting rates to better reflect what it should be charging based on its own expenses and risk models.

  • More rate request hearings are occurring. Sunshine State Insurance Company had a rate request hearing on Thursday, September 30. The South Florida Sun Sentinel reports on the rate hearing and Sunshine State’s request for an average 25 percent increase. A rate hearing for Homesite Insurance Company is scheduled for October 14, followed by another one for First Community Insurance Company on October 21.
  • Flood insurance rates in Manatee County will be dropping, thanks to effective floodplain management. The Bradenton Herald article on flood insurance rates explains that policyholders in high-risk areas will be getting a 25 percent discount, up from the current 20 percent discount, which equates to a savings of $44 annually.
  • South Floridians whose homes were damaged by Hurricane Wilma have until October 24 to pursue an insurance claim. (That’s the five-year anniversary of Hurricane Wilma.) The South Florida Sun Sentinel reported Hurricane Wilma’s deadline and talked to the III last week, which explained that some insurers may be willing to review a claim filed beyond the five-year deadline, depending on the language in individual contracts. Florida’s five-year statute of limitations actually runs from the time the insurer denies the claim or violates the contract.
  • A deadline is approaching for small businesses in Northwest Florida that want loans to help them with recovery from the BP oil spill. The Miami Herald explains that short-term loans are available under the State of Florida Small Business Emergency Bridge Loan Program through October 27. The interest-free bridge loans of up to $25,000 are available to businesses in seven Northwest Florida counties. Businesses must demonstrate physical damage or economic injury from the oil spill. Details and applications are available at
  • Bermuda-based Hannover Re Ltd. is the third foreign reinsurer allowed to post a lower amount of collateral in Florida. The other two companies are the German-based parent company of Hannover Re, which is considered a separate entity, and XL Re. This move helps “level the playing field” for foreign reinsurers who had been required to post 100 percent collateral; domestic reinsurers had no such collateral requirement. About 90 percent of reinsurance for Florida property insurance comes from foreign reinsurers. Florida is the only state to approve a rule imposing lower collateral requirements on alien reinsurers. Insurance News Net provides more details.
  • An online newsletter produced by the American Consumer Institute suggests that the top priority for the next Florida Cabinet is to fix the property insurance market. The article is written by John Rollins, who was previously an actuary for Citizens Property Insurance and now has an independent business. Mr. Rollins offers three solutions for the new Cabinet to consider: approving all rules issued by the OIR,managing the Florida Hurricane Catastrophe Fund so that it only promises coverage on hand, rather than on what it might be able to borrow, and focusing on consumer education and financial solvency.
  • The Florida Times-Union reports that candidates for governor are grappling with property insurance. Rick Scott, the Republican nominee, has said he favors letting the private market work, making it easier for companies to raise rates and reining in Citizens and the Florida Hurricane Catastrophe Fund. Democratic candidate Alex Sink hasn’t yet provided a detailed plan on dealing with property insurance, but she has experience dealing with the challenges as the current state chief financial officer. CFO Sink supports plans to make Citizens the insurer of last resort, but did not support last year’s insurance deregulation bill.
  • Thirty percent of U.S. households don’t have life insurance coverage, compared with 22 percent six years ago, according to a recent survey by the Life Insurance and Market Research Association, an industry-supported research group. Among those going without coverage are 11 million families with children under age 18. The Miami Herald article on people skipping life insurance had originally appeared in the Baltimore Sun.
  • Seven Broward County residents have been arrested is a “crash for cash” scheme. They allegedly intentionally crashed a rented U-Haul truck into a passenger van, then fraudulently billed their insurance companies for $80,000 in medical services at various clinics. The Palm Beach Post article on the staged accident said regulators were tipped by the insurance company.
  • Two insurance companies have “now hiring” signs out in Florida. American General Life and Accident Insurance Companies has a 15-city bus tour that makes a stop in Tampa today, part of a nationwide effort to hire 4,000 agents in the next two years. More details on this are in the Tampa Bay Business Journal. Auto insurer Progressive intends to hire more than 240 people at its Tampa Bay call center over the next four months. The company has about 2,300 employees at its suburban Tampa location, one of six call centers in its network. Details on Progressive’s jobs are in the St. Petersburg Times.
