2014 Coming to a Close

Wow, can it be true? Only sixteen more days left in 2014.  It seems the days and years are clicking by faster and faster.  We feel like 2014 has been a good and successful year in many ways and we hope to celebrate the season of joy and thankfulness with all of you as the year winds down.  And as we pause a bit to reflect, we use those reflections to think ahead to 2015.  In the areas where we made touchdowns, hooray, and in the areas where we need to work a little harder and smarter in 2015, we say, “bring it on.”  As with you, these last couple of weeks of the year, we’ll take some time to focus hard and put plans to paper identifying the goals we want to reach.  It’s a great way to close out the old year, and start the new one with gusto.  We hope you also set aside some “thinking time” and make your plans for tremendous successes in 2015, right along beside us.  But for today, here’s a recap of the action-packed two weeks since our last publication.

Florida Chamber of Commerce Shines Bright Light on “Jobs Report”

As a member of the Florida Chamber, LMA closely monitors the group’s conference calls and other meetings to garner information that might be useful to our clients. On December 1, the Chamber’s Small Business Council held a conference call and we participated for you.  The 35 minute call was full of information about jobs and job growth in Florida. One of the highlights of the call was a report by Jesse Panuccio, Executive Director of the Department of Economic Opportunity (DEO).  Mr. Panuccio shared that Florida’s unemployment rate is down at six percent and that four-out-of- five of the 32,000 private sector jobs created in October alone were done so by small businesses. We are all about pro-growth, so those stats are music to our ears.  Some other key stats from the call were:

• Nine out of Florida’s ten major industries saw positive over-the-year job growth.
• 59 of Florida’s 67 counties saw their unemployment rates drop.
• Florida has experienced 56 consecutive months of positive job growth.
• Since December 2010, Florida has added 679,000 private-sector jobs, and has dropped its unemployment rate by 5.1 percentage points.
• Since April 2012, Florida’s annual job growth rate has been better than the national rate.
• Florida is forecasted to add approximately 178,000 jobs throughout the coming year.
• By 2030, Florida will need to create nearly two million jobs state-wide to maintain a six percent unemployment rate.

Yes, it appears our home state is growing again, and in the right way, according to Mark Vitner of Wells Fargo Securities.  Mr. Vitner stated, “We’ve made tremendous strides in moving up the value chain.  It’s a different world today than it was 10 or 20 years ago, a far healthier mix of jobs and a far more promising future.” Yes, it is a great time to be a Floridian and we will continue to work very hard to help those industries that create good, lasting jobs for Floridians.  For more information and stats on Florida’s job growth, go to DEO’s website by clicking HERE.

LMA, Industry Reps Heavily Engaged with DBPR in Mold Rules issue

In September, your LMA team met with the Department of Business Professional Regulation (DBPR) to discuss draft amendments to the rules that oversee the standards and practices of mold assessors and mold remediator. These two areas are the last pieces of DBPR’s rule chapter outlining Florida’s mold-related services law (Sections 468.84 through 468.8424, F.S., which became law in 2007). The current Rule Chapter is 61-31 of the Florida Administrative Code which can be viewed by clicking HERE.  As a follow-up to our September meeting, on December 3, 2014, we again met with the DBPR team to have an in-depth discussion about the ever increasing trend where mold assessors/air quality assessors are becoming a routine part of water claims and there is a strong argument that assessors are not needed at every juncture where sudden and accidental water is discharged.  When reading the statutory definitions of mold assessment and mold remediation, these sections provide a threshold that appears to define when an assessment or remediation is needed and simply put, an assessment or remediation should be triggered only when a visual inspection of mold within 10 contiguous square feet is evident.  This “trigger” is clear in statute and we drove that point home at the DBPR meeting.  We have more work to do with these two rules overseeing mold assessor and remediator practices. We had a great team standing with us during our meeting with officials, including representatives from three insurance companies and a reputable mold assessment firm. We were encouraged that the DBPR team indicated they will have these rules finalized and ready for further consideration before the end of the year when we will have yet another opportunity to provide written comments.  Please let us know if we can send to you the draft rules and if you’d like to become a part of the team working to ensure these rules are appropriately written to ensure only proper, necessary and accurate mold assessment and remediation is performed by the mold industry.

