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Insurance - your family's financial security

Page Highlights

Homeowner's Insurance - updates on  Legislative action, Congress, and the home insurance market. Black Boxes -- reinsurance -- anti-trust.  So far, 2011's major insurane bill is S 408, which is currently in the Senate Insurance Committee.

Sinkhole Insurance - learn what the insurance companies and legislators are up to.

Insurance Rates Must Be Affordable - by Senator Mike Fasano - an analysis of deregulation.

Reinsurance

FCAN and a coalition of allies oppose the Neal bill, which is an attempt to tax offshore reinsurance companies -- companies that Floridians depend on to reduce our hurricane risk. Rep. Richard Neal's (D-MA) bill -- H.R. 3424 -- to raise taxes on foreign based insurance companies operating within the United States is anti-consumer and anti-competitive.

FCAN joined with the Coalition for Competitive Insurance Rates (CCIR) and voiced its strong opposition to the bill. CCIR, a broad-based alliance dedicated to assuring competitive insurance costs and insurance availability for American consumers, contends that the bill would drive up consumer insurance rates by reducing competition and critical US insurance capacity. When Neal introduced similar legislation in the 110th Congress, consumer organizations and businesses that rely on affordable insurance coverage joined in opposing passage.

FCAN believes that the international insurance market is an essential component of our ability to provide protection to homeowners and businesses. This tax increase proposal would in all likelihood have adverse consequences for consumers. Given today's financial and economic conditions now is certainly not the time to make access to insurance more costly.
(Feb 2, 2010 press release)
(July 30, 2009 press release)

Life Insurance - buying guide - the real information about life insurance the companies don't want you to know

Sinkholes - the problem you don't want to hear about, but they're here.  See FCAN's video explanation of the new Pasco County Sinkhole law

Lower Homeowner Insurance Rates

Hurricanes have ravaged the Gulf Coast, and now we're all facing much higher insurance costs, the highest in the US. FCAN believes we must encourage sustainable development to hold insurance costs down, and make major changes in the way insurance is regulated so the community can unite against unjustified rate increases.

FCAN supports an Independent Insurance Consumer Advocate, similar to the Public Counsel office for utility rates. FCAN also wants greater citizen participation in insurance rate cases would give consumers the ability to challenge rates. "Black Box" models used to set rates should be examined because they are fundamentally flawed.  Citizens, the insurer of last resort, should be allowed to compete against the private market until insurers agree to take all applicants.

How we got here


We all know about the hurricanes, but there are other causes for our high insurance rates. When development began to boom in Florida, back in the 70's and 80's, we were in a time of low hurricane activity. Now, whether you believe it is a natural cycle or global warming, NOAA scientists are telling us to expect stronger and more numerous hurricanes for at least ten years, but no one is certain.

Perhaps, if we had known this potential existed, we might have made different decisions about risky coastal developments. Instead, Florida's powerful developers pushed for more and more homes, condos, and businesses in coastal areas. Now, the real cost of those decisions is apparent and insurers have sent us a bill. -- triple digit premium increases!

How to Lower Insurance Rates


The answer is to retrofit existing homes and build more sustainable communities. Our barrier islands offer important protection from hurricanes. We need to protect these natural hurricane barriers, not develop them. We should consider not rebuilding in coastal areas that are damaged by hurricanes. And we should immediately reconsider risky development that is already underway or planned. Its cheaper than the alternative.

These measures won't provide instant rate relief. Nothing will. However, insurance reform will give consumers new powers to fight for lower rates and force insurers to justify what they're charging. Some rate increases just aren't fair and can be challenged.

We face a situation where the state has too much risk and is not using the mechanism of reinsurance to spread risk.  Citizens rates were frozen for several years, and are now limited to 10% annual increases. "Acturially sound"rates could lead to either higher or lower rates, but current rates may not longer reflect of actual risks. 

Rates may go up, but FCAN supports giving consumers the tools to lower their insurance bills through My Safe Florida Homes, mitigation discounts, and strong regulation.

Other insurance sites


Be a good neighbor:
lower our rates!

Profits Soar Despite Hurricanes

Insurers have continued to make large profits, especially since we have not had a hurricane here in 5 years.  According to the Insurance Information Institute (III), "the P/C insurance industry will record positive growth in 2010".  And III said, "profit totaled $26.7 billion during the first nine months of 2010", another solid year.  According to the Insurance Information Institute, insurers mad a $60 BILLION profit in 2006. The Institute described this as "the best annual result in more than a half century (1955, to be exact)."  2007 brought another $63.4 billion but 2008 ended lower, with only $3o billion in profits.  Shareholders could expect a measly 9.5% return on their investments according to Fitch Ratings.

Despite these huge profits, our rates still go up, not down. Insurance reform is needed. Florida's system is badly out of balance. Insurers make huge profits and the taxpayers are stuck with the bills. More state subsidies are just going to the insurer's bottom line.

