Irma Strikes Florida – But It Could Have Been Worse

Our heart goes out to those seriously impacted by Hurricane Irma.  As Governor Scott reminded us many times leading up to and during the storm, “We can rebuild your home, but we can’t rebuild your life.”  Amid the tragedy of last week’s hurricane, there should be some thankfulness that it wasn’t worse, but for a last minute change of track.  The Bermuda High in the Atlantic Ocean prompted the Category 5 hurricane to shift westward and ultimately weaken. Had Irma passed 20 miles west of the SW Florida coastline, rather than hitting the coast early, the storm’s deadly eastern eyewall of 150 mph winds would have hit populated areas creating what one expert said would have been astronomical damage.

But here’s what “lucky” looks like in Florida as of last night: More than 40 storm-related deaths, including the eight tragic heat-related deaths afterward at the Rehabilitation Center at Hollywood Hills; an estimated $83 billion in total economic costs, including property damage and lost economic output; an estimated $18-billion in insured losses; and up to 75% of Florida’s citrus crop is on the ground, in what one farmer said would be “devastating to the Florida citrus industry,” still the number two industry despite years of declines due to citrus canker.  As of last night, exactly one week later, there are still 675,000 customers without electricity.

And the flooding – seemingly more destructive overall than the wind –  isn’t over, as some rivers continue on their way to crest, including the Sante Fe and Withlacoochee Rivers in North-Central Florida and various creeks in Clay County, just south of Jacksonville.

While the final numbers will be tabulated over the next few weeks and months, what is without doubt now is that Hurricane Irma was the largest…and likely the costliest storm to ever hit Florida.  Irma’s high winds and flooding impacted nearly all of Florida’s 67 counties – itself a record.  Damage will be measured in the tens of billions of dollars.

Homeowners, businesses, and other property owners have been assessing the damage and begun filing claims with their insurance companies.  Those claims are expected to number in the hundreds of thousandsInsurance Villages are opening around the state this week in key hard-hit communities.

In all 37 of 67 counties qualify for federal disaster aid.  The declaration allows residents in those counties with damage to apply for federal financial assistance and allow county governments to be reimbursed 100% for emergency protective measures for the first 30 days, and 75% afterward.

The road to recovery ahead will be long and difficult with twists we likely cannot currently imagine.  What we do face immediately ahead – is outlined ahead in this newsletter.

Those Without Flood Insurance Face Tougher Road Ahead in Irma Recovery
Fewer Floridians have flood insurance than five years ago

Insurance adjusters so far say that Hurricane Irma was not the huge flood event in Florida that its predecessor Hurricane Harvey was in Texas, but nonetheless there was significant water damage along with wind damage.

Florida has about 2.5 million homes in flood hazard zones, the most susceptible to hurricanes and other natural disasters.  Yet only 42% of these homes are covered by flood insurance, according to a recent Associated Press analysis.  Worse, that figure is down from what it was five years ago, especially in South Florida.  The AP analysis showed only 13% of the homes in high flood risk areas of Broward County have flood insurance from the National Flood Insurance Program (NFIP).  The AP noted it’s part of a national trend, especially in coastal areas vulnerable to storm surge.

Congress’ Biggert-Waters Act and its associated policy rate increases of 18%-25% along with updated flood maps putting more homes in the higher risk and more expensive “A” and “V” zones may be reasons why fewer homes now have flood insurance.  But others legally should have it and don’t.  Of the approximately 700,000 properties with federally-backed mortgages that are therefore under the mandatory purchase requirement, FEMA says only 57% had flood insurance as of 2015 data.

NFIP Director Roy Wright says he wants to double the number of properties that have flood insurance – whether it be NFIP or true private market alternatives.  Congress has temporarily reauthorized the NFIP until December, to allow more time to consider a myriad of reform plans we’ve outlined in past LMA newsletters.

Without flood insurance, how will property owners pay for repairs from Irma damages?  FEMA’s disaster grant program isn’t meant as a substitute for insurance and typically pays only in the $4,000-$6,000 range to cover interim expenses.

