Insurance Claims And Issues

"Fay, You Are No Hurricane" -- So, No Effect on Premiums?

    Hurricanes caused hidden damage in Florida in 2004 and 2005.  They caused Premiums to rise because they caused the Florida Hurricane Catastrophe Fund and Citizens Property Insurance, for example, to require higher assessments.  See Tom Zucco, "Fay Unlikely to Cause Havoc With Insurance" (St. Petersburg Times Online, Monday, August 18, 2008).

    Fay is a Tropical Storm and not a Hurricane as this post is written.  Presumably, Fay will not cause charges to be imposed which can cause Insurance Premiums to rise accordingly.  Presumably.

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Florida Office of Insurance Regulation Putins Allstate Insurance.

    For nearly a year, Allstate Insurance Company and its subsidiaries resisted investigations by the Florida Insurance Commissioner into its Reinsurance arrangements, its unauthorized Catastrophe Models that consistently predicted greater damage -- and thus the 'need' for greater Premiums -- than was predicted by the Catastrophe Models that have long been used in the industry and in Florida, and Allstate's relationships with raters and trade associations.  As readers of this web log know, many posts here have followed the developments during that time, until Allstate exhausted its appeals and Courts overruled its objections to the Insurance Commissioner's investigations.  Now, what the Florida Insurance Commissioner calls "'drastic actions'" have been agreed to by Allstate.  Tom Zucco, "Deal Cuts Allstate's Rates" (St. Petersburg Times Online, Friday, August 15, 2008).

    The capitulation to which Allstate has been forced to consent is as overwhelming in its own way, as the recent invasion of Georgia by the Russian Army.  Allstate's "agreeement" was released on Friday, August 15, 2008, the traditional day of the week to release bad news to the public and press.  The agreement includes these terms:

Allstate will pay a $5,000,0000.00 fine to the Florida Insurance Regulatory Trust Fund under its agreement with the Florida Office of Insurance Regulation, which is the Florida Insurance Commissioner's Office;

Allstate will write 100,000 new Insurance Policies in Florida over the next three years, breaking down into 50,000 new "basic" Homeowner's Insurance Policies and 50,000 new Condominium, Renters and other residential Property Insurance Policies;

Allstate will lower Premiums on its existing "Florida policies" by 5.6 %, it is reported in the linked article, although what kind of Insurance Policies they are is not reported;

Allstate will not seek a Premium Rate Increase for at least a year, although again, the linked article does not identify for what kind of Insurance Policies;

Allstate will continue to 'cooperate' with the Florida O.I.R. investigations; and

Allstate waives its rights to challenge this agreement in Court.

    Allstate is reportedly the Number 2 Automobile Insurance Company in Florida, writing an average of some $564,000.00 in new Premiums a month in that line of business.  It is also reportedly the Number 4 Property Insurance Company in Florida.

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Past Fears, Uncertain Future Drive Florida State Hurricane Warnings.

    Predictions of the future can be very uncertain.  Sometimes perceived future dangers, for example, are based more on past fears than present facts, perhaps.  It is reported that the Florida "state meteorologist" (did you know that Florida has one of those?) predicts an active Hurricane Season in the rest of 2008.  HIs predictions, together with consequences of not preparing for Hurricanes in the past, and some people's current state of preparedness, are all broadly explored by Curtis Krueger, "Don't Panic, Just be Wary" (St. Petersburg Times Online, Saturday, August 9, 2008).

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Federal Disasters Declared, Catastrophe Models Unspecified But Described As Consistent.

     During his two terms as president, Mr. Bush has issued 422 declarations of disaster.  That is described as more than President Bill Clinton and far more than President Ronald Reagan, also two-term presidents.  The largest number of Mr. Bush's disaster declarations in any given year came in 2004.  Austin Bogues, "Bush Declared 422 Major Disasters" (New York Times Online, Sunday, August 10, 2008).

    Mr. Bush's government committed $40 Billion in disaster relief from the Federal Government after Hurricane Katrina and Hurricane Rita in 2005.  Since they took office, they have committed an additional $47 Billion, for a total of $87 Billion in Federal Taxpayer Funds used for disaster relief, so far.  With or without the relief following Hurricanes Katrina and Rita, Mr. Bush has assigned more Federal money to disaster relief than his predecessor by some 2 and 1/2 times after adjusting for inflation, it is reported in the linked newspaper article.  The likely cause is, ironically, global warming.

    Before concluding this post, it is worth noting that a curious quote in the linked report is attributed to a person with the Environmental Defense Fund.  He is quoted as observing that "'weather events'" are "'consistent with what the models predict'".  However, the linked article does not provide a description of whose Computer Catastrophe Models they have in mind.

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Rate Rejection Redux.

 This Updates a Previous Post.

    Florida Farm Bureau's 2007 Premium Rate Increase was rejected in 2008.  FFB's 2007 Premium Rate Hike Request was for a 26.8 % increase.