Its Unimaginable but Super Bowl 2015 may not See the First Huddle

The far reaching impacts of the failure by Congress to reenact TRIA (2002’s Terrorism Risk Insurance Act) have now landed squarely on the upcoming Super Bowl, this according to a December 9th article published in the Bloomberg Businessweek. According to article authors Howard Kunreuther and Erwann Michael-Kerjan, TRIA was renewed in 2005 and 2007 and will expire on December 31 unless Congress renews it. With only about two weeks until the deadline, it’s questionable whether enough time is left for policymakers in Washington to take care of business. TRIA established a risk-sharing partnership between the federal government and the insurance industry that made terrorism insurance widely available to U.S. businesses-among them, organizers of sporting events. Without federal support, most insurers have been unwilling to offer coverage. Click HERE to read Bloomberg Businessweek’s detailed article about the possible year without a Super Bowl.

LMA Blankets Citizens’ Quarterly Meetings to Provide Comprehensive Report

On December 9th and 10th, Citizens held its quarterly committee meetings and Board of Governors meeting. It was two very full days of discussion, with topics including updates on agents’ services, the clearinghouse, depopulation, legislation, budget, information systems, audits, claims, rates, underwriting, product changes, and consumer services. The agenda included detailed discussion on many of the issues, with lots of interest on current depopulation efforts and what will occur in 2015 and ’16. Below is an overview of many of the topics we know you will be interested in.

Depopulation Program

A series of changes are forthcoming that will provide customers with more information, more quickly in order to determine whether to accept a private-market offer or remain with Citizens. Among the changes are:

• The Office of Insurance Regulation (OIR or office) has begun requiring takeout companies to provide estimates to policyholders comparing their renewal premiums to Citizens’. Companies will be required to either include the estimates on the takeout letter or provide a telephone number that customers can call.
• Citizens will change the timing of its encouragement letter so that it is mailed to customers before the takeout company sends an assumption notice to policyholders. The encouragement letter also has been rewritten to better inform customers about the upcoming takeout offers. The revamped letters will begin starting with the February takeout.
• Citizens will establish a Depopulation Working Group to oversee and address customer questions and concerns. The group will include representatives from the Office, insurance agents, private companies and consumer advocates. The group is expected to begin meeting early next year.
• Citizens has modified its web site, www.citizensfla.com, to make it easier for customers to find additional information about the takeout process and obtain necessary forms.

While the depopulation program has successfully moved hundreds of thousands of policies into the private market (Citizens policy count hit its high in August 2012 at 1.5 million and was down to 727,122 on November 30 of this year), this movement may slow down in 2015. Citizens President and CEO Barry Gilway told members of the Board of Governors on Wednesday that, “While depopulation will be slowing, as we begin to look more like the market of last resort we were created to be, we’re still forecasting to be well below 650,000 next year,” Gilway said.  And while there may be more than 182,000 policies ready for removal from Citizens in January, they will be available to be picked up by nine private carriers in the take-out process.  In February, five companies are approved to receive up to 132,941 residential policies. In both cases, the overall number of policies eventually shifted is not expected to reach the approved maximum, as private companies’ will choose the least-risky policies and often go after many of the same customers.

Claims Litigation Management

There have been approximately 2,700 sinkhole-related claims (primarily in Pasco, Hernando and Hillsborough counties) in a state of flux for some time (some cases have been ongoing for up to seven years).  President and CEO Barry Gilway was happy to advise the Board on Wednesday (12/10/14) that agreements had been reached on 1,516 of the claims through November.  The average cost of the claims was $86,000; however, the average settlement cost may grow due to the cost of underground stabilization. Settling 1,516 sinkhole-related claims is a huge improvement over the past where only about 100 claims had been settled. As part of the settlement, Citizens has agreed to cover the cost of below-ground repairs as recommended by a licensed professional engineer chosen by the policyholder from a pre-approved list. Policyholders will also be able to select contractors from another pre-approved list for above-ground repairs caused by the sinkhole repair work. Further, the work also comes with a 5-year warranty from the below-ground stabilization contractor.

