For the past couple weeks, I have been engaged in various industry forums and at all of these gatherings, there is lots of conversation. But not just conversation about the weather or summer vacation plans, but about meaningful reform for our state’s insurance marketplace. Have you noticed that now news stories are starting to honestly talk about Citizens rates being inadequate and we have a choice to assess (tax) post storm or pay the right rates pre-storm? And the magical June 1 start of hurricane season is, in my opinion, the catalyst for the conversation. Notice how those of us in the industry shudder when there’s a rainstorm AFTER June 1 but yawn when it occurs before June 1? Just last week, I attended a forum presented by the West Pasco Realtors who had four items on their agenda and two days later, I was in an audience of over 200 attendees discussing ways to reduce the size of Citizens. In addition, I visited with the National Association of Mutual Insurance Companies (NAMIC) Liz Reynolds on what is happening in Alabama and North Carolina as well and provide a few tidbits on that too. Here are a few of the conversation highlights over the past couple weeks:
Personal Injury Protection (PIP) News
Oscar Luis Franco Padron managed several clinics and recruited patients for staged accidents. He was ordered to pay $4.35 million in restitution and sentenced to 5.5 years in prison for that work. The U.S. Attorney’s office said recruiters sought drivers and their friends/family members to participate in phony accidents and coached them on what to say to the police officer who responded to the scene and how to claim injuries. They were then directed to chiropractic clinics controlled by co-defendants. Read more here. I can hear the cheers from our auto insurance colleagues.
West Pasco Realtors Insurance Forum
This forum focused on 4 topics: a) Citizens reform, b) regulatory reform, c) sinkhole reform, and d) ways to attract capital back to our state and restore a competitive marketplace. The room had great talent in it – representatives from insurance companies, underwriting inspection firms, legislators, consumer advocates, you name it. The Citizens reform discussion focused primarily on Citizens handling of sinkhole claims and ways to improve that process. Citizens data shows it has a 260 day “cycle time” which is the average time it takes to close a claim. Most in the group said that was “way too long” and thought that it could be shortened if, in some cases (and the right type of cases), were handled under a “repair” option meaning Citizens works with the consumer to assure them that they will repair the sinkhole damage using thoroughly vetted vendors to do the work. This process works in the auto insurance arena and many in the room were puzzled why more companies didn’t engage in it. Discussion ensued about the legal challenges a repair option poses, but the topic was left open for further conversation with Citizens who, because of their large volume of sinkhole claims, would be best positioned to re-institute is repair program which was terminated in early 2006. Most in the room agreed that in order to restore Florida’s competitive marketplace, rates would have to rise in a gradual manner that is more aggressive than the 10% glide path but cited other ways to return Citizens to a market of last resort. For those of you who want to see the notes from this forum, I am happy to discuss and share that with you.
Recent Insurance Company Rate Hearings
Kudos to those with Cypress Insurance Company including their actuary John Rollins for educating the Office of Insurance Regulation at the May 31 hearing on why they need a rate increase. Often these hearings are seen as a challenge, but actually they are more of an opportunity, in an open forum, for companies to give a status update of their underwriting and claims experiences and what they need to sustain their business models in Florida. Cypress used this opportunity and did a fantastic job patiently and thoroughly addressing each point of their rate filing in great detail. It appears OIR is recognizing the attritional loss challenges that are occurring with water and sinkhole tail losses and working with companies to find a balanced rate structure that sustains financial solvency. We are all concerned about the tremendous backlog in the forms filing arena and a few of us are working on some solutions to assist OIR. If you have any, please share your thoughts!
Citizens Depopulation Summit
Many of you receiving this email attended the June 1 summit in Tampa. There were over 200 attendees and speakers included realtor representatives, insurance company CEO’s, insurance consultants, insurance agents, legislators and consumers. Ideas included withholding agent commissions from agents who don’t actively encourage their customers to take the takeout offer; encourage state leaders to TALK to private carrier CEOs and executives to hear from them what is needed to restore the market; and talk to takeout customers about why they do/do not accept takeout offers. There was overwhelming agreement that Florida needs a true residual market for hard to insure homes. Returning to that is our goal. Please see the attached notes from the summit and I welcome your comments. What’s next? One of Florida’s very forward thinking CEOs suggested that three representatives sit in a room and begin writing a plan to reform Citizens – a representative from the Governor’s office, a representative from Citizens and a representative from the Office of Insurance Regulation. Will keep you posted as we progress in this “conversation.”
Legislators speak up
Attached is the letter addressed to Citizens interim director Tom Grady asking for Citizens rates to rise. Its not just inland legislators who co-signed. See the letter attached and if your representative or senator isn’t on it, maybe call them and ask why? Would love to hear about your conversation with your elected official.
Florida Association of Insurance Agents (FAIA)
This week is the FAIA annual convention. I have the privilege of working with FAIA’s CEO, Jeff Grady, and his incredible team on many reforms that are not just good for insurance agents but good for the industry overall. Whether it’s the PIP debate, public adjuster reform, Citizens initiatives or expanding market capacity, FAIA is in the mix and they are doing some great work. I hope to see you at their convention in Orlando and if you see Jeff or members of his team, tell him, “great job.”
News from the National Association of Mutual Insurance Companies (NAMIC) – South Carolina, North Carolina and Alabama
The link below is NOT for the faint of heart so be sure you are sitting down when you read this South Carolina news story. I will be curious of your reaction.
And it gets worse – please read:
Storm of Money: Shopping for homeowner’s insurance in South Carolina is no easy task
Liz Reynolds, NAMIC’s Southeastern State Affairs Manager, sent me two columns by NAMIC President Chuck Chamness discussing the need for more and better catastrophe education. Some lawmakers and their constituents in other southeastern coastal states see Florida as a bright, shining example of how to keep premiums low for high-risk coastal property exposures rather than a cautionary tale of good intentions gone bad in the long run. We all must work to change that perception!
As a footnote to the first article about Alabama, NAMIC was pleased that a legislative package of diverse bills that addressed insurance issues throughout the state, not just on the coast, passed after a great deal of time and effort invested by all stakeholders. Chief among the bills was making insurance fraud a crime, cracking down on storm scammers and metal thieves, and helping policyholders establish tax-free catastrophe savings accounts. Also passing was a policyholder “bill of rights” and a “clarity” bill and because of hard work, both pieces of legislation finished the process in more tolerable versions than they started.
The 2012 North Carolina session is just now getting underway, but NAMIC and others are working to clear any misunderstandings so they won’t make their way into ideas to address coastal insurance concerns.
Continuing the Conversation
So will close for now but I am hearing encouraging conversation. I want all of you to be a part of it and will do all I can to facilitate that. Please stay close and I’ll be in touch!