A Tribute to Integrity and Loyalty

This past week, I had the distinct pleasure of attending the retirement party for John Auer, CEO of St. Pete-based ASI property insurance company.  John and I have been friends for over 20 years starting when I was a regulator.  Never the one to want to take the stage, he would always make sure that the message was right whether it was mediating a dispute with the regulator or one with a claimant.  He used to always say, “It’ll work out!”

The most wonderful thing about John is that he has never forgotten where he has come from, beginning with his austere upbringing in Ohio where his family worked in the steel industry, to his early career as a hungry stock broker, cold calling folks for business.  He knows the meaning of work and play and his number one priority is his family.

With three beautiful children and a new grandchild, John’s retirement party was filled with those who have been in every chapter of his life.  It was good to see all them and his simple, heartfelt message to the audience as he waved goodbye was that he would always be here for those who have been with him for the long haul.  I am so privileged to be able to work with so many in this industry who understand integrity and loyalty and for that I am grateful.  Hope you enjoy this edition of our newsletter.  So much going on in the world around us…up next is a few of the topics!

Seven Months After Irma, Florida Counties Still Awaiting Federal Aid
Florida farm aid sign-ups won’t even begin for another 100 days

Florida counties, some still awaiting federal reimbursement for 2016’s Hurricane Matthew damage, have in some cases spent through their emergency reserves and are now having to borrow money to continue cleanup and repairs from last fall’s Hurricane Irma.  Although Congress approved a $90 billion relief package in early February, the money has been very slow in getting down to the state level and from there to the local level.  Florida U.S. Senator Marco Rubio has taken notice of the bureaucratic disconnect between disaster relief and those who are supposed to write the checks to fund it.

In a March 20 letter to Senator Rubio, Monroe County Mayor David Rice outlined a series of problems the county has encountered in the Florida Keys.  Of 13 funding requests totaling $16.1 million, FEMA has obligated the federal share of funds for five, worth about $3.4 million, but have paid out nothing so far.  Rice wrote that a new central claims handling portal isn’t in sync with its state counterpart, which will require duplication of county staff’s efforts.  Further, all communication with the feds is now through a single local program manager, who insists he has no knowledge regarding the basis for funding decisions nor the authority to change them.

“This new delivery model has rendered FEMA a nameless, faceless entity incapable of meaningful interaction and timely resolution of issues that arise,” Rice wrote to Rubio.  Rice also cited “inconsistent and contradictory guidance” from the feds on removal of storm debris still choking the county’s canals, posing safety concerns.

During a visit to the Florida Keys last week, Senator Rubio said it appears FEMA may have overcorrected with its new system that’s designed to reduce fraud seen in past hurricane relief efforts.   Monroe County has taken out a $40 million line of credit to cover Irma expenses that it estimates could reach $93 million.   The County said some of the federal money is now in the state’s hands, undergoing further approval.  You can read more here about the Keys’ dilemma.

Florida’s farmers are also waiting for federal aid for crop and infrastructure damage.  U.S. Agriculture Secretary Sonny Purdue said this past Friday that sign-ups for the new program will begin no later than July 16, as the department develops “procedures and a system by which affected producers can access disaster assistance.”  The program will provide $2.36 billion in aid to farmers in Florida and other states impacted by hurricanes and wildfires.

Meanwhile, the upcoming hurricane season that starts in just eight weeks is predicted to be slightly above average, with 14 named storms, 7 hurricanes and 3 major hurricanes.

Citizens Property Insurance Reopening a Third of Irma Claims
Managed repair program being fine-tuned, too

Citizens Property Insurance Corporation is now facing the more challenging of its Hurricane Irma claims, prompting the insurer to reopen more than one-third of the nearly 67,000 hurricane claims as more information comes in.   Those claims include properties with more extensive and complex damage, those where contractors haven’t provided repair estimates, and disputed claims.  Meanwhile, Citizens has further refined its Managed Repair Program (MRP) for non-weather water claims to further encourage policyholders’ participation.

In a recent conference call and statement, Citizens said it’s closed nearly 90% of its Hurricane Irma claims and made payments on about 54% of those claims.  “We want to reinforce to people that what we have provided them is an estimate and that estimates may change as repairs begin,” Citizens Chief of Claims Jay Adams said.  “The initial estimate and payment does not necessarily mean your claim has been concluded.”

Citizens and private insurance companies have had to be ever vigilant to fraud and claims abuse.  As of December 31, 2017, Citizens was served with 7,580 new incoming lawsuits – averaging 632 new lawsuits per month for 2017.  This reflects a 24% decrease in the number of new incoming lawsuits as compared to 2016.  But that encouraging trend has reversed, post-Irma.  From January through February 2018, Citizens was served with 1,832 lawsuits – averaging 916 new lawsuits per month.  This reflects a 28% increase in the number of new incoming suits per month as compared to this same time last year.

