LMA Newsletter June 27, 2016

June 27,   2016

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What Should We Take Seriously?

When I read an article recently about the suicide of a Fortune 500 insurance executive, it struck me very hard.  This young man of 59 years old, shot himself at his family’s Alpine resort, six months after leaving the company.  The story said that he had quit as a chief executive in December following a series of profit warnings and a botched takeover.  This young man had been CEO since 2010 ascending to this position after stints with Swiss banks in Asia. He was married and had two grown children. Acquaintances described him as withdrawn and reclusive following his departure from the company, which the insurance company said at the time was by mutual agreement.   And to make this even more tragic, three years prior, this same insurance company’s finance chief, at 53, took his own life also. He killed himself after writing a suicide note in which he described becoming demoralized by what he called a new, more aggressive tone under the Board Chairman, a former worldwide bank executive, who denied any wrongdoing but quit after the finance chief’s death.  Sorry to open our newsletter on such a sad and tragic note, but this story just chilled me to the bone and made me stop and think, “what takes a person to the place where they would take their own life because of “business.”  I will be the first to admit that my work and career are deeply important to me and that I work many more hours than I probably should.  But, oh my goodness, are we really so entrenched in careers that it could take us to this tragic end?  What is going on in our world today?  I am sure the families of these men must wonder why.  I am very sure that we as a country SHOULD wonder why.  If the sad stories of events of these insurance executives make us stop and think about our own lives and priorities, then their lives and deaths were not in vain.  I certainly am thinking about what REALLY is important in life today and encourage you to do the same.

Here is one way to focus on what’s important in your life …turn off the television. When you are watching TV you are not talking to those you love! And make sure that at least once a day you make a call to someone you haven’t talked to in more than 3 months to simply “check in.”. Be good to YOU and others…that’s most important.

Citizens Board Approves 6.8% Average Statewide HO3 Rate Increase Request

Increased costs from non-storm water damage claims driven largely by fraud and abuse, coupled with a growing number of litigated claims due to misuse of Assignment of Benefits (AOB) has prompted the Citizens Property Insurance Board of Governors to submit rate increases for 2017 in both personal and commercial multi-peril lines.

Citizens will request a 6.8% average statewide increase for HO3 personal lines and a 9% increase for commercial lines.  The rate indication for personal lines was 64.7%, up from 25.5% last year; and for commercial lines was 46.8%, down from 58.3% last year.  The legislatively-mandated glide-path limits Citizens’ rate increases to 10% annually.  OIR will likely schedule a rate hearing in August, with approved changes taking effect on new and renewal policies beginning February 1.

The number of AOB claims also continues to increase with an “alarming number” of lawsuits so far this year, with Board member Jim Henderson saying that reducing the number of litigated claims is the key to reversing the trends of today.  The average monthly number of suits went from 625 last year to 826 so far this year, with more than 1,000 suits filed in each of the months of March and May.  Citizens’ LAE (Loss Adjustment Expense) has seen a 450% increase since 2011 which coincidentally was the same year the legislature passed laws to stem the sinkhole LAE.  The loss cost per policy for water more than doubled in two years, from $551 in 2013 to $1,156 per average claim in 2015.

Citizens is doing all it can to fight back with increased staff focus and a concerted effort to encourage their policyholders to “Call Citizens First” to get help with a water claim. Effective July 1, there’s a $3,000 limit on coverage for temporary repairs and emergency measures, with additional coverage available only upon prior approval by Citizens.  Policyholders won’t be covered for permanent repairs unless Citizens either inspects the loss first or gives verbal or written approval.  Those restrictions would not apply 72 hours after first report of loss.

Citizens President Barry Gilway said he will continue to work with the Legislature who has the power to make law changes with Citizens taking a stronger leadership role in negotiating a set of recommendations that will get consensus among the industry and other stakeholders. One Citizens committee member said “consumers have a free kitchen and a new roof”, so it will be tough to give this the right perspective.  (For examples of what people are trying to get away with in filing false claims, take a look at Citizens Special Investigations Unit Cases of Interest.)

For the first time since its early days, Citizens forecasts it will take in a bit more policies than it depopulates in 2017.  Last month, Citizens wrote 9,000 new policies, the same number they shed to private carriers. The Citizens Depopulation Committee noted that most companies aren’t writing new business in Tri-County and with some filing for rate increases, Citizens will be more competitive than it wants to be.