The fear is that those who don’t have enough in savings to rebuild will be faced with either borrowing money or be forced to sell their damaged property for a loss, or worse, simply walk away.  Beyond the personal financial toll this will take on Floridians, will be the potential impact on real estate values, the local government tax base, and economic development and revitalization efforts post-Irma.

As we’ve said many times, water doesn’t follow a flood map. Especially here in Florida, the entire state is practically one flood zone.  You’re gambling if you don’t have flood insurance (a recent Washington Post analysis showed 80% of homeowners living in the eight Texas counties that flooded the worst from Hurricane Harvey didn’t have flood insurance).  Just because you’re in a “low-risk” zone, doesn’t mean you’re safe from flood water!

FEMA/NFIP and Florida OIR Ease Regulatory Restrictions on Claims and Policies
Rate increases in Florida on hold for 90 days, as Data Call is ordered

For those with National Flood Insurance Program (NFIP) policies and for those insurance companies who participate, FEMA has issued five bulletins in the past week designed to ease a homeowner’s burden on filing claims and paying premiums and to help adjusters streamline their process, too.   The Florida Office of Insurance Regulation (OIR) has summarized these in a Consumer Alert on FEMA/NFIP Claims Filing Process.

Meanwhile, under encouragement from Governor Scott, Florida Insurance Commissioner David Altmaier has signed an Emergency Order by OIR that among other things, requires all insurance companies doing business in Florida to:

  1. Provide an additional 90 days to policyholders to supply required information to their insurance company. Many Floridians were displaced during this dangerous storm, and providing additional time to submit information to insurance companies gives them needed flexibility.
  2. Require all non-renewal or cancellations issued to policyholders in the days leading up to Hurricane Irma be rescinded for 90 days. This gives policyholders 90 days to either renew their insurance policy, or find a new policy; and
  3. Rescind increased rates on policyholders for 90 days. Due to the devastating effects of Hurricane Irma, Floridians should be focused on getting back to their normal lives without their insurance premiums being increased.

The order contains other narrative and I encourage you to read it.  The ultimate message the Governor stressed in encouraging this, along with his previous Executive Order issued prior to Irma’s arrival, is to “do no additional harm” to Florida’s policyholders.  We have a more detailed interpretation that we can discuss if you’d like to contact us.

Commissioner Altmaier’s order says that given the strength and size of Hurricane Irma and its catastrophic effect across Florida, there will be a potential impact on hundreds of thousands of policyholders, and OIR expects all insurers and regulated entities to “implement processes and procedures to facilitate the efficient payment of claims.” This includes “critically analyzing current procedures and streamlining claim payment processes as well as using the latest technological advances to provide prompt an efficient claims services to policyholders.”

OIR has also ordered a Claims Data Call for insurance companies, utilizing this catastrophe reporting form provided by OIR.

Do Florida Insurance Companies Have Enough Adjusters?
Make sure you do, direct CFO Patronis and Commissioner Altmaier

Another thing that Insurance Commissioner Altmaier together with Florida CFO Jimmy Patronis made clear after the storm, in a conference call with about 50 insurance companies regulators, was the expectation that the industry provide enough adjusters to handle claims volume expected to number in the hundreds of thousands.  In a follow-up joint press release, CFO Patronis said there are nearly 200,000 individuals currently licensed to adjust hurricane damage claims in Florida.

That is a whopper of a number and surprised many of us in the insurance business.  (After all, there are only 86,000 licensed and eligible attorneys in Florida.)  CFO Patronis also pointed out that insurance companies can appoint (contract with) adjusters to ensure an adequate supply under existing    Read Information on appointment of Emergency Adjusters & Licensure for details.

I talked with professional adjuster Jason Evans and American Integrity Insurance Company President & CEO Bob Ritchie about the supply of adjusters and the challenges facing our claims process on the latest episode of The Florida Insurance Roundup podcast.  They explained on the program how claims are being handled, how Hurricane Irma has impacted the supply of adjusters needed to handle claims, and the ability of Florida’s insurance companies to pay claims.  They also share advice with policyholders and other consumers hit by damage and reveal how insurance industry best practices are being put to the ultimate test with Irma.