It’s that growth of lawsuits plus shoddy repair work by some third-party contractors that prompted Citizens to create its MRP and Emergency Water Removal programs last fall.  Citizens has announced further refinements to the programs that will impact policyholders who do not choose to participate in either program.  It makes clear that the $10,000 coverage limit for non-participants includes a $3,000 limit for water mitigation/removal services.  It also eliminates the options to request Citizens’ approval for any additional water mitigation coverage or a limit of 1% of Coverage A when that amount exceeds $3,000.  But if the $3,000 isn’t enough to complete mitigation/removal, Citizens will offer its Emergency Water Removal Services to complete water mitigation.  The refinements are meant “to ensure that coverage remains available for permanent repairs after water mitigation service,” according to Citizens.

As of mid-February, 493 Citizens policyholders had signed up for its MRP.  Of those, 60 accepted Emergency Water Mitigation Services.

During the conference call, Citizens revealed that litigated non-weather water claims cost 4 times the amount of non-litigated claims.  The Litigation is spreading statewide, too, with the percentage of claims involving litigation projected to be 56%, up from 30% in 2014.  Statewide claims involving AOB are projected to be nearly 27% this year, up from 13% in 2014.

Insurance Companies Responding to Legislative Inaction on AOB Reform
Some companies no longer writing in Miami-Dade County

There are published reports of non-renewal notices showing up in mailboxes of homeowners in South Florida.  Those homeowners are being dropped by their insurance companies regardless of whether they filed a past claim or not and it’s all associated with increased costs connected to the use of Assignments of Benefits (AOB) in insurance claims.  One independent insurance agency took to the television airwaves to share that about six of the 14 carriers she represents are no longer writing in Miami-Dade County.

Dulce Suarez Resnick with NCF Insurance Associates of Miami, appearing on a CBS-4 Miami television segment, explained that “private companies realize there’s no way they can do business in Florida without needed reforms.”  She references a national company that has stopped writing altogether and has pulled their entire program from the state of Florida.  Those policyholders who aren’t being cancelled are facing big premium increases at renewal, she said.

“The companies are bleeding dollars due to these frivolous claims.”   Resnick goes on to outline that inflated claims, from roof repairs to non-weather water leaks, as well as outright fraud, is occurring with increased frequency.  She points out that those losing coverage will have to shop around among a tighter market – with resulting higher premiums.  Most of the major carriers writing homeowners insurance in Florida have asked for and received rates increases in the double-digits. Resnick, a familiar face to South Florida television viewers, pointed out that it’s not just the Tri-County area, but is expanding to the Interstate 4 corridor in Central Florida.  Here’s a link to her 5-minute interview that’s worth watching.

Resnick explained that while AOB works with health and auto insurance, the nature of homeowners claims lends itself to potential abuse.  She warned that these cancelled policies will provide upward re-population of Citizens Insurance Corporation, the state’s insurer of last resort.  As we’ve chronicled here in the LMA Newsletter, the Florida legislature last month and for the fifth year in a row failed to pass needed reforms in AOB claims abuse.  Lawmakers disagreed over specific changes to the one-way attorney fees allowed under AOB agreements.

FEMA to Provide Some NFIP Data to States
Wrap up of the spring NAIC meeting

In the aftermath of Hurricane Irma and with the 2018 Atlantic Hurricane Season on our doorstep, many states would still like answers from FEMA’s National Flood Insurance Program (NFIP) on how it does what it does, including the steps many hope it’s taking to at least get out of the way of a developing private flood insurance market.  Florida has been a leader in efforts to get the NFIP to reveal how it sets federal flood rates, specifically in Florida.   After much delay, some information may finally be forthcoming, according to a recent briefing at the spring NAIC meeting.

It’s been more than two years since former Florida Insurance Commission Kevin McCarty sat down with NFIP officials to try to break the information logjam.  He wanted to know how rates are set and to eliminate the burdens the feds have placed on private insurance companies that discourage growth of the private market.

The Fed’s answer so far is the NFIP Desk Reference Guide for State Insurance Commissioners and Others, a 32-page slick online resource.  Short of being the “Everything you always wanted to know about the NFIP, but were afraid to ask,” the guide contains the dictate right upfront that “This guide defines your role and what you need to know as a State Insurance Commissioner and what is important to share with your constituents.”  It’s meant to provide information for insurance departments before, during, and after a flood.

At the NAIC meeting, we got an update on where Florida’s request for information from the NFIP stands.  The triple whammy of last year’s hurricanes delayed the feds in gathering requested data, but some of it was to be turned over to NAIC by the end of March and a timeline set for the remainder.  We’ll keep you apprised.  There was great uncertainty expressed on whether proposed Congressional reforms of NFIP will really happen, especially before its current July 31 program expiration.

Meanwhile, the Insurance Services Office (ISO) is filing personal and commercial flood programs in various states.  So far, ISO has filed forms in 41 states for commercial flood coverage and in 15 states for private flood insurance.  The NAIC is accelerating its general effort to encourage the public to purchase flood insurance and its specific efforts to push private flood insurance as an alternative and complement to NFIP policies.  Staff is preparing a communications campaign to share with insurance commissioners in time for the June 1 start of hurricane season.

