Clarifying the numbers
As anticipated – and plainly declared – when the Florida Legislature passed its recent series of property insurance market reforms earlier this year, the homeowners market would not be immediately out of the woods. And it isn’t with the recent news about Farmers Insurance and AAA Insurance. But beyond the unexpected uproar, there’s also been a misinterpretation of the policy numbers involved.
Published reports said up to 100,000 Farmers-branded auto, home, and umbrella policies in the state could be impacted. But looking at the Florida Office of Insurance Regulation (OIR) year-end 2022 market share report, it’s really about 6,000 homeowners/condo/tenants policies that are impacted – the rest are auto. These customers will all be welcomed by other carriers.
And it’s not just Florida, as Farmers is reducing its exposure in California and other states as well. Nor is Farmers alone – there have been more than a dozen other carriers who’ve retrenched in the past two years and yes, there may be a few more in the future. AAA also recently announced it was reducing its policy count, noting in a statement that it’s “encouraged by the statutory changes that have recently taken effect and believe they will provide positive results.” But “like all other providers in the state, (we) have been forced to make tough decisions while managing risk and catastrophe exposure.” It adds: “AAA’s Florida-based insurance provider is not leaving the state….we continue writing new home and auto insurance policies.” Read the full AAA statement here. It’s uncertain if decisions by other carriers are based on a lack of confidence in the recent legislative reforms. Most insurers cite a slight reduction in litigation but they temper that with the uptick in the Notices of Intent to Litigate.
Nor is anyone pulling the rug from policyholders during hurricane season. The bottom line is that the Farmers’ and AAA policyholders will have their current policies functionally through the end of 2023. S. 624.430, F.S. requires an insurance company to give 90 days’ notice in writing to OIR if it desires to discontinue the writing of any one or multiple lines of insurance in Florida and the reasons for such action. No nonrenewal notice can be sent out by the company until the 90 days has lapsed and then the required notice to policyholders will apply. Additionally, there’s a required 120 days’ notice before the effective date of the nonrenewal, to give consumers adequate time to find alternate coverage.
I’ve been clearly communicating with the news media to add all of this essential perspective and context. You can view these on our LMA in the News webpage. Last Sunday, I had the pleasure of joining WPLG-TV Miami host Glenna Milberg on “This Week in South Florida” about the recent legislative insurance market reforms and what further help is needed, especially in reinsurance. I also explained what insurance companies consider a high-risk property and how homeowners can help reduce their premium costs.
Governor DeSantis expressed confidence that the recent reforms will bring stability and growth. “It now is more economical for companies to come in. I think they’re going to wait through this hurricane season and then I think they’re going to be willing to deploy more capital to Florida,” he said in a recent radio interview.
OIR is also seeing greater interest and participation in the Citizens Insurance Depopulation program this year. In its Industry Depopulation Notice, OIR said it’s already approved 91,000 policies for takeout from Citizens by the private insurance market with another 184,000 requested for the October assumption date. The deadline to apply is this Friday (July 28). Citizens policyholders must return to the private market unless the proposed premium to move is greater than 120% of their current Citizens’ premium.
Citizens President & CEO Tim Cerio told its Board of Governors recently “we are very encouraged that we’re going to have even more depopulation activity than we’d anticipated.” Other news of note from the Citizens Board meeting:
- Florida’s private domestic market continues to shed personal lines policies to Citizens and now Citizens’ commercial lines policy count is growing at an “alarming rate,” per Cerio, up 92% since 2020 with an accompanying nearly 8-fold increase in insured value.
- Although Citizens is making progress toward attaining actuarially-sound rates for some policyholders, even if OIR approves its latest rate hike request, Citizens HO-3 policyholders will still be paying on average about 44% below the rest of the private market.
- Recent litigation reforms passed by the legislature allowed Citizens to lower its calculated premium need in that rate filing by $900 million.
- On the reinsurance front, “we did much better than expected in the private reinsurance market. We filled our towers, and importantly, we did not take capacity away from the private domestic market,” Cerio said. Citizens purchased $650 million of the $675 million the Board had authorized, with risk transfer coverage of $5.38 billion. Citizens paid an average net Rate-on-Line of 12.03%, “a very, very good outcome,” he said.
- 72% of Citizens’ initial claims are paid within the first 90 days. Citizens Board Chair Carlos Beruff was impressed. “For those that take and twist the information and say we don’t pay claims quickly in the state of Florida, we now know that that is factually inaccurate,” he said.
LMA Newsletter of 7-24-23