  • A Florida federal judge has ordered a lawsuit brought by Chartis Inc. and subsidiary Lexington Insurance Company concerning Chinese drywall coverage be transferred to multidistrict litigation that is pending in New Orleans. The defendants in the case, Bonita Springs, Florida-based homebuilder WCI Communities Inc. and WCI Trustee Robert C. Pate, sought to dismiss or transfer Chartis’ case, alleging the insurer violated the “first filed” Rule and was engaged in “a flagrant and belated attempt at forum shopping,” according to court documents. Mr. Pate is the trustee for WCI Drywall Trust, formed after the homebuilder went bankrupt. He filed suit against 14 insurers that sold liability insurance to WCI. More details on the drywall lawsuit are in Business Insurance.
  • All 25 Florida members of the U.S. House are promoting passage of a bill designed to curb the cost of homeowner insurance in disaster-prone areas. The South Florida Sun Sentinel’s political blog explains that South Florida Congressman Ron Klein, one of the bill’s sponsors, got his Florida colleagues to send a letter to House leaders urging them to bring the bill to the floor before Congress ends its session this year.


Week of September 18-25

  • The Wall Street Journal published on article entitled “Sinkhole Claims Threaten to Engulf Florida Insurers” on September 21 that focused primarily on public adjusters and rising sinkhole claims affecting for Citizens.
  • USA Today reported that its analysis of state-run insurance pools shows that a major hurricane in the southern U.S. extends the financial impact of surcharges far beyond coastal communities. The article on hurricanes and surcharges included an interactive map of coastal states, showing that Citizens Property Insurance has $433 billion in risk exposure and $10.5 billion available to pay claims. The article also reported that, when Florida losses for the state-run insurer exceed $15 billion, surcharges would add up to 16 percent of premiums for policyholders.
    • WFOR-TV (CBS/Miami) picked up the USA Today article for its Web site, including commentary from a local insurance agent about how steps to curtail Florida’s vulnerability to surcharges were halted by Governor Crist’s veto of the property insurance bill this year. Click here for details.
  • Florida leads the nation in mortgage fraud and the state’s three-year statute of limitations means fraudulent loans issued before 2007 are no longer subject to prosecution. The federal Financial Crisis Inquiry Commission (“FCIC”) met last week in Miami for the third of four hearings being held nationwide to investigate what led to the housing collapse. The Miami Herald article on mortgage fraud reports that mortgage fraud convictions have been paltry comparedto the savings and loan crisis of the 1980s and 1990s. The Florida Office of Financial Regulation has a task force looking into the latest wave of real estate fraud — mortgage modification schemes. A comprehensive report by the FCIC is due to President Obama by December 15.
  • Record warm seas caused four hurricanes to form in the Atlantic within 20 days, and that’s unprecedented. Business Week’s article on record heat and stronger hurricanes points out that there are 10 weeks left in hurricane season, and more storms may be coming. The publication calls a storm hitting Miami a “nightmare scenario” for the insurance industry, with one hitting New York as a second-place scare.
  • Bank-owned homes in South Florida are not part of the first class-action lawsuit in the country over defective imported drywall. The lawyer representing claimants in the lawsuit against Miami drywall distributor Banner Supply says that taxpayers will be paying for the write-off on those loans. The case goes to trial with 79 plaintiffs, but there would have been 38 more if banks had joined the lawsuit and had homes they took over tested for contamination. Details on the class-action drywall lawsuit are in the Miami Herald.
  • The rate hike for Citizens Property Insurance has been approved, with an average statewide increase granted of 10.3 percent, rather than the 9.7 percent requested. The OIR said it decided on the higher amount based, in part, on risk variables such as sinkholes. The South Florida Business Journal article on Citizens’ rate hike noted that owners of mobile homes will see their rates rise by 9.1 percent instead of the 6.1 percent Citizens filed.