Speaking of hurricanes, NAIC is working on a proposal to expand the choice of models used to calculate the catastrophe risk-based capital charge.  The proposal would allow insurance companies to use cat models beyond the five commercially available ones (AIR, EQECAT, RMS, ARA HurLoss, and the Florida Public Model).  NAIC is also developing new rules to allow equivalency for recognizing model approval by a U.S. based company or a group’s lead state regulator just as non-U.S. group’s models with their global group-wide supervisor.

Florida Suing Drug Companies Over Opioids
New state law restricting prescriptions takes effect July 1

Florida Attorney General Pam Bondi is moving ahead with plans to sue drug companies over a statewide opioid crisis that has resulted in the deaths of thousands of Floridians.  While she has been conducting a multistate investigation for months into potentially unlawful practices by drug companies in the distribution, marketing, and sales of opioids, Bondi says Florida needs to file its own lawsuit and she’s interviewing outside counsel now.  Meanwhile, some Florida doctors are anticipating an increase in patient visits, required under newly passed legislation.

Bondi said last week that her office is coordinating the state lawsuit with cities and counties that are also pursuing what she called “bad behavior” by drug companies.  “Florida deserves the maximum compensation for all of the deaths that have happened in our state,” she said in published reports.   A November report by the FDLE’s Medical Examiners Commission found the total number of drug-related deaths in Florida rose 22% from 2015 to 2016.  The number of opioid deaths were up 35%, where opioids were either the cause of death or present in the decedents.  Deaths from the especially dangerous synthetic opioid fentanyl rose 97%.

The Florida legislature responded to the opioid crisis last month by passing HB 21, designed to prevent misuse and addiction.  Effective July 1, it limits opioid prescriptions for those patients with acute pain to a three-day supply.  Doctors can go beyond that to a seven-day prescription for those determined medically necessary.  Patients with cancer or terminal illnesses and certain trauma patients are exempted from prescription limits.

While the 205-page bill is all the rage, some doctors are voicing concern about the impact to patients.  Those patients requiring a greater than 3- or 7-day supply will have to make repeated visits to their doctor’s office, creating more out of pocket costs.  There is expected to be an even greater burden on poorer patients and those in rural areas having to drive back to specialized big city clinics just for another script.

With concern about upward pressure to health insurance premiums, it’s ironic that the legislature failed to pass a telemedicine bill and created a highly regulated medical marijuana law that still hasn’t been fully implemented as a result and is subject to increasing court challenges.  Research published in the Journal of the American Medical Association shows that states with any kind of medical marijuana law had a 25 percent lower rate of death from opioid overdoses than other states.

Older People to Outnumber Children for First Time in U.S. History
All baby boomers will be over the age of 65 by 2030

The rest of the United States is catching up to Florida when it comes to the percentage of older vs. younger residents.  The U.S. Census Bureau is out with its latest numbers, projecting the number of folks age 65 and older will be greater than those under the age of 18 by the year 2030.  By then, 1 in 5 residents will be of retirement age.  The reason: Baby Boomers are approaching retirement age and the Great Recession has younger adults putting off having kids.

“The aging of baby boomers means that within just a couple decades, older people are projected to outnumber children for the first time in U.S. history,” said Jonathan Vespa, a demographer with the U.S. Census Bureau. “By 2035, there will be 78.0 million people 65 years and older compared to 76.4 million under the age of 18.”

The Census Bureau’s report notes the age structure will continue to move upward as the number of births slow down and the number of deaths increase in aging population. The median age is expected to grow from 38 today to 43 by 2060.  The trend presents implications for health care, social security, and pensions.

As the population ages, the ratio of older adults to working-age adults, also known as the old-age dependency ratio, is projected to rise.  By 2020, there will be about three-and-a-half working-age adults for every retirement-age person.  By 2060, that ratio will fall to just two-and-a-half working-age adults for every retirement-age person.

Florida’s population as of 2017 is 20,984,400.  Our state remains a retirement mecca.  The latest statistics show 20.1% of Floridians are under the age of 18 and 19.9% are age 65 and older.

Of State Constitutional Matters

In the next edition, we will print a snapshot of what Florida is considering when it comes to changing its state Constitution.  For those of you who love to follow history and civics, you will want to read where things stand when we release the latest, but briefly, Florida must formally review its Constitution every 20 years and leave it alone or recommend changes to it.  As you can imagine, there’s not been a time that proposals weren’t floated to change it since the first meeting of the Constitution Revision Commission (CRC) in 1977.

The ’77-’78 CRC put eight amendments on the ballot, but none passed by the electorate.  On the other hand, in ’97-’98, eight of the nine proposals received voter support.  And as of last week’s meetings, the 37-member CRC has over 24 proposals they are considering, pared down from over 900 that originally were proposed with hundreds of hours of public testimony from Floridians who wanted to express opinions about all of them.  We look forward to sharing the final recommendations in the next edition of this newsletter, because as our readers know, no matter what the topic, there’s always an insurance discussion to be had about it!

Have a great April!