Agents worried
Photo by ra2 studio/Shutterstock
Ask any insurance agent and they will tell you “I’m worried.” Why are they worried? For starters, property insurance companies have no choice but to shrink their footprint and raise their rates. Some ask why? To which I say, “I can’t count the reasons!” New data from OIR, plus a recent webinar by Demotech, the rating service for residential property insurers focused on Florida, are shedding some additional light.
You have seen time and again in our newsletter, references to Florida’s insane litigation environment where policyholders have no idea they are a pawn in a lawsuit; where plaintiff lawyers threaten that “if you don’t pay me what I’m asking, you (the insurer) will be facing a fee multiplier”; where private vendors team with law firms to cook up and/or inflate a claim; and where reinsurance is sky high and we all gotta pay for it. As one former regulator said to me last week, “am I hearing this right? Are things really this bad?” To which I replied, “I haven’t seen a market like this in my lifetime.” Here’s an example of a solicitation currently in the marketplace: https://www.facebook.com/132003600195132/posts/3136267789768683/?vh=e
Claims creep is one of the culprits for our market woes (the others being growing attorney fees, rising reinsurance costs, and resulting rising rates and market contraction). OIR’s January data call shows claims from 2017’s Hurricane Irma grew by 60,000 from the 1,002,000 claims in the last report in November 2018, which itself was 14 months after the storm. Insured losses totaled $17.44 billion, up from $11.1 billion in the last report.
At last week’s Demotech webinar, Wesley Todd, CEO and co-founder of CaseGlide, noted there are still thousands of new Hurricane Irma lawsuits coming in every month and he expects that to accelerate between now and the September 10 three-year anniversary, which is the statutory deadline for filing Irma claims. He put the open Irma claims now at 5-10%, depending on the county, with new claims “interfering with the carriers’ focus on closing existing claims,” he said.
Reinsurance was also discussed during the webinar. Risk-adjusted rates rose 20%-50% and while Florida and the Gulf Coast have seen the steepest prices, it’s increased elsewhere as well. Some insurance companies decided to retain more net exposure. Despite the hefty reinsurance rate increases, some analysts warn Florida rates may still not cover the true cost of risk.
For my part, I told the webinar audience that agents are losing business. Companies are not writing business or they are cutting appointments and shrinking their agent count because of all these factors. Demotech President Joe Petrelli added that Citizens Property Insurance is likely to be repopulated for a number of reasons. On the legislative front, Paul Handerhan said his team at the Federal Association for Insurance Reform is focusing on crafting narrow policy reform, identifying those putting their self-interest ahead of consumers, and targeting those bad actors with a group of stakeholders working together.
We invite you to join the effort. Please email me at [email protected] or call me at 850-528-9229. Demotech’s next webinar on the 2020 Florida storm season is scheduled for August 18 and you can register here.
LMA Newsletter of 6-22-20