    FFB also requested a Premium Rate Increase in 2008, upping the ante so to speak to 28.4%.  It was recently rejected by the Florida Office of Insurance Regulation.  FFB may now request an Administrative Hearing with a Florida Administrative Law Judge, or Hearing Officer.  Florida Farm Bureau has reportedly issued some 100,000 Homeowner's Insurance Policies in Florida.  Tom Zucco, "Farm Bureau Rate Hike is Rejected" (St. Petersburg Times Online, Tuesday, August 5, 2008).

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FFB Raises Rejected Rate Request.

     In 2007, Florida Farm Bureau requested a Premium Rate Increase of 26.8% in Florida.

     In early July, 2008, FFB exhausted its appeals of the Florida Office of Insurance Regulation's denial of that request.

     In late July, 2008, FFB asked for a Premium Rate Increase of 28.4% in Florida.  Tom Zucco, "Insurer Still Seeks Rate Hike" (St. Petersburg Times Online, Wed., July 30, 2008).  FFB reportedly has 100,000 Florida Policyholders.

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Homeowner's Associations and Condominium Associations: Professionalism, Business ... And Insurance.

      Boards of Directors of Condominium Associations, and of Homeowner's Associations and of other similar Community Associations, have a hard job.  Their many obligations and expectations are explored by Kay Senay, Forum Publishing Group, published online on Thursday, July 31, 2008 at South Florida Sun-Sentinel .com under the headline, "Board Responsibility Makes All the Difference".

     Among the responsibilties summarized there, is this one at the top of the list:  "Confirm that the association's master insurance policy is appropriate, including D&O coverage."

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Thanks for the Insurance and Your Service, Citizen Douglas!

     Thursday, July 31, 2008 is the last day that Mr. Bruce Douglas will serve as the Chair of Citizens Property Insurance Corporation.  Reportedly, Citizens is the largest Homeowner's Insurance Company in the United States that operates as an arm of State Government, and in this case, the State is Florida.

     Citizens also reportedly has 1,200,000 or 1.2 Million Policyholders.  In the 6 years that Mr. Bruce Douglas has been the Citzens Chair, "its exposure to storm damage" has more than doubled, "to $425-billion, but reserves have been rising, thanks to no recent storms."  Mr. Douglas is virtually everyone's dictionary definition of a fine human being.  His public service has been performed with honor.  Consistent peformance of his duties with honor, and a good sense of humor rarely found in those in modern public life, are both on display in this interview by Tom Zucco, "He Leaves Citizens More Stable" (St. Petersburg Times Online, Friday, July 25, 2008).

     Thank you, Bruce Douglas.

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Catastrophe Claims Strip Homeowner's Insurance Coverage, Lift Premiums.

     Since about the time of Hurricane Andrew in 1992, Homeowner's Insurance Policies and other kinds of Property Insurance Policies have been adversely affected by Catastrophe Claims.  Coverage provisions have been narrowed and new Exclusions have been added.  A director of consumer services at Florida's Department of Financial Services is quoted on these issues, for example, by Jeff Plungis, "Homeowners May be Twice Burned as Insurers Cap Policy Coverage" (Bloomberg.com, Wed., July 16, 2008).  "Policies are written annually so insurers can add exclusions."  Id.  (This last observation makes sense, but it applies to virtually all Insurance Policies.)

     One transformation of Coverage has been the nearly uniform refusal to provide "guaranteed replacement cost" Coverage, with Property Insurance Companies instead offering Coverage with a cap called "extended replacement cost" which by any name does not cover the actual cost of replacing a home totally destroyed by a Catastrophe.  These developments over the last 15+ years, which have been chronicled in many places including in previous posts here, for example, lead to the newspaper article's wise advice that "people should review their homeowners' coverage to make sure dollar amounts keep pace with currrent construction expenses."  Id.

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Insurers Cry "Catastrophe" From Tornado Claims: Allstate, Travelers Claim Hits.

     Travelers Companies, reportedly the second largest Commercial Insurance Company in the United States, recorded its third decline in Quarterly profits in a row due to "the record number of tornadoes in the second quarter."  Andrew Frye, "Travelers Net Income Drops 25 Percent on Catastrophes (Update 5)" (Bloomberg.com, Wed., July 23, 2008).  It is reported in this article that 2Q 2008 provided the most tornadoes in the second quarter of the fiscal year since the National Weather Service started counting in 1950.

     It is also reported in the article, although not as a cause of The Travelers' reported decline in profits, that the Commercial Insurance Industry has competitively cut Premiums to gain large corporate Policyholders.  The Council of Insurance Agents and Brokers is credited in the article with a report of its own that Premium Rates for the largest Commercial Insurance accounts fell 16% in 2Q 2008, and overall, Commercial Insurance Premiums were down 13% in the quarter.

    Allstate Corporation also reported that its falling profit continued a streak, in Allstate's case for the fourth quarter in a row.  Allstate astonishingly reported that compared to 2Q 2007 one year ago, its net income fell 98% in 2Q 2008, a result it blamed on tornadoes.  In addition, Allstate pointed to its investment losses due to writedowns resulting from the failing economy and the credit crisis, i.e., the downgraded collateral it took back to secure its investments.  Erik Holm, "Allstate Profit Falls on Tornadoes, Investment Loss (Update 3)" (Bloomberg.com, Wed., July 23, 2008).

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