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A good friend of mine has a plaque in her house that says, “NEVER, NEVER GIVE UP”. She keeps it in a prominent area of her home and so every time I visit her I notice it. I will tell you that there have been times in my life when I visited her and happen to read it at just the right time. Life certainly throws us all some big curve balls from time to time that make us want to just give up and stay under the covers. But, we can’t do that if we hope to grow, learn or succeed in those important areas of our lives. I read a short article the other day that reminded me that lots of famous folks have sure wanted to give up, and because they didn’t, we certainly know their names and what they did in their lives. Lucille Ball was kicked out of her drama program because she was perceived as being too shy to put her best foot forward. The Beatles were turned down by Decca recording company because guitar music was on its way out. Michael Jordan was cut from the high school basketball team. Thomas Edison was told by a teacher that he was too stupid to learn anything and should rely on his personality instead. And last but not least, Walt Disney was fired from a newspaper because he lacked imagination and had no original ideas. REALLY?? What a difference it would have made in our world today if these folks had given up when they were discouraged, disappointed or disparaged. You and I are no different from these famous folks if we adopt the characteristics that most likely moved them forward: hard work, commitment, resilience and focus. Surely perseverance moved them from losing a few battles to winning the war. I hope you will be inspired to Never, Never Give Up when you read this article, and if today is a day you especially need to not give up. Stay the course toward your success!
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ABC Action News Focuses on Roofers Misusing
Assignment of Benefits
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On Wednesday May 18, ABC Action News Reporter Jackie Callaway introduced her Tampa Bay audience to the problems of AOB abuse in Florida. LMA is proud of this report, as we met with the television station late last year and provided the background and story framework.
The story centers on resident Carol Eriksson, whose Citrus County home was hit by a hailstorm two years ago. A familiar tale follows to those of us in the insurance business. A roofer canvassing the neighborhood pointed out damage to her roof and those of her neighbors. She signed an Assignment of Benefits (AOB) contract and paid her deductible to the insurance company. Nine months later, still no roof repair.
Jackie reported that AOB abuse runs rampant in Florida through inflated claims. As part of the story, she interviewed an insurance agent who explained that a loss that would normally cost $3,000 ends up with a bill from the contractor to the insurance company for $10,000 instead. That is a cost passed along to all insurance consumers through higher rates.
Jackie pointed out that’s exactly what happened to Citizens Property Insurance Corporation, which attributed high AOB costs to its need for a recent 3.2% rate increase. Sometimes insurance companies will pay these inflated claims. When they do deny the claim, the roofer or water mitigation company then pursues the homeowner for payment. Eriksson said her insurance company paid her claim in full to the roofer last summer but her roof still hasn’t been repaired. She’s since received a cancellation notice from her insurance company. The roofing company, not surprisingly, chose not to talk with Jackie for her story.
Although Eriksson and 15 of her neighbors filed complaints with the state, the ultimate solution for this abuse is through AOB reform by the Florida Legislature. This past session, the only surviving reform bill died; it would have helped prevent illegal kickbacks, require written estimates, and limit referral fees to contractors involved in an insurance claim.
What’s truly needed is an outright elimination of AOB. LMA will continue its diligent efforts, working constructively with various partners and parties, to make this happen. In the meantime, we continue to inform the media and share this all-too familiar tale. You can watch the ABC Action News story here.
It is just these types of instances of fraud as reported by Jackie Callaway and others, that has contributed to Insurance Consumer Advocate Sha’ron James’ decision to hold an all stakeholder forum entitled, “Troubled Waters: Finding a Balanced Approach to Florida’s Water Loss Crisis”. The forum will be held at the Florida Atlantic University Stadium, on the Boca Raton Campus located at 777 Glades Road from 9:00 AM to 4:00 PM on Tuesday, June 14, 2016. The agenda and other pertinent meeting documents will be posted on the Insurance Consumer Advocate’s website.
