Of Messages and Marketing

I hope all of you are enjoying our glorious spring wherever you are.  If Mother Nature is still tormenting you, please come see us in Florida – my house is your house!  As I have jumped back into all things that are NOT Florida legislature-centric, I have been frantically going through emails touching base with those who I haven’t connected to in a bit.  Doing so, has reminded me of two universal truths.

The first is that in our interpersonal dealings, one never knows what the other person is going through at that particular moment of time in their life.  They may have just lost a loved one, learned of a divorce, or received an unsettling medical diagnosis.  Give the other person a break if their response is not immediate or to your liking.

The second truth is that a bit of humor can go a long way in forging a connection and acknowledging the frailty and increasingly hectic pace of our lives – which sometimes work against those very connections.

The case in point was an email from a public relations agent who was trying to get me to publish his material in our newsletter.  His email to me said, “I’ve reached out twice regarding this story. My guess is that we’re out of touch for one of three reasons:

– You don’t see a fit for your readers.

– You are backlogged working on other stories.

– You are secretly a superhero and have been too busy fighting crime to reply

If any of these are correct then I totally understand your inability to get back to me.  But if you have a spare minute, please reply.”

After reading his email, I felt I fit the superhero status in response to the unpredictability of life – especially working in a field such as insurance that tries to assess and quantify that unpredictability.

Here’s what I wanted to tell the sender:  “The reason I am not responding to you is that a dear friend was one of the seven pararescue military heroes who perished when their helicopter went down in Iraq.  These are tough times and our hearts are broken.  In addition, I drove a couple hours to visit a pal that is in the cancer fight for his life and it was an all day trip.”

To all my readers, thank you for being caring and having your priorities straight.  The LMA family is one that matters deeply and knows what means the most in messaging and marketing!

Florida Leads Nation in Uninsured Motorists
Among five states with rates higher than 20%

Florida tops the nation in the number of uninsured drivers on its roadways.  The Insurance Research Council (IRC) says 26.7% of Florida drivers drive without auto insurance, according to its latest study based on 2015 data. Nationwide, nearly one in eight motorists go bare and put the rest of us at greater risk – and facing increased costs – in auto accidents.  The most compliant state was Maine, with just 4.5% of uninsured drivers.

The IRC study shows that five states: Florida, Michigan, Mississippi, New Mexico, and Tennessee all have uninsured drivers rates of 20% or more.  The 13% nationwide rate was up just slightly from the 12.3% reported in 2010.   The study was based on data from 14 insurers representing about 60% of the private passenger auto insurance market in 2015.

The insurance industry puts the average cost of an uninsured motorist claim at about $20,000, excluding any vehicle damage.   Some states noted decreases in uninsured drivers.  Oklahoma’s rate dropped from 25.9% in 2012 to 10.5% in 2015.  New Mexico’s rate dropped from 29.8% to 20.8% from 2006 to 2015.

“The drop in uninsured motorist rates in several states certainly is good news,” said Elizabeth Sprinkel, senior vice president of the IRC, in a press release.  “However, the increase in the countrywide rate is a concern.  IRC is exploring why uninsured motorist rates vary so much across states and why the countrywide rate is once again be on the rise.”

When the Florida legislature this year considered Personal Injury Protection (PIP) insurance repeal, one of the side benefits touted was that it would lower overall auto rates and encourage those driving illegally without proper insurance to get coverage.  PIP repeal bills failed to pass.  The bills would have also revised the legal damage thresholds for uninsured and underinsured coverage.

This Spring Is All About Flood
Many changes to the flood insurance marketplace

Over the past couple of weeks, we have seen numerous media reports about flood insurance, including Friday’s four-month reauthorization of the National Flood Insurance Program (NFIP) and new trends showing that Americans are moving in the right direction by moving away from NFIP into private insurance coverage markets.  The flood insurance buzz is alive and well and we wanted to give you a quick snapshot of what the buzz has been all about.