Claims Estimating Software

Citizens’ claims committee staffs are in ongoing negotiations with Exactware while two other vendors, Symbility and Simsol, vie for this business. In the claims committee recently, Claims staff indicated that they needed more information before finalizing this multi-million dollar contract.  Many of the Citizens independent adjusting firms are monitoring this vendor selection as they are directly affected by Citizens claims estimating software.  Because of Exact ware’s longstanding relationship with Citizens (almost 10 years), a change in platforms may force the independent adjust firm to incur software transition and migration costs.  Citizens anticipates the vendor selection process to be completed in late December or January

Independent Adjuster Resources

In the first quarter of 2014, Citizens released an RFP for adjuster resources and selected 60+ independent adjusting (IA) firms.  Approximately 20 firms protested the decision, citing bid irregularities and a flawed process. Citizens subsequently threw out all bids and announced it will re-bid for adjusting services in the first quarter of 2015. Current IA contracts have been extend thru May 2015 to give Citizens time to get through the re-bidding process. More importantly, Citizens must have this entire procurement completed with IA firms selected before the 2015 Hurricane Season begins.

Rating Agency Discussion:  Weiss vs Demotech

CEO Barry Gilway took some time at the Board meeting to talk about the insurer evaluation process, making a clear distinction between Demotech and Weiss.

He reported to the board, “In 2014, the OIR has approved well over a million policies for depopulation … staggering numbers to say the least.  It is highly encouraging that the private market is getting stronger with more restrictive financial requirements established by OIR and Demotech, Florida’s primary rating agency.  I do want to take the opportunity to make a very key point, focusing on the recent press coverage, in that Demotech is a rating agency which satisfies Fannie Mae and Freddy Mac guidelines as well as those of other mortgagees.   These entities require that an insurer rating indicates it is able to meet it claims paying obligations and Fannie and Freddie only recognize Demotech and AM Best.  Weiss Ratings is not recognized by either of these entities, and while Weiss does have a place in rating in assessing financial capability,  as we all know, despite the fact the Florida insurance market has $4.5 billion in surplus, it’s also backed by $16 billion in reinsurance capacity.  The Weiss Rating does not recognize the reinsurer capacity, the $16 billion in reinsurance capacity, so they are evaluating Florida domestic companies on the basis of about 20% of their available surplus or claims paying ability.  I do want to restate that Citizens is not a rating agency.  It does not rate companies.  We rely on OIR and we rely on Demotech for the rating, and decisions on who can participate in our programs.  An insurer cannot participate in either depopulation or clearinghouse unless OIR approves that the company has the surplus and capability in order to do that and an insurer cannot write and be accessible to the mortgage market unless it has a Demotech rating of A or better”.

Clearinghouse

With the clearinghouse operational since January of this year, the following stats were presented at the board meeting:

New Business (1/27/-10/31)

• 139,855 (128,588) unique requests for coverage submitted, an 8% increase over last month’s volume
• 10,825 (8,737) risks deemed ineligible for Citizens representing $2.8B ($2.3B) in Coverage A averted
• A 19% increase in ineligible risks over last month and an 18% increase in Coverage A averted
• 3,682 (3,288) risks confirmed bound with participating insurers, with Florida Peninsula leading with 2,732 (2,295)
• This represents an 11% increase over last month’s bound policy count

Renewals (9.2.14 -10.31.14)

• 63,543 existing HO-3 policies
• 42,109 (66%) policies submitted to Clearinghouse
• 4,117 (9.8%) policyholders received additional offers
• 707 (1.7%) were deemed ineligible to renew with Citizens
• 20,240 (32%) policies not sent to Clearinghouse
• 18,708 were assumed by takeout carriers while 1,532 were non-renewed for underwriting reasons
• 1,194 (2%) not sent to Clearinghouse due to data quality issues
• Prepared Insurance began integration work to join Clearinghouse beginning in April 2015
• Avatar Insurance will begin processing new business on 11.16.14 bringing the insurer participation total to thirteen (13)
• Capitol Preferred began integration work to start processing renewals in February 2015
• This will bring the total number of insurers processing renewals through the Clearinghouse to nine (9)
• Core Personal Lines Policy Center-new business and renewal processes for HO-3 will be supported (4th Quarter 2014)
• Integration with Citizens Data Warehouse (CDW) is targeted for delivery in 1st Quarter 2015

