Insurance Claims And Issues

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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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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Florida's Largest Property Insurance Company Requests 47.1 Percent Rate Hike.

     State Farm is reportedly Florida's largest insurer of private property.  As such, it has faced many more Catastrophe and other Property Insurance Claims than it could have anticipated.  On account of such Claims, It has reportedly requested a Premium Rate Increase of 47.1% on the Homeowner's Insurance Policies it issues in Florida.  In 2006, State Farm was allowed to raise its Premium Rates by 52%, which it reportedly did.  In 2007, State Farm lowered those rates by 9%.  See this report written by Julie Patel, "State Farm Seeks 47.1 Percent Rate Increase in Florida" (South Florida Sun-Sentinel.com, Wed., July 16, 2008).  Mathematics is not otherwise included in the newspaper report of these things, but basic calculations reflect that since 2006 State Farm's Premium Rate Hike Requests amount to something on the order of 103% or more than double the amount of the Premiums it was collecting from Policyholders in Florida before 2006.  Such is the current state of Property Insurance in the State of Florida in 2008.

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Earthquake Shakes Up Some Insurance Coverage Expectations.

     A newspaper report about Insurance Coverage and Catastrophe Claims following the Sichuan earthquake in China, highlights issues important to people in the United States who face the real possiblity of having to make Catastrophe Claims.

    Concentrating on two types of Insurance, it is reported that holders of Property Insurance Policies are left with little more than uncovered Catastrophic Damage, while the much smaller group of Chinese Life Insurance Policyholders have fared much better.  Life Insurance Policies in China, as elsewhere including in the United States, generally pay benefits upon an accidental death regardless of cause.  Earthquakes as a cause of loss are almost always Excluded in Property Insurance Policies in China, however.

     "[A]s in California," in order to obtain Coverage for losses caused by Earthquakes, for example, "you have to buy a special policy and pay extra."  "In China, Few Are Covered by Earthquake Insurance," by Don Lee (Los Angeles Times Online, Tuesday, June 24, 2008). 

     These differences are illustrated in the newspaper report by convincing numbers.  First, so far about a quarter of a million Property Insurance Claims have been presented to China Property Insurers as a result of this Catastrophe.  Most of those CatClaims are reportedly on account of damage to personal property.   In addition, some Three Million houses were destroyed.  Approximately $15 Billion to $20 Billion of Property Damage is estimated as a result of the Sichuan earthquake.  Property Insurance Companies have paid out $20 Million in CatClaims.

     With regard to Claims on Life Insurance Policies, on the other hand, an unreported number of Claims has been presented since the Sichuan earthquake.  It is reported that "only a tiny fraction of people hold such policies."  Reportedly, Life Insurance Companies paid out $26 Million in Claims resulting from the earthquake.

     Finally, it is of more than passing interest to Homeowners seeking Property Insurance Coverage outside of China, that the Earthquake Exclusion was reportedly adopted after a 1996 meeting of "earthquake scholars" and "experts".  In that meeting, participants predicted that earthquakes would trouble China for the next ten to twenty years.  The Property Exclusion was almost immediately written in response, it is reported.

     In the United States, one of the central and largely unreported battlegrounds concerning Property Insurance Coverage, particularly for CatClaims, has been the use of new Catastrophe Models that result in predictions of more Catastrophes such as Hurricanes, and in higher Premiums or Exclusions, than seem justified by authorized and fact-based Catastrophe Models that have been relied on by Insurance Departments, Insurance Companies, Agents and Brokers, and of course ultimately, relied on by Policyholders.  Events associated with that battleground and other largely unreported areas of interest to Insurance Coverage for Catastrophes have been reported here in the categories of "CatClaims" and "Catastrophe Models," along with "Property Insurance" and many other related kinds of Insurance.

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"The scope of OIR's investigation ...."

".... cannot be limited by Allstate's unilateral actions."

Page 17 of the attached Official Opinion Denying Rehearing by Florida's First District Court of Appeal in Download Allstate_v. Office of Insurance Regulation (Fla. 1st DCA Case No. 1D08-0275, Opinion Filed May 14, 2008).pdf.

Florida's Office of Insurance Regulation (OIR) has prevailed in its judicial dispute with various Allstate Insurance Companies about OIR's right to receive subpoenaed documents and to impose a ban on selling new Insurance Policies until Allstate provided the subpoenaed documents:

The facts of this case are unique.  In order to conduct insurance business in Florida, Allstate is statutorily required to comply with OIR's investigation and make 'freely available' documents sought by OIR....  To the extent Allstate believed any documents OIR sought were privileged, Allstate was required to timely seek a protective order in circuit court.

Id.  Allstate did not seek a protective order in circuit court.  The First District denied rehearing of its earlier Order upholding the OIR's suspension of new policies until the Insurance Company complied fully with OIR's subpoenas.