The omnibus government funding bill passed by Congress and signed by President Trump last week contained an interim reauthorization of the NFIP through July 31.  The idea of not tying it to a full year funding of the federal government will provide Congress another opportunity to consider enacting meaningful reforms to a program that the Congressional Budget Office last week estimated is losing $1.4 billion annually.  The U.S. House last November passed the 21st Century Flood Reform Act, but the Senate has failed to act on it, out of concern by powerful coastal state Senators on the impact of the bill’s efforts to encourage a vibrant private flood market.  More here from the Washington Examiner.

Despite congressional inaction, the U.S. private flood market is growing, up 51% last year, with more competition leading to lower premiums.  Florida is leading the way, under a framework of bills championed over the past few years by state Senator Jeff Brandes (R-Pinellas County).  Florida surpassed California last year to become the largest private flood insurance market in the country.  NAIC data shows Florida private coverage grew from $47.8 million in 2016 to $84.5 million in 2017.  That’s still a drop in the bucket compared to the NFIP’s $962 million in Florida premiums as of January.  More here in this excellent article from the Insurance Journal.

Meanwhile, the Trump Administration is not waiting for Congress, pushing changes on its own, where it can.  FEMA finally loosened its grip and is now allowing WYOs (Write Your Own) insurance companies (those insurance companies that serve as claims and policy administrators for NFIP) to sell private insurance, eliminating a longstanding “non-compete” provision.  Details are outlined in this Federal Register notice.  FEMA also plans to reduce compensation for WYOs from 30.9% to 30%.  The bills before Congress would reduce the rate even more.

The NFIP has also been busy, announcing bi-annual program changes impacting its 5.2 million policyholders (1.8 million of them here in Florida).  Premiums are increasing 8% for Preferred Risk Policies.  Those properties newly mapped into special flood hazard areas will see premium increases of 15%.  Various surcharges and deductible factors remain unchanged.  For those “inquiring minds who want to know”, there’s more in this PropertyCasualty360 article.

Like the water, the stakes are high in all of this flood coverage news folks.  A new study in the journal Environmental Research Letters says the number of U.S. households exposed to serious flood risk could be triple the previous estimates.  The study says nearly 41 million Americans can be at risk of floodwaters, compared to the 13 million captured in high risk zones on FEMA flood maps.  Population growth and increased freshwater flooding just aren’t well reflected overall on FEMA’s maps, which vary in age and quality.  The study’s higher risk estimates are based on high-resolution hazard, population, asset and projected development maps of the entire U.S.  The Atlantic hurricane season starts in just ten weeks.  Are you (and your personnel) prepared?

Florida Has Strongest Building Codes in the Nation
New report examines residential codes in 18 coastal states

Florida has taken top honors for its strong residential building codes in the latest Rating the States report by the Insurance Institute for Business & Home Safety (IBHS).  The report spotlighted Florida as an example where well-enforced building codes reduce loss and speed recovery.   “Preliminary post-storm investigations indicate that homes along the path of Hurricane Irma that were built to strong, modern building codes in Florida sustained less damage than weaker structures built to pre-Hurricane Andrew provisions,” according to the report.  Nearly 80% of Florida homes impacted by Irma were built to the higher standards.

“States with strong, updated codes saw stunning proof this year in Florida that updated, well-enforced building codes have led to the construction of homes and buildings that can stand up to fierce hurricane winds,” Julie Rochman, CEO and president of IBHS, said in a press release. “It can’t be any clearer: these codes work. Unfortunately, many states took no action to improve their code systems and a few have weaker systems in place now than they had in 2015.”

The IBHS report used a point scale of 0-100 to assess the progress of 18 hurricane-prone coastal states along the Gulf of Mexico and the Atlantic Coast in strengthening their residential building codes.  Florida ranked highest with 95 points, followed by Virginia (94 points), South Carolina (92 points), and New Jersey (90 points).  The states that received the lowest scores (below 70 points) were Georgia, New York, Maine, New Hampshire, Texas, Mississippi, Alabama, and Delaware: they have no mandatory statewide codes.