    • The Miami Herald article on Citizens reported that Florida Insurance Commissioner Kevin McCarty is also asking the state-run insurer to file for a change in the way it provides sinkhole coverage. The OIR wants Citizens to require new and existing policyholders who want sinkhole coverage to have their homes inspected. If inspections are unacceptable, sinkhole coverage would only be provided for catastrophic loss, not comprehensive coverage. At the rate hearing for Citizens held earlier this month, the company reported that it has never had a sinkhole claim for a catastrophic loss.
    • A “Fast Facts” box outlines the Citizens rate hikes in the article in the St. Petersburg Times.

  • Gubernatorial candidate Rick Scott said he’d like to make rates for Citizens actuarially sound and thus, make Florida more attractive to private insurance companies. Mr. Scott unveiled his property insurance plan last week with a focus on returning Citizens to be the insurer of last resort in order to protect taxpayers from assessments. When asked what this would do to rates, Scott said, ”I believe that in a free market economy, prices will come down.” The Miami Herald article on Scott’s insurance position states that he is calling for “some politically tough medicine.”
  • Florida CFO Alex Sink issued a press release announcing the arrest of the founder of a health insurance plan for filing false financial statements. Kenneth Feldman, founder of Suncoast Physicians Health Plan, Inc., was charged with a first-degree felony charge. The company went into receivership for purposes of liquidation in August 2007.
  • Florida will become the third state to seek a waiver of the controversial medical-loss ratio provision of the national Affordable Care Act. The Sunshine State News report on the waiver explains that the Florida Health Insurance Advisory Board (“FHIAB”) asked for it because smaller insurers would not be able to meet the federal requirement that 80 percent of expenditures be for actual medical procedures. Larger insurers and those with larger group policies already meet the 80 percent threshold. FHIAB members expressed concern that the medical-loss ratio would reduce the number of companies and the choices available to consumers.
  • Teen drivers don’t think texting and driving is as big a danger as drunk driving, according to a survey released by State Farm. The Florida Times-Union wrote about texting and driving dangers, pointing out that 55 percent of 14- to 17-year olds agree they could be killed by drinking and driving, while only 36 percent think the same thing could happen with texting. Also noted in the article is that the Florida Department of Highway Safety and Motor Vehicles has an online tool to enable parents to monitor their teens driving record. Parents can register the teen’s driver’s license number and Social Security number to check for traffic infractions. Here’s a link to the monitoring website:


Week of September 11-17

  • Fewer people are torching their own carsto get insurance payouts these days, and the fact that the trend was on the rise in 2007 interested reporter Laura Layden of the Naples Daily News. Her article on “owner give-ups.”
  • In a related article in the Naples Daily News, Ms. Layden wrote on arson and foreclosures, explaining that the bad economy “ignited the fear of more arson here and around the country,” but that the “statistics haven’t shown a fire storm of arson cases involving homes and businesses.” Reported arson cases have declined in Florida and nationwide. Ms. Layden had been trying to build a connection between foreclosures and arson trends; however, the data for Florida does not show such a correlation. For further evaluation, check the arrest data from the Florida Dept. of Law Enforcement. 
  • September 10 is the day hurricanes are most likely to be stirring things up in the Atlantic, and the day came and went peacefully this year. The South Florida Sun Sentinel article on the peak of hurricane season notes that, since 1851, more hurricanes have existed on September 10 than any other day – with 85 hurricanes recorded on that day over a 159-year period. The “meanest stretch” of hurricane season is from mid-August to the first week in October.
    • An arrest was made related to the diversion of mail and premium payments for Citizens. An investigation by the Florida Division of Insurance Fraud led to the arrest of 23-year-old Aylin Hernandez of Miami. Ms. Hernandez created her own corporation using a similar name, Citizens Property Insurance. Using information gained while working as a clerk for insurance agencies, she sent invoices to law offices and title companies that handled property insurance escrow accounts. More details on the arrest are in the Insurance Journal.