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Rate Increases Hitting South Florida
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AOB and the higher costs of water damage claims are driving up homeowners rates across Florida, but especially in South Florida – the counties of Miami-Dade, Broward, and Palm Beach – ground zero for AOB abuse and outright fraud.
As those rates are starting to take effect now and with more in the pipeline, insurance agents are preparing for the expected onslaught of questions and likely complaints from customers.
Citizens, Federated National, and both Tower Hill Preferred and Select Lines have been approved for rate increases ranging from 3.2% to 13.1% (see table below). Universal Property & Casualty, a big writer in South Florida, Ark Royal, and Olympus have requested rate increases from 2.7% to 5.1% and are awaiting a decision from the Office of Insurance Regulation. (Note that the rate requests listed in the table are statewide averages and that rates in South Florida generally run higher than the statewide average.)
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Company
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Statewide Avg. Request
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Status
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Universal Property & Casualty
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+5.0
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Pending
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Citizens
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+3.2
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Approved
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Federated National
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+5.5
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Approved
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Tower Hill Preferred
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+8.2
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Approved
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Tower Hill Select
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+13.1
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Approved
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Ark Royal
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+5.1
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Pending
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Olympus
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+2.7
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Pending
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The Citizens rate increase, for example, is even higher in South Florida (Broward County 4.8% and Miami-Dade County 6.2%) because of what Citizens described to OIR as an unusual increased frequency and average cost of non-storm water damage claims. Citizens reported a 200% increase in its monthly average of new AOB lawsuits in the 12 months prior to February 2016 – most from water losses. Citizens now averages about 620 new lawsuits per month, a trend being reflected in the private sector says company president Barry Gilway.
Citizens has instituted measures to counteract the trend, including a managed repair program, a restructured water claims process, and anti-fraud measures such as a claims reporting timeline and setting policy limits on temporary/emergency repairs.
Published reports in South Florida quote insurance agents as saying the rate increases – some as much as 25% depending on the property – follow a three-year period in which rates declined 3-5% each year. Agents say some insurers are declining to write in certain zip codes or have stopped writing in South Florida altogether.
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Grappling With Texas Hail Storms and Their Claims-Data Call Issued
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This Spring has been one for the record books when it comes to the sea of claims generated by a series of devastating hail storms that pounded North Texas beginning in March. A late April estimate showed that the hailstorm that hit Collin County, Texas caused more than $300 million in damages. The later storm that hit Wylie and parts of Plano will not be the most expensive in North Texas but did push insured losses in the geographic area to over $1.5 billion in less than four weeks time. The $1.5 billion is in addition to an estimated $700 million in damages on March 23 when large hail battered Plano. Six days before that, Tarrant County was hit hard to the tune of $600 million. The latest storm puts the overall total in North Texas at around $1.6 billion.
And perhaps borrowing a play from Citizens’ manual on how to better address sky rocketing litigation costs associated with abusive AOB practices, the Texas DOI recently issued a data call directed at insurers providing coverage against loss from hail and windstorm events. The purpose of this data call is to collect information for the examination of data on the cost of weather-related property insurance claims and the incidence of litigation of these claims. The Texas DOI will use this information to assist the House Insurance Committee and the Senate. Insurers required to respond to this data call must respond by no later than August 19, 2016. Although the results of this data call will be based upon the Texas marketplace and judicial environment, we here at LMA believe the results could be beneficial in better understanding Florida’s unique and highly litigious business environment. Accordingly, we will continue monitoring the Texas DOI’s work and share with you their results as soon as they become available. Stay Tuned!
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Health Insurance for Family of Four Tops $25,000
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The average cost of health insurance for a family of four through an employer plan is now $25,000 annually, triple the cost in 2001, according to a new report from actuarial and healthcare consulting firm Milliman.