Evans said Irma has stressed the supply of adjusters to handle claims, especially coming so soon after Hurricane Harvey, but that there are enough adjusters to handle the volume.  The program also discusses the technological advances that are making the claims process easier and more efficient for both policyholders and insurance companies.  “But nothing replaces the tender loving care at the first notice of loss,” Bob Ritchie pointed out.  “It’s a people business.  When you have a crisis, people want to talk to a live person.  Where technology is important is that everyone is equipped to take the first notice of loss within a few minutes and to reassure the customer that they have coverage.  You have one chance to form the right first opinion.”  Bravo Bob!

Taking the time to educate the public and especially the news media, is important, too.  It’s something I devote a considerable amount of time and effort on.  During an interview with Orlando public radio last week, I stressed that insurance companies taking claims calls from Hurricane Irma are handling them like an emergency room in a hospital: triaging the calls in order of severity.  I was honored to provide advice on how Floridians can navigate the post-Hurricane Irma claims process to make it easier on both policyholders and the insurance company’s call center on the other end of the line.  You can listen to the WMFE-FM Orlando radio program Intersection here.  Please feel free to link to it and The Florida Insurance Roundup podcast where appropriate in your communications outreach to your board, policyholders/clients, media, policymakers, and the public.

Where do we go from here with Recovery?
Future challenges and assurances

Speaking of providing great advice to the public, another insurance company executive helped set the record straight this past week by urging those with damage to go ahead and file a claim.  Security First Insurance President Locke Burt reminded folks that doing so, for hurricane-related damage, will not count against them on a future rate increase.  While several non-weather claims can cause your rates to go up, Burt urged those with hurricane damage to file, regardless of whether the amount is less than the deductible.  Good advice, given that here in Florida we have calendar year deductibles, so people aren’t paying separate deductibles for strings of hurricanes within the same season.  So you’ll want to get deductible credit for any Irma damage.  Timely advice indeed, given that as of this writing, there are other hurricanes in the Atlantic Ocean.

As our insurance companies rush to get adjusters into the hardest hit areas to expedite the claims process, county property appraisers are also out surveying Irma damage.  They’re urging property owners to let them know of damage as well, as it may affect their property tax bill due next spring.  As our real estate friends know, under Florida law, if property is devalued and not brought back to the original appraisal by January 1, taxes are lowered on that property.  Again, that’s why having flood insurance is so important!

Another thing that American Integrity’s Bob Ritchie mentioned on The Florida Insurance Roundup podcast is that “there is no question that the industry has not been better capitalized, both in terms of the primary insurance carriers, but also the supporting carriers, including the Florida Hurricane Catastrophe Fund, Citizens Property Insurance, and the world’s reinsurers.” Ritchie said on the podcast that Irma will be a high-frequency lower severity event.  While Irma will not overwhelm our collective financial resources, press reports noted that it will test our cat bonds, with about $12.5 billion in cat bond value exposed to losses.

As we mentioned earlier in the newsletter, some streams and rivers in Florida continue to reach crest and there is potential for lingering flooding this week.  Hurricane Irma also caused wastewater treatment plants in cities including Miami, St. Petersburg, Orlando, and Clearwater to malfunction, causing raw or undertreated sewage to overflow into waterways.  The federal EPA has granted pollution waivers to several localities during this interim cleanup period.

State Activates the Small Business Emergency Bridge Loan Program
A helping hand to businesses impacted by Irma

So many of your policyholders may be struggling to make their insurance deductibles and if so, this story will be of interest to you and maybe worth noting on your website as well.  Florida businesses who need a short term loan to get back up and operating post-Irma can now apply to take advantage of a state program activated now through October 31.  The Florida Small Business Emergency Bridge Loan Program uses public dollars to provide interest-free loans of three to six months available in amounts from $1,000 to $25,000.

The program is designed for small businesses that have been physically and/or economically impacted by the storm.  It’s intended to “bridge the gap” between the time a major catastrophe hits and when a business has secured longer term recovery resources, whether that be profit from a revived business, or insurance claims money or federal disaster assistance.   Eligibility is linked to pursuing those other resources.

Small businesses in all 67 counties are eligible, so long as they have between two and 100 employees.  Repayment isn’t required during the loan term but must be paid in full by the end of the term.  The program is administered by Florida First Capital Finance Corporation.  Again, the application deadline is October 31 and is contingent on the availability of funds.

