Raising the Bar

Greetings to all of you!

Some of you receiving this are first time readers and I am appreciative of your interest in following Florida’s insurance market.   It is my intent for all those who read about the news and stories I follow that you will receive 3 things:  a) a glimpse into Citizens and the property/auto insurance market and its effect on all who live/work/play in Florida b) encouragement to work in this industry notwithstanding its challenges and c) “pearls” of information that will help you raise the bar.

Speaking of raising the bar, I wanted to share with you an incredible debate about the Citizens Board of Governors exploring the idea to uncap the rates for new policies.  As you all know, Citizens rates are capped as of 2010 so that no single policyholder receives a rate increase of more than 10%.  Citizens Board member John Rollins, who many of you know as Florida’s leading consulting actuary and who has been a driving force in leading Citizens reform with others on the Board, asked Citizens legal team to study the rate cap  law with a fresh perspective.  The legal team advised the board at Citizens April 26 board meeting that, indeed, it is legal to have two sets of rates – renewal rates with a 10% cap and new business with actuarially sound rates.

The past two weeks since the Citizens Actuarial Committee broached the idea have been packed with press stories and others opposing the concept.   Senator Mike Fasano (whose senate term is expired due to term limits but who has announced a bid for his Pasco county house seat – November 2012 election cycle) testified against the two tier approach at the Citizens board meeting.  And interestingly, CFO Jeff Atwater, one of Florida’s four cabinet officials, published a letter opposing the rate change noting that he was the then-Senate President when the rate cap was put in place, and the Senate intended that the 10% cap apply to both new AND renewal policies.  NOTE:  the Florida cabinet has 4 statewide elected officials – Agriculture Commissioner Putnam, Attorney General Bondi, Governor Scott and CFO Atwater.  And CFO Atwater’s colleague, Robin Westcott, who serves as Florida’s Insurance Consumer Advocate, also expressed concern about raising new business rates.  Many at Thursday’s Citizens meeting remembered the 2011 sinkhole rate increase debate and all the parade of horribles that went with it so we owe a debt of gratitude to board member Rollins for preventing a repeat of history.

I am attaching the notes from the Citizens board meeting so you can read his remarks starting on page 6, but in a nutshell, Mr. Rollins presented a motion to direct staff to study the 160 Citizens rating territories and apply actuarially sound figures to each  and then compare those rates with a 10% rate cap for these same territories.   He was very succinct in saying that he wanted the board to have the right data to study the rate comparison so that those territories that needed attention could have their rates adjusted to reduce the rate subsidy as needed before the August rate filing is submitted. Mr. Rollins idea passed the board and at the June meeting, the rate comparison will be presented.  So, in essence, Mr. Rollins took a politically charged, volatile situation and raised the bar for facts vs hysteria.  Stay tuned!

Other committee meetings surrounding the Citizens board meeting included the following:

  • April 12: Actuarial and Underwriting Committee – discussion and notes included in my April 15 mailing titled “Florida’s fire fight.”
  • April 13:  Claims Committee – discussion and notes included in my April 15 mailing titled “Florida’s fire fight.”
  • April 25: Market Accountability and Advisory Committee – meeting materials with discussion about revamping Citizens agent’s commission structure, agent contract and Citizens exposure reduction and policy coverage changes;
  • April 25:  Consumer Services Committee –  This was the 2nd meeting of this committee of this newly created group and it has tremendous promise in including consumer groups at the table as Citizens changes.  The chair is Carol Everhart, Citizens longest serving board member and she has some incredible ideas.  Let’s be sure to follow Chair Everhart’s work as she is raising the bar!
  • April 25:  Depopulation Committee —  This was also the 2nd meeting of this re-instituted committee which had been dormant for over 3 years.  Tower Hill insurance group presented a program where they are requesting Citizens to grant them $200 million in a surplus note to remove 175,000 policies from Citizens.  I’m happy to discuss this with any of you who have an interest in following this discussion.
  • April 25:  The Audit and the Finance and Investment Committees – big news in these meetings was Citizens announcement that it will place the largest single “cat bond” in the history of the cat bond market and they will place more private reinsurance than any single carrier in our market.  In essence, Citizens is raising the risk transfer bar.  Maybe some day, we can raise the the bar so high that transferring risk from Citizens won’t make history.

On the auto insurance front, PIP Fraud fighters scored this week and yes, raised the bar – see the following article appearing in the Miami Herald.  For those of you living the PIP insanity, our friends in the property insurance industry feel your pain with the sinkhole saga that is plaguing all of us.  A startling sinkhole statistic for those in Hernando County: From 2005-11, a total of $283 million has come off the tax rolls because of sinkholes.  If you want to share ideas and thoughts with each other, I’m happy to be the bridge so we can all raise the bar!  Wishing a good week to all and thanks for all you do!