The 2016 Milliman Medical Index (MMI) notes that although this year’s increase of 4.7% was the lowest increase in the Index’s 15-year history, it represents the 11th consecutive year that the total dollar increase has exceeded $1,100. This year’s increase will be $1,155.The total average cost for 2016 will come to $25,886 and represents an employer-sponsored Preferred Provider Organization (PPO) plan. It includes both the premium the employer pays ($14,793) and the employees’ premium contributions ($6,717) and employees’ out-of-pocket expenses ($4316), such as deductibles.
The biggest cost driver: prescription drugs, which rose 9.1%, compared to a 3.8% increase for all other health care services. At an average of $4,270 per family, prescriptions account for about 17% of the total cost of coverage.
Milliman Principal and Consulting Actuary Chris Girod, who co-authors the MMI, referenced surpassing the $25,000 a year family coverage cost level as “a significant and somewhat unsettling milestone,” in a company news release. Healthcare cost trends have exceeded medical CPI in every year since Milliman’s first published MMI in 2001.
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Citizens Purchases Private Reinsurance
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The Citizens Insurance Board of Governors, locked-in to multi-year reinsurance contracts negotiated when its policy counts were much higher, has approved spending $204 million for private reinsurance this storm season.
The reinsurance will provide more than $2 billion in supplemental claims-paying ability, and is on top of the mandatory state Cat Fund coverage Citizens has bought, which among all carriers can pay as much as $17 billion in claims. Citizens also has more than $7 billion in surplus.
Citizens’ Chief Financial Officer Jennifer Montero pointed out in last week’s Board meeting that the reinsurance could help the company avoid spending all of that surplus even in a once-a-century storm.
Last year, Citizens spent about $283 million for reinsurance with this year’s contractual obligation to pay about $164 million, ultimately adding an additional $40 million to its total 2016 spend.
As usual, the debate continues on whether the cost of reinsurance is worth it, especially for Citizens, who didn’t purchase any reinsurance until about five years ago and whose policyholder count continues to shrink. Citizens now has fewer than 500,000 customers, down from about 1.5 million four years ago. Helping/complicating matters, of whether to buy reinsurance or not is that Florida has now gone 10 seasons without a major storm. Proponents of private reinsurance for Citizens say it’s a hedge to help reduce the risk of assessments (the so-called “storm taxes”) on all insurance policyholders in Florida to bail out Citizens after a catastrophe.
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Louisiana Follows Florida’s 2012 Lead,
Greatly Simplifies Adjuster Licensing
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Approved by the Governor on May 19 and Effective August 1, the Louisiana Legislature’s recently passed Senate Bill 266 mirrors much of what Florida regulators and legislators accomplished in 2012 to reduce governmental bureaucracy and streamline the adjuster licensing process. Major highlights of the Louisiana adjuster measure are as follows:
- Requires only those individuals with controlling interest in business entities applying to do business as independent adjusting companies to be listed on applications as executive officers and directors.
- Allows individuals who reside in states that do not license adjusters to designate Louisiana as their “home state” for the purpose of obtaining non-resident adjuster licenses in other states in which the adjusters wishes to conduct business.
- Establishes a statutory mechanism for Louisiana to reach what appears to be full reciprocity with other states in the area of adjuster licensing.
- Extends adjuster license eligibility without taking the state exam as long as the applicant resides in a state that requires adjuster licensure for residents and residents take a state exam in order to gain licensure. Also creates a “transfer of license” statute essentially identical to Florida’s transfer of license statute. This means a claims adjuster licensed in good standing in his/her home state can move to Texas, begin adjusting claims, and has 90 days from the date residency was changed to submit a resident adjuster license application to the Texas DOI.
- Collapses to four (4) the total number of various adjuster license types issued by the Texas DOI to the following lines of authority: property and casualty; workers’ compensation; crop; and any limited line under Section 22:1666, Texas Insurance Code.
- Amends the Texas Code to permit the insurance commissioner to waive the workers’ compensation examination requirement for an individual with three years of verifiable experience adjusting workers’ compensation claims within the preceding five years, provided the application is received by August 1, 2017.