University of Florida Breaks the Top 10 List of Public Schools in the USA
Gains for FSU, USF, and FAMU, too

Some of us worry at times about the quality and education level of our future workforce here in Florida.  U.S. News & World Report has our back this week, reporting on gains in our public university system in the latest edition of its annual college rankings.

The University of Florida has broken the Top 10 public universities in America, coming in at #9.  UF shares that spot in a three-way tie with UC-Irvine and UC-San Diego.  Florida State University continues to make progress, rising to #33 in the country, up 10 spots from the past two years. The University of South Florida rose 15 spots coming in at #68.  Florida Agricultural and Mechanical University, better known as FAMU, maintained its #1 spot among historically black colleges and universities.

Graduation rates, retention rates and other key metrics are all up overall and noticed by the magazine at a time when the Florida Legislature is also funding our public universities at record levels.   Part of that funding has gone to boosting the number of merit and need-based financial scholarships.   The U.S. News & World Report with full rankings is available here.

Top 10 Market Conduct Exam Woes
imely action on claims is the top mistake

Walter Kluwer Financial Services is out with its annual report of the Top 10 violations found in a review of last year’s P&C market conduct examinations across the country.  As they say, knowledge is power and if you can learn from the mistakes of others, you’re a better, smarter company.  These are the most common reasons property and casualty insurers are found to be out of compliance:

  1. Failure to acknowledge, pay, investigate or deny claims within specified timeframes;
  2. Using unapproved rates/rules or misapplying rating factors;
  3. Failure to process total loss claims properly;
  4. Failure to cancel or non-renew policies in accordance with requirements;
  5. Failure to adhere to producer appointment, termination, records and/or licensing requirements;
  6. Failure to provide required compliant disclosures in claims processing;
  7. Improper/incomplete documentation of claims files;
  8. Failure to provide required compliant disclosures in the underwriting processes;
  9. Improper/incomplete documentation of underwriting files; and
  10.  Failure to issue correct payments and/or compliant denial notices

For those who’d like more detail, Wolters Kluwer will provide a copy of its report and is holding complimentary insurance webinars on this subject, with information available at this link.

The Worst Brings Out the Best in People and Corporate Citizens
Donations to Irma relief efforts outstanding

Amidst the cold flood waters of IRMA is a warmth to the heart in its aftermath created by the generosity of donations that have poured in from all over Florida, the United States, and the world.   We are able to mention just a few of the many here whose contributions are making a difference in the speed and surety of the recovery of millions of people and businesses that call Florida home.

Publix Super Markets, headquartered in Lakeland near my hometown of Plant City, helped us take Irma with a dose of sugar and good humor, baking hurricane-decorated cakes and cookies in the days leading up to landfall.  In all, Publix has pledged $5 million to food banks in Florida and throughout the Southeast.  Ashley Furniture has pledged to offer products and discounts worth $1 million in Florida to victims of Irma and another $1 million in Texas to victims of Harvey.

The National Hockey League and its Florida teams (the Tampa Bay Lightning and Florida Panthers of Miami) are donating $2.7 million to various relief efforts.

On the insurance side, WellCare Health Plans is donating $1 million to Volunteer Florida, which is serving as the state of Florida agency coordinating volunteers and donations.  Florida Blue has pledged $1 million in relief to local organizations in the hardest-hit areas, including United Way chapters, community foundations, the Red Cross, and Volunteer Florida’s Florida Disaster Fund.

Banks (where the money is) are also coming to the rescue.  The SunTrust Foundation announced a $500,000 donation, with $250,000 going to the Red Cross and the remainder to other groups.  BB&T is also giving $500,000, with half going to the Red Cross and the other half toward eight truckloads of humanitarian supplies, including bottled water.

If you haven’t yet, we urge you to help your neighbors around the state, too.  One easy way is through Volunteer Florida, which is mobilizing both volunteers and donations to help Irma victims in our home state.  In our travels this past week to Central and coastal areas of Florida, we saw a tremendous outpouring of care and courage.  The resiliency of Floridians is tremendous – and together – we can get through this.   Please let us know if we can be of service to you in any way.

Take good care,