How to provide reasonable and workable AOB reform and fix Florida’s water loss crisis was the subject of the “Troubled Waters Forum” convened on June 14 by Insurance Consumer Advocate Sha’Ron James.  Insurance company executives, contractors, consumers, legislators, and the attorneys that represent the various parties attended to try to reach common ground.  Most left hopeful that a balanced solution was possible.

“What developed from this forum was an amazing amount of commonality among parties that included support for changes in AOB reform, in licensing and regulation of contractors, revised definitions of adjusting, and specifically allowing participation by certified adjusters, ” said Citizens’ President Barry Gilway. By all accounts, President Gilway was the most compelling speaker of the day, presenting the facts and calling attention to unscrupulous lawyers taking advantage of unsuspecting consumers.    Gilway told the Forum attendees that he will continue his work to find common areas that he believes Citizens can recommend to legislators in the upcoming session.  See President Gilway’s slides  here and please pay close attention to slide 8 which lists the law firms suing Citizens most frequently.

Sandra Starnes, OIR’s director of property and casualty review, told the group that limiting emergency repairs and other OIR approved restrictions for Citizens and private insurers may help in the interim, but “aren’t the real solution to the problem”, echoing Gilway’s earlier sentiment.

State Rep. Frank Artiles (R-Miami), himself a public adjuster, said the state needs to regulate water repair companies.  He proposed requiring those companies provide good faith estimates before homeowners sign AOBs.  He got agreement from Foyt Ralston with the Florida Association of Restoration Specialists, who said the association agrees state licensing and regulation is needed to counter those who abuse the system.  Others, including Scott Johnson, representing the FAII, said restoration companies should be barred from offering referral fees – some as high as $1,500 – to emergency contractors in exchange for names of potential customers.

Plaintiff’s attorneys complained of low-balling by insurance companies and denial of claims.  Several restoration companies also complained that some insurers don’t respond quickly enough to consumers’ calls for help.  Insurance company reps attending said that fraud and abuse in the claims process is driving up the cost of insurance for all consumers and that it’s not a victimless crime.

Consumer Advocate James said afterward she leaves the forum very hopeful of finding common ground on solutions to the water claims crisis and will be developing policy recommendations by the end of summer.

The Role Managed Repair Can Play in AOB Reform

One related issue to AOB reform that we need to be aware of in the future, will be the tendency for third-parties to disparage the Managed Repair programs that several insurers have and that Citizens Insurance is about to launch.

At the Troubled Waters Forum, one restoration company owner in published reports complained about insurers that refuse to put small companies like his on lists of “preferred providers” that those insurers urge customers to use.

This is an issue auto insurance companies have faced for years in Florida. They have a similar list of preferred vendors – auto repair shops – and require the policyholder gets his/her estimate at one of those shops, but by state law cannot force them to have the work done at the shop. The insurer decides the amount of the authorized claim, based on the preferred vendor estimate.

Recently, a group of 25 Indiana auto repair shops and their association  lost a case   before the federal court for the middle district of Florida.  The shops accused several Florida insurers of tortious interference, steering, and quantum meruit claims.  The judge ruled that none of the specific examples cited in the suit involved a customer being lost to another shop due to an insurer’s action.

We as a firm understand the need for preferred arrangements to ensure proper claims handling.  In our many conversations throughout the state with consumers, most love the fact that they make one call and the repairs they need are taken care of – no dealing with three estimates from contractors or wondering who to call.  We find it curious that there are those who would not find it helpful to have in an instant, at their fingertips, a way to bring a resolution and start the process of repairing their home or car for that matter.

It takes time to vet contractors (or auto repair shops) and why wouldn’t we as policyholders want to rely on the vendors who have been vetted and screened by seasoned professionals versus us lay people who don’t necessarily know what to look for or who to trust?

Suffice to say we see parallels between auto repair body shop networks and managed home repair networks – in a good way.  What is so ironic is that the Florida Justice Association representative, Lee Jacobson, who spoke at the recent Troubled Waters forum, said that paying referral fees to plumbers who refer water loss claim work to contractors is no different than an insurance company referring claims work to its vendors.  We were puzzled because paying a referral fee can inflate a claim cost while ensuring a claim is sent to a preferred vendor in a managed repair program does two things – it ensures the customer is taken care of swiftly and can help ensure the RIGHT claim cost is calculated and paid.