Again, as noted earlier in this article, the vast majority of Texas’ adjuster licensing amendments or provisions almost identical to Florida’s was adopted in our state in 2012. However, if you have any questions about the above changes to Texas’ Code or Florida’s current licensing statutes, simply give our office a call.
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PIP Fate in Florida May Rest on Study
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Growing dissatisfaction about the continued effectiveness of Florida’s no fault automobile insurance program through mandated personal-injury protection coverage (PIP) has prompted OIR to order a study on alternatives.
OIR has posted an RFP for a study that would determine “the potential impact to Floridians if the personal injury protection coverage requirements were repealed and replaced with varying levels of bodily injury coverage, or if the current requirements to purchase auto insurance were completely repealed.”
In 1972, Florida became the second state in the country to enact a no-fault auto insurance system. The legislature made significant reforms in 2001 and 2003 to stem rising fraud and abuse. Under current law, motorists are required to carry personal-injury protection coverage that includes $10,000 in medical benefits.
The new study will also look at the effectiveness of 2012 reforms (HB 119) intended to further reduce fraud. The only report to date, one published in January 2015 by OIR, noted the limited data that was available to determine the true impact of those reforms. The OIR report showed a general decrease in the per-claim costs and the overall number of claims, in both frequency and severity post-reforms. The report however, also showed that other coverages, such as bodily injury and uninsured motorists, increased in both frequency and severity when some benefits covered under PIP moved to these coverages.
CFO Atwater has publicly expressed doubt, based on that OIR report, whether the decreased costs are being reflected adequately in decreased rates for consumers. Quite the contrary – PIP rates increased 13% this past year.
A draft of the new study’s findings is expected by the end of August, with a final report presented to the Governor and legislative leaders on September 2.
As I wrote in our last newsletter in response to an agent’s question, the Florida legislature was right in creating PIP and it did halt the 40% rate increases we were experiencing at the time. But in the last few years, costs have crept back and despite various bills to address the continuing problems, the legislature has been unable to pass any significant reform.
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So, How Much of Our Country “Belongs” to Other Countries?
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Maybe it’s just me, but I was a bit surprised by some information I read a couple of weeks ago that has been on the “down low” for at least 42 years. And what is it that took me by surprise that I thought our readers may not know? The U.S. owes some serious big bucks to lots of countries in the form of U.S. Treasuries. We understand the borrowing and lending practices between countries. Nothing new there, but the staggering dollar amounts and the countries involved is what made me pause for a moment. The U.S. Treasury Department recently revealed that Saudi Arabia has $117 billion dollars of U.S debt holdings as of March 2016. That makes Saudi Arabia the 13th largest holder of U.S. treasuries, right behind India at $118.9 billion, and ahead of Singapore with $112.7 billion. The top holders of U.S Treasuries are as of March 2016:
| 1. China |
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1,244.6B |
| 2. Japan |
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1,137.1B |
| 3. Cayman Islands |
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265.0B |
| 4. Ireland |
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264.3B |
| 5. Brazil |
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246.4B |
| 6. Switzerland |
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230.0B |
| 7. United Kingdom |
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227.6B |
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| 8. Luxembourg |
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221.3B |
| 9. Hong Kong |
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200.3B |
| 10. Taiwan |
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182.3B |
| 11. Belgium |
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153.8B |
| 12. India |
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118.9B |
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| 13. Saudi Arabia |
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116.8B |
Maybe that’s ok with lots of folks, or maybe not. Regardless of our feelings about this state of economic affairs, it is the truth and I frankly like to know the truth. So as I do, I’m sharing it with all of you. We have truly become a world of intertwined finance and what happens in other countries certainly impacts the financial stability of our country. We should probably all pay more attention.
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Troubled Waters: Finding a Balanced Approach to Florida’s Water Loss Crisis
June 14, 2016
FAU Stadium, Boca Campus
Boca Raton, FL
June 15-18, 2016
Orlando World Center Marriott
Orlando, FL
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