     The same day that the First District Court of Appeal denied rehearing, Allstate provided a sworn affidavit to the Florida Office of Insurance Regulation that all the subpoenaed documents had now been provided.  The OIR lifted the suspension as a result.   See Florida Office of Insurance Regulation Press Release, "Florida Insurance Commissioner McCarty Stays Allstate Suspension, Continuing Compliance Required," Wed., May 14, 2008.  Anika Myers Palm, "State Lifts Allstate Ban, Allows Insurer to Take New Customers" (OrlandoSentinel.com, Saturday, May 17, 2008).

    On Wednesday, May 21, 2008, Dennis Wall will discuss these and other major developments affecting Hurricane Insurance Preparation before the 2008 Hurricane Season.    This presentation is open to the public and there is no charge.  It is offered by the Insurance Law Committee beginning at Noon and scheduled to run through 1:00 P.M. at the Orange County Bar Association Center, 880 North Orange Avenue, in Orlando, Florida.  Dennis Wall, Chair of the Insurance Law Committee, will speak about many ways of "Preparing for Hurricane Insurance".  You are cordially invited to attend this free presentation.  As a reminder:  In Florida, the 2008 Hurricane Season officially begins on June 1, 2008.  There is no better time to begin preparing.

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Florida O.I.R. Lifted Suspension of New Allstate Policies...

... The Same Day Florida's First District Court of Appeal Denied Rehearing of its Opinion Upholding O.I.R.'s Order Suspending New Allstate Policies.

     Press reports published on Saturday, May 17, 2008 made it appear that the Florida Office of Insurance Regulation (O.I.R.) lifted its suspension on new Allstate Insurance Policies on Florida on the day before, or Friday, May 16, 2008.  As you will recall, the O.I.R. issued its Suspension Order in the first place because Allstate failed to comply with O.I.R. subpoenas for various groups of documents including unauthorized Catastrophe Computer Models purchased by Allstate in connection with its Premium Rate Increase requests.

     According to the O.I.R., it announced a stay of its Suspension Order on Wednesday, May 14, 2008, immediately after the Florida appellate court denied rehearing of its Opinion upholding the O.I.R. Order.  The reason given by the O.I.R. was its receipt of a sworn affidavit from Allstate "certifying that it has complied with Florida law by freely providing all documents requested" by the O.I.R.  See Florida Office of Insurance Regulation Press Release, "Florida Insurance Commissioner McCarty Stays Allstate Suspension, Continuing Compliance Required," Wed., May 14, 2008.

     Dennis Wall, Chair of the Insurance Law Committee, will speak at the Orange County Bar Association Center in Orlando, Florida about Preparing for Hurricane Insurance, on Wednesday, May 21, 2008 from Noon to 1:00 P.M.  The Orange County Bar Association Center is located at 880 North Orange Avenue in Orlando, Florida.

    You are cordially invited to attend this free public event.  Hope to see you there. 

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Preparing for Hurricane Insurance.

    Dennis Wall, Chair of the Insurance Law Committee, will speak at the Orange County Bar Association Center in Orlando, Florida about Preparing for Hurricane Insurance, on Wednesday, May 21, 2008 from Noon to 1:00 P.M.  The Orange County Bar Association Center is located at 880 North Orange Avenue in Orlando, Florida.

    You are cordially invited to attend this free public event.  Here  is a link to the "EVENTS" published about this presentation by the Orlando Sentinel on Monday, May 19, 2008 on page C3, col. 1, in "The Law & You" Section.

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Credit Crisis Hikes Hurricane Force.

     The credit crisis has reportedly already hit Hurricane Insurance like, well, like a Hurricane, even before the first 2008 Hurricane hits.  The credit crisis, and the related and overwhelming number of houses that are either in foreclosure now or are predicted to be in foreclosure proceedings soon, are the reported culprits in an anticipated post-Hurricane Catastrophe.  Local and State Governments, and Insurance Companies, may have to rely on bond markets if they all run out of money paying Hurricane Claims during and after Hurricanes may strike in 2008, it is reported in "Credit Crunch Could Restrict Post-Hurricane Help" (St. Petersburg Times Online, Monday, May 19, 2008).  The source announced in this newspaper report is a report issued by A.M. Best, which excluding the news media perhaps, has an established policy of releasing its usually copyrighted reports to those who pay for them.

    On Wednesday, May 21, 2008, Dennis Wall, Chair of the Insurance Law Committee, will present "Preparing for Hurricane Insurance" at the Orange County Bar Association in Orlando, Florida.  He will discuss these and other major developments affecting Hurricane Insurance Preparation before the 2008 Hurricane Season.    This presentation is open to the public and there is no charge.  It is offered by the Insurance Law Committee beginning at Noon and scheduled to run through 1:00 P.M. at the Orange County Bar Association Center, 880 North Orange Avenue, in Orlando, Florida.  As a reminder:  In Florida, the 2008 Hurricane Season officially begins on June 1, 2008.  There is no better time to begin preparing.

Please Read The Disclaimer.