With a New Year, Comes the Continued Fight Against Insurance Fraud

We hope and pray that one day the topic of insurance fraud will never be something to write about.  Unfortunately, that time hasn’t come and we at LMA stand beside all of those who, through their life’s work, make the near elimination of insurance fraud in Florida a reachable goal.  We know, we may be shooting for the moon, but we’ll keep shooting and in the meantime, hit some very important stars.  Florida is certainly a leader in the country in our efforts to prevent and prosecute insurance fraud, with New Jersey and New York mightily in the fight. With the outstanding work of the Florida Division of Insurance Fraud, the P&C and Workers’ Compensation Fraud Task Forces, the SIU units of insurance carriers, and many more, we constantly move closer to that goal.  Measuring insurance fraud is an elusive target with no single national agency gathering omnibus fraud statistics. Insurance fraud data thus are relatively piecemeal, making our complete understanding of the crime a work in progress. Insurance companies and diverse state and federal agencies each gather fraud data related to their own missions. But the kind, quality and volume of data they compile vary widely. Independent watchdogs, academics, insurance industry groups and other organizations also conduct research on a variety of fraud topics. Some is national in scope, and some is state-specific. And while the types of fraud cross state lines, some are state-specific. Among the more common offenders is contractor fraud, automobile fraud, health insurance fraud, Medicare and Medicaid fraud, medical identity theft fraud, underwriting fraud, and of course, workers’ compensation fraud. So, with all the folks working very hard, why does the fraud continue?  Unfortunately, we found some stats that told us that consumer tolerance of insurance fraud has increased in recent years.

• More than half (55 percent) of U.S. consumers say poor service from an insurance company is more likely to cause a person to defraud that insurer;
• More than three-quarters (76 percent) say they’re more likely commit insurance fraud during an economic downturn than during normal times;
• More than two-thirds of consumers (68 percent) say they believe insurance fraud happens because people believe they can get away with it; and,
• Some 72 percent of consumers believe insurance companies are incapable of identifying fraud.

In other research we found:

• One of five U.S. adults – about 45 million people – say it’s acceptable to defraud insurance companies under certain circumstances;
• Nearly one of four Americans says it’s ok to defraud insurers;
• About one in 10 people agree it’s ok to submit claims for items that aren’t lost or damaged, or for personal injuries that didn’t occur; and,
• Two of five people are “not very likely” or “not likely at all” to report someone who defrauded an insurer.

In addition to the above, there has been a decline in the number of Americans who think it’s unethical to:

• Misrepresent facts on an insurance application to lower their premiums;
• File a claim for damage that occurred before the damage was covered;
• Inflate a claim to cover the deductible; and,
• Misrepresent an incident in order to be paid for an uncovered loss.

It for sure boggles the mind when we in the business of fighting fraud see these kinds of stats, but what it says to us, is that the message of the “true cost” of fraud to consumers’ pocket books is not being heard loud and clear.  That is the piece that we MUST focus on going forward, while we continue to find and prosecute the offenders.

It’s the Most Wonderful Time of the Year

Yes, it is, and since you won’t hear from us through our newsletter again until after Christmas (the 12/29 edition), we want to take a special moment during “this wonderful time of the year” to say THANKS SO VERY MUCH for standing beside us, and often leading us, as we have grown at LMA during 2014.  We greatly appreciate your time, commitment, and dedication to the causes we all work so hard on and hope and pray that each year will grow us all stronger, wiser and more determined than before to keep up the good work!

Here’s wishing you a blessed holiday season….Lisa and the LMA Team

December 15, 2014