Black Box Models Overstate Risk

A new study by Karen Clark & Company, a modeling, risk and risk management firm which actually invented the models years ago, says current models "significantly overestimated” losses during the five-year period.  Clark says, "Catastrophe modelers, through their near-term models, have overshot actual insured losses for 2006 through 2010 by as much as $53 billion. "

Clark says useing just five years of data is not a credible way of estimating the probability of hurricane landfall. After all, we've had no hurricanes in five years, so shouldn't the probability be zero?

The black box models have raised insurance company profits. They gave insurers a reason to dump some of their riskist customers, while increasing rates on the rest. Insurers have a history of using third parties to justify high rates.  Historically, insurance companies used "rating services" which collected information on claims and other data, or companies "cooperated" to set rates. This became embarassing sometime in the nineties, and the models began. It's really the same game on a new board.

 

Insurance Profits

The Insurance Cycle

As the following graphic shows, the insurance cycle occurs every 8 to 10 years.  We are currently entering what is known as a soft market, with low demand for policies and more competition between insurers.  That should result in lower prices, but Floridians can tell you, that is a long time coming. 

Insurers used new computer models, called "black boxes" to increase profits in the last several years.  These use short term 5 year risk models instead of basing premiums on past claims, for which 50 years or more of data exists.

 

Insurance cycle

 

 

Consumer Agenda for Insurance Reform

2011 Legislature

Legislators are upset that former Gov. Charlie Crist vetoed S 2044 last year.  They have revised the bill and brought it back with a veangence. While S 2044 would have extended the "file and use" rate approval system, there is nothing for consumers in this bill.

S 2044 does deal with sinkholes, but extends to all homeowner's policies.  It would reduce the time after the event to file a claim to three years from five years. It would make it almost impossible to get sinkhole insurance and public adjusters would be limited.  It is an anti-consumer bill that the leadership plans to ram through.

There may yet be a de-regulation bill, but FCAN believes legislators are afraid of the massive rate increases that would come with such a move, and would rather continue to milk the insurance companies for campaign contributions.

FCAN Would Like To See:

Prior Rate Approval --currently insurers have "file and use" rates. That means approval from the Insurance Commissioner is needed to raise rates. That is a reform passed in the 2007 Special Session and the result is that insurers are having to prove they deserve rate increases.  Under the "use and file" system, insurers can raise rates at will, then justify them later.  Its more difficult to lower rates when they've already been raised. Insurers should have to prove they deserve rate increases.

End Black Box models --insurer "black box" computer models are suspect, at minimum, and possible collusive. We call them black boxes because nobody can see inside. One of the companies that produces these models is actually owned by the insurance companies. All are paid by insurers. They tell their customers -- the insurers -- what they want to hear.   The public model was more accurate in 2005. Fully fund the model and allow the consumer advocate to modify assumptions.

Independent Insurance Consumer Advocate -- current the ICA works for the CFO, an elected official. That means the Consumer Advocate can be fired for taking a position contrary to the CFO, which has happened.  It also opens the ICA office to politics.

Consumer Participation in rate reviews -- rate filings would be open to the public and consumer groups may participate in rate increase hearings.

Intervener compensation in rate reviews -- it is nearly impossible for citizen groups to participate in insurance rate cases.  Groups that do participate meaningfully should recieve compensation for their work.

Living expenses -- must be paid within 48 hours after a hurricane.

Fixing Citizens

Citizens is the state-run "insurer of last resort" and is now the largest homeowner’s insurer.

Citizens has too many risky coastal properties that have been dropped by mainstream insurers. These would normally be lucrative customers (big houses, nice cars, lots of income) but Citizens isn't allowed to sell other lines of insurance. Instead, the insurance companies can "cherry pick" the best business leaving Citizens stuck with very high rates.

Citizens coverage should be priced according to actuarial standards. Why not? But to avoid rate shock, rates must rise gradually where justified.  Some areas should have lower rates.

Citizens should be allowed to sell other lines of insurance to their customers to balance their portfolio. Otherwise, "cherry picking" insurers should have to help support Citizens. This would encourage them to start selling to coastal customers again.

Repeal Insurance Anti Trust Exemption -- Insurance companies have been exempt from the Sherman Anti-trust act since 1948. That means insurance companies can legally fix prices and collude. No other business gets this kind of break. The NY Attorney General recently busted several large insurers on bid rigging and fraud charges. Many think this criminal behavior in the insurance industry is encouraged by anti-trust exemptions.

Restore the trust between insurance agents and their customers. Eliminate so-called contingent fees that encourage agents to sell poor policies to consumers to earn high fees.

Title Insurance --rates are currently set by law and no competition exists. Clean up title insurance and allow companies to compete, lowering prices for consumers.

Write or Call
your Legislators

Governor Rick Scott
The Capitol
Tallahassee, FL 32399
(850) 488-4441

Senator Ronda Storms (R - Brandon)
421 Lithia Pinecrest Road
Brandon, FL 33511
(813) 651-2189

Senator Don Gaetz (R - Destin)
420 Senate Office Bldg
Tallahassee, FL 32399
1-866-450-4366 (toll free)

Key points to include in your letter:

Insurer lobbying expenses are part of your premiums!