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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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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Increasing Risk, Increasing Insurance Role.

    Current market conditions strongly reflect significant risk.  In this situation, Insurance Coverage Issues and Claims are inevitable.  They are coming.  They are coming under all sorts of Insurance Policies.  These Insurance Coverage Issues and Claims will in turn trigger many accusations that Insurance Companies and others acting in Fiduciary settings did not act in Good Faith and Deal Fairly.  In a climate like this one, these Issues and Claims are inevitable.  See generally Peter G. Gosselin, "In This Economy, Failure is an Option" (Los Angeles Times Online Sunday, July 20, 2008).

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Where is the Help for Homeowners?

     This is the question asked in a Letter to the Editor of The Boston Globe by Ms. Sharon Smith of Portland, Maine, published on Sunday, July 20, 2008.  In the whirl that surrounds issues and events connected with Homeowner's Insurance and Market Performance and the like, it is necessary to stop and listen to the questions posed by people who presumably stand on the outside of those issues and events and ask:  "Why is the government NOT backing Americans who are losing their homes because of predatory lending and usury?"

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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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