We welcome your thoughts and feedback!

According to Worker Survey, Leaders Most Concerned About Productivity

Earlier this month (6/6/2016) the National Safety Council (NSC) released the results of one of its largest annual surveys assessing the potential importance of safety in the workplace. The survey is officially known as the NSC’s  survey on employee perceptions of workplace safety.  A little over 2,000 workers were personally interviewed during the May 10 through May 14 data collection period and they came from the following work sectors:

• Educational Services Industry
• Retail Trade
• Agriculture, Forestry, Fishing and Hunting Industries
•  Construction Industry/Trades
• Information Services Industry

In spite of the fact that most workers reported that safety is a priority in their workplace, about one-third of survey respondents feel their employers value productivity over safety. The NSC further reported that a significant number of workers, particularly those who are employed in high-risk industries such as construction, reported that safety takes a back seat to completing job tasks.  All survey respondents were 18 years of age or older and work for employers having 30 or more workers on their teams. Important sub-findings from the survey revealed that 65% of workers interviewed from the information industry and 87% from the construction trades acknowledged that safety is a priority in their workplaces. Also critical among the survey’s findings was that 70% of all workers interviewed reported safety training being part of every new employee’s orientation and that worker health and wellness is promoted by their employers. Upon the release of the survey findings National Safety Council President and CEO Deborah A.P. Hersman stated that, “Every employee deserves a safe workplace”. In speaking further about the overall survey results Ms. Hersman went on to note that, “While some of our findings were encouraging, others were a stark reminder of how far we still have to go to ensure safety is every employer’s highest priority.”

Florida Unemployment Rate Reaches Eight-Year Low 

Florida’s unemployment rate fell to 4.7% in May, the lowest in eight years, according to information released by the state Department of Economic Opportunity.  The decline of 0.1 percentage points from April to May matches the federal unemployment rate.  At this time last year, the state unemployment rate was 5.4%.

Florida has the distinction of leading the country in job creation, with 24,500 new jobs in May.  Since last May, the state added 253,900 jobs.  One-fifth of those jobs (49,300) were generated in the leisure and hospitality industry, up 4.4%, representing the state’s largest job growth sector

Other industries gaining jobs included education and health services (+46,200 jobs, +3.9%); professional and business services (+45,300 jobs, +3.7%); trade,  transportation,  and  utilities (+34,300  jobs, +2.0%);   construction (+29,400 jobs, +6.9%); financial activities (+18,900 jobs, +3.5%); government (+14,900  jobs,  +1.4%); manufacturing (+10,900 jobs, +3.2%); and other services (+7,900 jobs, +2.4%).  The only industry that lost jobs over the year was information (-3,100 jobs, -2.3%).

457,000 Floridians were considered jobless in May out of a labor force of 9,773,000.

Reimbursable Employee Health Care Costs In the Works

The U.S. House Ways and Means Committee last week passed a bill that would remove the current prohibition on small businesses from reimbursing their employees for healthcare costs.  That is currently not allowed under the Affordable Care Act, which requires small businesses provide policies to their employees.

Yet, according to the National Federation of Independent Business (NFIB), about 14% of small businesses that don’t provide insurance instead reimburse their employees to purchase insurance on their own, usually through the federal health exchange.  That’s a no-no, as it shifts the burden from private sector employers back on U.S. taxpayers and the IRS can impose excise taxes of $100 a day per employee.  The NFIB has taken the lead in this latest reform, arguing that punishing small business for trying to help their employees isn’t fair.

The Small Business Health Care Relief Act, co-sponsored by Rep. Charles Boustany (R-LA) and Rep. Mike Thompson (D-California) would provide an exception from group health plan requirements for qualified small employer health reimbursement arrangements so long as it’s funded solely by the employer and is limited to $5,130 annually for the employee or $10,260 annually for employee and family.  The legislation has been introduced in the U.S. Senate by Sen. Chuck Grassley (R-IA) and Sen. Heidi Heitkamp (D-ND).