IBHS evaluated 47 key data points to assess the effectiveness of the states’ residential building code programs, including code adoption and enforcement; building official training and certification; and licensing requirements for construction trades who implement building code provisions.  Because residential building codes represent a minimum life-safety standard for occupancy, the findings suggest that many homes remain at risk from severe hurricane events.

The report offers state-specific roadmaps to help each state improve building strength and community resilience.  For Florida, the report notes the lack of a continuing education requirement for our building officials to maintain their certification and/or licensure, specific to residential codes.  It also warns that Florida could miss important code improvements in the future.  The Florida legislature last year changed the rules to eliminate the automatic piggybacking of code changes made by the International Code Council into the state building code.  Instead, the Florida Building Commission now has the power to disregard any of those national code changes.  More in this insightful Bloomberg article appearing in the Insurance Journal.

Higher Building Limit Approved on Key West Parcel
Move meant to encourage more affordable housing

Buildings on a nearly three-acre stretch of Key West will be allowed to be built higher under new code changes recently approved on the island that suffered significant damage from the high winds and storm surge of Hurricane Irma last September.   Residents voted earlier this month to raise the building height on the city-owned Easter Seals property on Stock Island from 25 to 40 feet, allowing the city to build 104 units of affordable housing.

Hurricane Irma destroyed 1,179 homes and severely damaged nearly 3,000 more on the Florida Keys.  That’s about 8% of the Keys’ total housing and has made the area’s longtime affordable housing problem even worse.  Key West officials sought the voter approval to allow for another floor to be built, representing 30 additional units.   It’s part of the Keys’ efforts to lower rents and provide workforce housing.

Key West’s 40 foot building height limit is in place on other parcels on the island, including the water towers adjacent to the proposed affordable housing.  Some of the town’s hotels along North Roosevelt Boulevard and condominiums on South Roosevelt Boulevard have all been built near the maximum height.

Courts Rule Against Citizens Insurance
Long-running sinkhole case to be appealed

Citizens Property Insurance Corporation recently suffered setbacks in two Florida courts, both involving sinkhole claims on which the insurer of last resort has been accused of unfairly denying payments.   A Pinellas County jury recently awarded $12.7 million to residents of the Cloverplace Condominium Association in their six-year court battle against Citizens.  That same week, the Second District Court of Appeal in Lakeland ordered a new trial in a breach of contract case against Citizens, ruling the Tampa homeowner hadn’t received a fair trial.

The Pinellas case involves 83 homes in a 240-unit condo complex that the association said first saw signs of sinkhole activity in 2007.  The $12.7 million verdict – one of the largest ever against Citizens – represents the estimated amount required to stabilize the homes’ structures.   Another lawsuit against Citizens involving 26 other condo units in the complex is still pending.   A key issue of dispute has been whether the condo association’s master policy predated Florida’s revamped sinkhole statutes in 2011.  The law required claim coverage only if the damage was deemed structural.  The judge in this case ruled last summer that the policy didn’t require the residents to meet the tougher structural standard of the 2011 law.

Citizens said in a statement that it will appeal the verdict, explaining that “Simply making a cash payment that does not require repairs to be made is not in the best interest of Citizens or the community.”  Its previous efforts to settle with the condo association were turned down.

The Tampa homeowner’s case involves a breach of contract filed against Citizens by Michael Daskalopoulos, who alleges that Citizens denied his 2012 sinkhole claim.  During the trial, Citizens argued that the damage wasn’t caused by a sinkhole, but another excluded clause in the policy.  In the opening statements, the issue of Daskalopoulos’ foreclosure came up, when Citizens disclosed he had stopped paying on his mortgage about the same time he’d made the insurance claim.  When the jury later asked about the foreclosure, Daskalopoulos’ attorney moved for a mistrial, which the judge denied. Although the jury later returned a verdict in favor of Citizens, the 2nd DCA ordered a retrial, saying Daskalopoulos was deprived of a fair trial after details about his foreclosure proceedings were included in the trial.

Florida has more sinkholes than any other state in the U.S.   For more information, including the laws governing sinkholes and their distinction from catastrophic ground cover collapse, visit the Florida Office of Insurance Regulation sinkhole webpage.

