Many of us grew up in austere environments that taught us the value of a dollar; to clean our plates; and to smile in the face of adversity. These tenets are what have made many of us strong and resilient no matter what. As you read the below, remember to stay strong and to let me know how I can help you do what you do! Having said that, it’s been a busy past couple weeks with everything from PIP, to Citizens to the Cat Fund’s lively debate about its claims paying capacity. Here’s some snippets for you as you have breakfast this morn!
Personal Injury Protection (PIP)
Last week, the Office of Insurance Regulation released a competitive solicitation that gave actuarial and other firms the ability to bid on a project that would calculate a “presumed factor” (expressed as a percentage) which would equate to the savings House Bill 1A provides. In 2005, the legislature passed similar legislation for the calculation of a sinkhole presumed factor and in essence presumed factors are designed to be used in calculating rate reductions associated with certain policy changes. The legislation affecting the PIP presumed factor says, “The Office of Insurance Regulation (“Office”) is issuing this Statement of Work („SOW‟) to define the scope and requirements of this task. This support is needed because HB 119 Section 15, Chapter No. 2012- 197, provides that the Office shall enter into a contract with an independent actuarial consultant to calculate the savings expected as a result of the act. The bill further provides that, notwithstanding Section 287.057, Florida Statutes, the Office may retain the independent consultant to implement the requirements without a competitive solicitation. The Office is required to submit a report to the Governor, the President of Senate, and the Speaker of the House of Representatives concerning the results of the independent consultant‟s calculations by September 15, 2012.”
Interestingly, I visited with several of the Division of Insurance Fraud investigators who have analyzed HB 119 and have identified about a dozen “holes” in the bill in which they will need a catcher’s mitt as a backstop! Please let me know what you are seeing in the marketplace so I can pass on as I visit with regulators.
Assignment of Benefits for Water Losses: Insurance Consumer Advocate Engaged!
This week, I had the opportunity to attend a meeting convened by Insurance Consumer Advocate (ICA) Robin Westcott to discuss the burgeoning trend of water loss claims that are inflated because the insured assigns their policy benefits to a water remediation company who, as some describe, use the assignment as a “license to steal.” Members of the Department of Financial Services’ (DFS) Division of Insurance Fraud and OIR were in attendance. The meeting was convened to allow attorney Kim Salmon, Groelle & Salmon, to lay out legal arguments regarding the following:
a) that current Florida Statutes are in place to assist insureds and insurers who want to dispute remediation company demands for payment. The remediation companies use the assignment of benefits document as a hammer to force payment for so-called water extraction and repairs.
b) that the judiciary needs better education about the current statutory framework because it appears many judges summarily dismiss these cases referencing court citations that are wholly inapplicable to the validity of these assignments; and,
c) that the Office of Insurance Regulation has the authority under existing law to allow a change in policy forms to address assignment abuses.
Attorney Salmon provided example after example of how insureds are duped into assigning their benefits at a time when they are most vulnerable (when water intrustion occurs) and after the fact, these insureds can be verbally abused or “extorted” into agreeing to so-called repairs. She shared exhorbitant invoices from water remediation companies and their demands for payment within “10 days” of receipt. Ms. Salmon also provided an opinion that new legislation is not needed to stop these practices and provided the meeting attendees with a series of statutes that are in place which could assist in disputing frivolous assignment of benefits. Ms. Westcott indicated that this has a high priority and indicated she will be taking steps to stem this consumer abuse. Will keep you posted!
This week, Citizens held its actuarial and underwriting committee meeting to discuss the 2013 rate filing and the possibility of applying actuarially sound rates to new business or as commonly called, “uncapping” the Citizens new business rate. The headlines and news articles have been blistering about this concept but the board members pressed on, with board member John Rollins, Rollins Analytics, laying out the process by which the rating analysis might be used in the board’s 2013 rate deliberations. One policymaker expressed to me that the Citizens board “creates their own laws” while another said “it’s what needs to be done.” The debate is hot – the outcome certain to be pivotal to 2013 legislation. I have detailed notes from the meeting should anyone like to see them – just let me know.
Florida Hurricane Catastrophe Fund – (FHCF)
The Cat Fund has had two events of interest in the past couple weeks. First, the May bond estimate was released with the Cat Fund advisory council voting and approving the bond estimate of $7 million and authorizing the cat fund staff to initiate pre-event bonding mechanisms “as much as the market will allow.” The Cat Fund’s bond estimate report on page 9, footnote 6 said, “When all the FHCF claims‐paying resources are considered, a bonding capacity of $7 billion would generally result in full payment to the FHCF participating insurers approximately 96.5% of the time.” The May 2012 bonding estimate assumed that in the event of a 100‐year event the FHCF would need to pay 100% of its contractual obligations within 12 months. Some observers point out that it will take a long time for the cat fund to spend its current $8 billion in cash and are not convinced of the cat fund’s “shortfall.” Others want to reform the cat fund’s financial status similar to this year’s failed legislation and may propose these same changes in the 2013 legislature.
In addition to the cat fund advisory council meeting, the cat fund staff put on an incredible two day workshop with the theme of remembering Hurricane Andrew. The presentations will be available soon here.
Sunshine State Insurance Company
Lastly, I had the pleasure of attending the Sunshine State rate hearing. I must compliment Sunshine State’s senior executives who presented at the hearing with their professional presentation and more importantly, educational style in an effort to share with regulators exactly what it’s like to live a day in the life of an insurance company! I have tremendous respect for all of you who work in the property and auto insurance arena. It’s not easy – it’s not always pleasant – but it’s challenging and as your mama used to say when she made you eat your spinach, “It makes you strong.” My best to you and I am standing beside you every day!