With the negative impacts of the Zika virus continuing to be observed throughout a large number of countries, some experts in the insurance industry say the spread and impact of the disease may reduce attendance during this summer’s major sporting events. Of course, the Summer Olympics which is set to be hosted by Rio de Janeiro in August is the most prime example. The experts also say that the virus is going to make travel/trip cancellation and business interruption insurance that’s harder to get and the coverage that the policyholder can obtain is going to be more expensive. This is because insurers must clearly weigh the risk of insuring such events with another possible global communicable disease outbreak as an underwriting backdrop, in addition to measuring possible public reaction if situation factors worsen.

The Zika virus is transmitted to people via infected mosquitoes. According to the CDC and other health agencies, the virus can spread through sexual contact and also to unborn babies. More serious effects of the virus include microcephaly in infants and Guillain-Barre syndrome, a severe and progressive neurological disorder. Currently, there is no vaccine to prevent the virus and no medicine to treat it. In spite of containment measures being taken in Rio and elsewhere, the Zika virus is expected to complicate procuring certain types of insurance, like event coverage and business interruption. Both policy types offer board coverage for communicable diseases and most insureds buy the coverage in advance of knowing what the next outbreak type will be, however, they are covered against it when the disease evidences itself. Policy coverage would typically kick in when the government or other responsible party deems an event too risky and either cancels it or stages it elsewhere. As noted earlier, experts are clear that Zika specific coverage will likely be very difficult to procure and expensive. These problems are fueled by the uncertainty surrounding the illness combined with public health concerns that may scare the insurance market.

In the event there is a loss under one or more of the coverage types noted above, claims experts say the state of mind of the policyholder can be an issue as well as the state of mind of the insurer. Reaching settlement in claims of this nature gets more complicated to the extent there’s unstated knowledge on the part of either side. Claims experts reinforce that insurance companies need to be extremely clear and explicit about what is and what is not covered under events related policies. They note that many coverage disputes in high profile cases are triggered because the policies are simply not as clear as they should be. We will continue to monitor national and international efforts to combat the Zika virus and the impact this disease is having on the global insurance market.

PETS Act                 

Since I shared about my furry family with my readers last time, I thought I would take a minute and share some important information about how to care for our pets during disasters.  In 2006, Congress passed the Pet Evacuation and Transportation Standards Act (PETS Act), which requires local jurisdictions to have a pet evacuation plan in place to qualify for FEMA funding in the event of a disaster. The PETS Act has saved countless animal lives in subsequent disasters and reflects the public understanding that pets are indeed a part of the family.  In addition, the Humane Society of the United States reminds us, “If you are told to evacuate, leave immediately and take your animals. If it’s not safe for you, it’s not for them.”  A couple of suggestions they share with us: 1) ID your pet – make sure your pet’s tags are up-to-date and securely fastened to your pet’s collar.  You may even want to go further and microchip your pet. 2) Create a pet emergency kit that includes food, water, medicines and medical records, and a first aid kit. 3) Keep a container that includes a collar with ID tag, harness or leash, your pet’s registration information, adoption papers, vaccination documents and medical records, pet litter and litter box if appropriate, newspapers, paper towels, plastic trash bags and household chlorine bleach to provide for your pet’s sanitation needs; a picture of you and your pet together, favorite toys, treats or bedding. 4) Make a plan for evacuation that includes your pets.   Keep in mind that if you go to a public shelter, pets may not be allowed inside.  Therefore, a good idea is to make arrangements with family or friends outside your immediate area who would be willing to take your pets in an emergency.  You may want to develop a buddy plan where someone is willing to care for your pets if you are unable to do so.  You may also want to discuss emergency planning with your pet’s veterinarian.  June is National Pet Preparedness Month and there are many more tips to be found at the American Humane Association website.   And while we are on the subject—June is National Cat Adoption month and you still have a few days left to rescue a kitty!  See the same website for info on what to consider when planning to adopt a cat.

We love our furry family members and know you do also, so let’s make plans to care for them in the same manner we care for our human family when disasters strike.  Start working on that today so you are prepared for tomorrow.

Here are some of the beloved pets we have rescued and included as cherished members of our families:

Tokie & Chico

Bear

Paris

Porsche

Bentley