Legislature Freezes Some Department of Health Funding
Lawmakers displeased over lack of medical marijuana implementation

The Florida legislature carried out its previous threat to withhold about $1.9 million in salaries and benefits at the state Department of Health (DOH) over numerous delays in carrying out Florida’s medical marijuana law passed last year.  In February, the Joint Administrative Procedures Committee formally objected to 17 items in DOH’s proposed rules and publicly chastised the head of the Department’s Office of Medical Marijuana Use for ignoring months of requests by the committee for more information.

The committee’s objections included a requirement that caregivers of sick patients be required to carry identification cards and a provision that bans applicants seeking medical-marijuana licenses from amending their applications once filed.  The committee pointed out that the ban conflicts with state law requiring agencies give applicants time to correct errors and provide additional information.   Many of the 17 items are considered unauthorized regulation that “enlarges, modifies, or contravenes” the law passed by the legislature and signed by Governor Scott implementing the 2016 constitutional amendment passed by Florida voters.

Much of the legislature’s ire has been directed at Christian Bax, the head of DOH’s Office of Medical Marijuana Use, who presented to the committee on the Office’s efforts to date at the February meeting.  Those efforts included numerous delays beyond an October 2017 deadline to ensure that at least 10 more organizations are licensed to produce and sell medical marijuana, which has been challenged in court.   Bax has blamed lawsuits and administrative disputes for the slow progress in implementing cannabis for medical use.  DOH this spring has been holding a series of workshops hearing public input on rule language to seek a more unified direction going forward.

Budget proviso language holds the $1.9 million in reserve until the regulations are implemented.  DOH said in a reported statement that the office has made progress on several rules and regulations, including some on edibles, signage and dosing. The department has also added online payments to streamline the ID application process, it said.

Commercial Real Estate Packing a Wallop in Florida
$1.89 billion pumped into the Sunshine State economy

In another sign that Florida’s economy is growing stronger each year, a new study by the National Association of Industrial and Office Properties (NAIOP) shows Florida’s commercial real estate sector contributed $189.4 billion to the state’s economy last year, the third most of any state in the country.  The more populous California had the largest impact, followed by Texas.  It’s one of several indicators that show Florida isn’t just a popular destination for individuals, but also for business.

The NAIOP report Economic Impacts of Commercial Real Estate also ranked Florida number three in direct spending on commercial real estate inputs, such as labor, materials, and management, following California and Texas.  Florida was also third in spending on warehouse development and construction.  Florida came in second in the nation (behind Texas) in the retail and entertainment sector, with $66.3 billion in total economic output.

The report’s author, George Mason University economist Stephen Fuller, noted that 2017 was the sixth straight year of increases in U.S. construction spending, up nearly 55% in that period.

Nationwide, commercial real estate development and operation of existing buildings supported 7.6 million American jobs in 2017 (a measure of both new and existing jobs), contributed $935.1 billion to U.S. Gross Domestic Product, and generated $286.4 billion in salaries and wages.

The NAIOP study warns that rising interest rates, labor shortages, energy prices and recent changes in federal tax law could have significant repercussions that could impact the ongoing economic recovery.

Regulators Are People, Too

Often I get calls from those “heading to Tallahassee” to see this or that regulator and often it’s not just insurance regulators.  Those that work in the government space are generally grouped as regulators and it can be a bit uneasy when visits to government offices aren’t routine.

Recently, a leader of a group called Insurance Nerds found me on LinkedIn and asked if I would participate in a podcast about how to approach and talk to regulators.  I thought it might be instructive for those of you who don’t make a habit of visiting those who oversee your business.  The podcast, titled “Regulators Are People, Too”, provided the opportunity to talk with host Nick Lamparelli about how the insurance ecosystem we are all a part of can interrelate effectively with regulators.  I hope you’ll give the podcast a listen and let me know your thoughts!  And for those not connected with me via LinkedIn, I’d welcome our connection here to allow us to stay in closer touch.

Have a safe week,