    • Regulators will be holding a public symposium on October 21 in Orlando to look for ways to improve the property insurance market. The complimentary public event runs from 1:00 p.m. to 5:00 p.m. at the Gaylord Palms Resort in Orlando.
    • The South Florida Sun Sentinel featured an article this week that presented the differing points of views between regulators and an actuary from the Insurance Consumer Advocate’s office. The actuary’s evaluation of Royal Palm Insurance suggests it is at high risk for default; regulators say it is healthy because it has purchased substantial reinsurance. Additionally, the article mentions that Insurance Consumer Advocate Sean Shaw recently stepped down to join Chief Financial Officer Alex Sink’s gubernatorial campaign.
    • State officials are putting more pressure on the claims manager for BP’s oil spill to get money to suffering business owners. The St. Petersburg Times article on oil spill funds states that criticism is aimed at Ken Feinberg, the Massachusetts lawyer who said he remains “skeptical” of claims that are from areas not in close proximity to the Deepwater Horizon disaster off the Louisiana coast. But, after getting blasted for those remarks, Mr. Feinberg said he will consider paying claims to Florida hotels and restaurants, regardless of whether they experienced oil washing ashore. CFO Alex Sink said there are gaps in Florida laws that other states do not have, making it more difficult for businesses in Florida to receive compensation.
    • Property and casualty financial results for the first half of 2010 were released this week from the ISO and Property Casualty Insurers Association of America. Net income rose for the first half of the year, compared with 2009. The Insurance Journal article on insurer results offers details. Commentary from III President, Dr. Robert Hartwig, can be viewed by clicking here.
    • Two of Central Florida’s biggest employers are well insulated from workers compensation lawsuits following an overhaul of state laws. However, critics think the current system is slanted too heavily toward businesses. An Insurance Journal article on the workers comp debate discusses the history and implications.
    • The III has authored an article on auto insurance fraud in the current issue (September) of Florida Underwriter. Click here to read “Criminals, Cars, Crashes and Cash.”


    Week of September 4-10

    • During Citizens rate increase hearing in early September, the insurer blamed sinkholes as one reason for needing higher rates. Sinkhole claims are being filed in places that usually don’t have them – such as South Florida. During 2009, Citizens collected about $19.6 million in premiums for sinkhole coverage, but covered losses worth about $97 million. In the article, III representatives explain that cracks in a home are not necessarily due to sinkhole activity but are more often due to normal settling. Click here to read the rest of the article in the Miami Herald.
      • The rising claims costs of sinkholes are attributed, in part, to the expense of investigating suspected sinkhole activity, an expense borne by the insurer. Florida also does not define “structural damage,” -which may include claims that might be paid for what is essentially cosmetic damage. Read more on sinkhole claims and Citizens.
    • September is National Preparedness Month. Florida CFO Alex Sink launched a new disaster preparedness video on protecting families and homes. Entitled Insure, Secure, Recover,” the nine-minute video offers tips and other free online information, including the “Homeowner’s Financial Toolkit.”
    • Orlando Sentinel columnist Mike Thomas thinks a hurricane hitting the Big Apple might not be a bad thing for Florida. Mr. Thomas’ column on hurricane funding declares that a storm in the northeast means “we would finally get a national catastrophe-insurance program to subsidize our premiums and underwrite all those condo towers and mansions on Miami Beach.” He thinks a national catastrophe program is coming because there is pressure coming from “….screaming by rate-payers to move enough members of Congress to vote for it.”
    • A crowd gathered Monday for Islamorada’s annual Labor Day Service at the historic Hurricane Monument, which commemorates the Labor Day hurricane of 1935. Islamorada was struck by the strongest recorded hurricane to hit the U.S. More on the 1935 hurricane memorial is in the Miami Herald.
