By: Julie Patel, South
Florida Sun-Sentinel,
www.sun-sentinel.com,
Feb 23, 2010
Companies say they haven't been able to build
claims-paying reserves
Edsel Hulse, a veteran who
lives in Hollywood, said he's expecting his
Citizens Property Insurance Corp.
windstorm insurance policy premium to increase this year
because state legislators in 2009 approved allowing the
insurer to boost premiums by up to 10 percent annually.
But he's also worried that may not be the last of it.
Hulse, like many other South Florida insurance
policyholders, is apprehensive about new insurance laws
the Legislature is slated to take up when it convenes
its annual session March 2.
Key Florida lawmakers are drafting legislation that
would essentially allow additional property insurance
rate increases and reduce fraudulent claims and
discounts that can drive up insurance costs.
Sen. Garrett Richter, R-Naples, who leads the Senate's
insurance committee, and Rep. Bryan Nelson, R-Apopka,
said they plan to file broad property insurance measures
that would expand on an insurance bill passed last year
that, among other things, allowed insurers to increase
premiums by up to 10 percent to pass certain backup
coverage costs to policyholders.
"With that bill we crossed the starting line, which is
dramatically different than crossing the finishing
line," Richter said.
Richter and Nelson, who sponsored the bill last year,
are considering having other fixed costs included in the
10 percent provision. That could drive up the cost of
Hulse's homeowner policy, covered by a private insurer.
"So now instead of worrying about taxes, I have to worry
about insurance," Hulse said, adding that 40 percent of
his monthly income already goes to paying insurance
premiums, utility bills and taxes.
Insurance industry executives say rates aren't high
enough to build claims-paying reserves and are pressing
lawmakers for relief. "Even though Florida has gone four
years without a hurricane, many major property insurers
lost money in 2009," wrote the Florida Insurance
Council, a trade group, in a recent report.
The state's Office of Insurance Regulation approved 99
homeowner insurance proposals to increase statewide
average rates last year by 0.2 percent to 27.9 percent
and 15 proposals to decrease rates, according to data
from the agency.
Insurance Commissioner Kevin McCarty told a panel of
senators in October that 102 of 210 property insurers
with a significant presence in Florida reported that
premiums collected during the first half of the year
weren't enough to cover claims and expenses. But McCarty
also said that 150 of the companies reported an increase
in claims-paying reserves. Specific Florida figures
aren't available.
Overall, U.S. property and casualty insurers are
expected to earn a net income of $30.6 billion in 2009,
up from $3.8 billion in 2008, according to a report this
month from A.M. Best, which rates the financial health
of insurers.
Senate President Jeff Atwater - who co-sponsored a law
passed in 2008 that extended Citizens' rate freeze and
allowed regulators to reject rate increases before they
took effect - said Florida's insurance market is
healthier now but still needs help.
"We're focused on two fronts: Not doing anything that
would make it more difficult for consumers to get prompt
payment of claims and fair pricing," said Atwater,
R-North Palm Beach, adding that legislators also want to
show insurers that Florida has a fair regulatory
environment.
Stephen Marino, an attorney for policyholders at Ver
Ploeg & Lumpkin in Miami, said the Legislature has
bigger issues to deal with. "It troubles me that the
insurance industry is causing legislators to expend
resources on these changes for no good reason other than
because the industry wants them," he said.
Like other major industries, insurers are aggressive in
pushing their agenda. The
Republican Party
of Florida received more than $1.5 million from
insurance industry representatives and groups last year
and the
Democrats
received more than $600,000, according to state campaign
finance records.
Sen.
Mike Bennett,
R-Bradenton, and Rep. Bill Proctor, R-St. Augustine,
proposed legislation this year that would essentially
allow insurers to increase rates as much as they want.
Gov. Charlie Crist
vetoed a similar bill they proposed last year and vowed
to do the same this year.
Sam Miller, executive vice president of the insurance
council, said his group supports the idea but has
resigned itself to the fact that it won't get far. He
said legislators should at least allow capped annual
rate increases as they did for Citizens. "We need a
glide path [increase] for private insurers. It's gotta
be capped. It's gotta be incremental," Miller told the
Sun Sentinel editorial board last week.
Bill Newton, executive director of the Florida Consumer
Action Network, said consumers can't afford 10 percent
increases every year and insurers "don't deserve that
kind of latitude."
Insurance Consumer Advocate Sean Shaw said that if
legislators limit the state's authority to shoot down
rate increases, they should consider allowing his office
to participate in insurance rate hearings on behalf of
consumers - much like the Office of Public Counsel does
for utility proposals.
Richter and Nelson's bills aim to:
Prevent inspectors from inflating discounts. Legislators
want to beef up the state's regulation of home
inspections because some homeowners are getting
discounts they don't deserve for fortifying their homes
against hurricanes. After recently inspecting 452 homes,
Citizens found 311 were not eligible for the discounts.
Increase the state's authority to set common guidelines
on the scope of damage during mediation, a program to
help resolve disputes between insurers and policyholders
over claims.
Reduce fraud that drives up costs for insurers. One idea
is to undo parts of a 2005 law that required insurers to
pay the full cost of replacing damaged items before
repairs are made. "What's happening is the policyholder
is saying, 'I'm going to get my $2,000, $3,000 for the
kitchen floor but I'm not going to replace the kitchen
floor,' " Nelson said. Another idea is to limit the time
policyholders have to open claims after a hurricane.
A state fund that sells catastrophe coverage to insurers
reports that it must raise up to $710 million more to
pay for losses from the 2005 hurricane season. It
proposes increasing a fee that all automobile and
property insurance policyholders pay from 1 percent of
premiums to 1.3 percent.
"We're supposed to only pay claims that are due, not
that are inflated," said Stacey Giulianti, the chief
legal officer of
Boca Raton-based
Florida Peninsula Insurance Co.
Marino said insurers' claims of fraud are overblown. A
recent state study found that in the past six years, the
Division of Insurance Fraud received 937 complaints
about fraud from insurers and others, investigated 269
of them and made 31 arrests from 2004 to 2009.
|
On
Friday, July 23, William R. Berkley, Chairman and
CEO of W. R. Berkley Corporation and Chairman of the
American Insurance Association, will address the
Florida Surplus Lines Association's 50th Anniversary
meeting in Amelia Island, Florida. Berkley, who
founded the Fortune 500 property casualty insurance
holding company in 1967, has served continuously as
Chairman and CEO over the past 43 years. During his
career, he has also founded a number of public and
private companies, some of which he continues to
lead as chairman or director, and has similar roles
in several financial institutions, including two
banks and a number of industrial companies. A
graduate of New York University and the Harvard
Graduate School of Business Administration, he is
active on the boards of both New York University and
Georgetown University, and serves as Chairman of
Achievement First, a group of charter schools
serving inner-city children in the New York
metropolitan area. He is the recipient of numerous
awards for his business, civic and philanthropic
activities over the years.