    • Regulators approved rate increases last Friday for homeowners covered by Allstate’s Florida subsidiary, the Castle Key Group. The OIR approved an average increase of 18.7 percent for Castle Key policyholders and an average increase of 17.8 percent for Castle Key Indemnity policyholders, effective with new and renewal business on November 28. Castle Key will also stop applying certain voluntary discounts to the hurricane portion of premiums and apply discounts only to the non-hurricane portion. The company originally sought increases of 33.3 percent for Castle Key Insurance and 17.9 percent for Castle Key Indemnity customers. Rate increases will begin phasing in for new and renewal business beginning November 28. More details on Castle Key are in the St. Petersburg Times.
    • Royal Palm Insurance Company received approval for an average statewide homeowners’ insurance rate increase of 15 percent. The insurer, which has written all of its business in Florida since 2006, had asked for an average hike of 21.7 percent. The article on recent rate hikes in National Underwriter also mentions other companies’ rate increase requests.
    • Amechanical engineer turned his conviction for drunk driving into an invention to stop others from making the same mistake. The invention is called SafeKey, and it forces users to pass a simple test of eye-hand coordination before the car’s ignition works. Check the article on the sobriety invention in Florida Today.
    • Early September also marked “Drowsy Driving Prevention Week” in Florida. Legislation passed this year designated Labor Day weekend as the time to bring attention to this public safety issue. The campaign is titled “You Snooze, You Lose. Don’t Drive Drowsy.” A press release explains the details.
    • Explorer Insurance Company told its 400-plus authorized agents that the company’s deteriorating results in Florida meant they would be paying no commissions. Explorer has been writing private passenger auto insurance in California since 1992 and in Florida since 2000. It had been paying 15 percent commission on new business and 12 percent on renewal, but said auto fraud is so bad that the company must leave the market. It has since filed for withdrawal with regulators, and if it is approved, non-renewals may go out on or after Nov. 22. The effective date of the first non-renewals would be Jan. 6, 2011. Details on Explorer’s drive out of Florida are in the National Underwriter.
      • The Insurance Journal article on Explorer states that the OIR is waiting for Explorer to fix details in its exit plan before approving it. An insurance agent quoted in the article said that fraud is chasing many auto insurance carriers out of the market. Last year his agency represented 16 or 17 carriers, and now the agency is down to three. This same agent said the frustration level is so high and crackdowns so few that petition are being collected from new and renewal clients calling for action on a petition to be sent to the Florida Division of Insurance Fraud.
    • There is no oil on southwest Florida beaches, but tourists think there is and some hotels are going broke. WINK-TV in Ft. Myers ran a story on hotels likely to close down because their claims to BP are on hold. The Gulf Coast Claims Facility has taken over the claims-paying process, but is focusing on businesses closer to the actual oil spill, not in locations suffering from perception problems. September and October are already slow months, but things are now at a standstill, say hotel owners.
    • BB&T, the banking company, has a “road show” that looks like it is taking lessons from insurers’ catastrophe response. The bank has put a 40-foot recreational vehicle on the road, retrofitted with computer stations and manned by mortgage and credit experts. The mobile unit is making stops around South Florida offering free credit counseling, credit reports, advice on loan modifications and help with financing to buy a home. More on the BB&T bus is in the Palm Beach Post.
    • Florida Office of Insurance Regulation released its 2009 annual report on Accident & Health Markets. The report includes data from health insurers, prepaid limited health service organizations and health maintenance organizations operating in Florida.
    • Two executives with a failed insurance company were arrested for fraud. After an extensive insurance fraud investigation, the president/CEO and the VP/chief operating officer for First Commercial insurance were arrested and charged with eight first degree felony counts for filing false or misleading financial statements.  First Commercial Insurance Company and its affiliated company, First Commercial Transportation and Property Insurance Company, were ordered into receivership for liquidation in 2009. Each felony count carries a potential 30-year sentence. The Florida Division of Insurance Fraud was able to prove regulatory reporting documents signed by both executives were fraudulent, including quarterly statements about maintaining the minimum capital requirements. Click here for more from the Insurance Journal.