Aug 15

Lloyds of London subsidiary pulls out of Tampa Bay flood insurance marketplace, but that’s OK

flood insurance3

A subsidiary of one of the world’s largest private insurance companies, The Flood Insurance Agency, will no longer be writing flood insurance policies in several Tampa Bay area counties including Pinellas.

That’s OK though, according to a local insurance guru.

“One division of Lloyds of London doesn’t dictate the entire market,” Jake Holehouse of Holehouse Insurance said.

That means there are still plenty of Lloyds of London-backed private flood insurance options for homeowners looking for affordable coverage.

Holehouse attributes a fairly open market to legislation introduced by State Senator Jeff Brandes that created a framework for private companies to start writing flood insurance policies in Florida. Prior to the bill’s passage, it could take more than a year for a private company to get through the regulatory process to be approved as a flood insurance provider. Under the Brandes bill, that process is more manageable to private insurers.

“When you have one of the largest insurers in the world having written hundreds, if not thousands, of policies it shows you what a demand there is for private market interests,” Brandes said.

Brandes introduced the bill amid concerns about rising flood insurance costs within the National Flood Insurace Program under the 2012 Biggert Waters Act.

Under that bill, rates were set to rise 18% per year for homeowners and up to 25% per year on second homes. The effects could have crippled the housing market in flood-prone areas.

Congress mitigated the effects earlier this year by postponing for four years mandatory rate hikes aimed at making the NFIP solvent. During that time, the Federal Emergency Management Agency is supposed to come up with a plan to make premiums more affordable.

By expanding the Florida flood insurance market to private insurers, the effects of Biggert Waters were further mitigated.

Jay Neal is the president and CEO of the Florida Association for Insurance Reform, or FAIR. He agrees homeowners are no worse off now that The Flood Insurance Agency has pulled out of writing policies in Hillsborough, Pinellas, Sarasota, Manatee and Pasco counties.

Losing that option could even be a good thing. Lloyds of London is what Neal calls a surplus company.

“Unfortunately what that often means is you’re just not getting great coverage,” Neal said.

For example, a homeowner filing a claim could be subjected to reduced coverage and high deductibles which could make the policy nearly moot.

Instead, Neal thinks the NFIP still needs reform. One of the key ways the program can be improved is by spreading risk. Florida has been a donor state, meaning ratepayers pay for policies without filing many claims.

However the downside of that could be higher deductibles. Regardless, Neal expects the flood insurance issue in Florida is on its way to better times.

Aug 15

Please post your comments on credit ratings affecting insurance rates.

People with poor credit scores in some states pay nearly twice for homeowner’s insurance. Poor credit can result from illness, job loss, and other factors. Is it fair that they should have to pay higher premiums because of bad luck?

Please sound off on this un-FAIR treatment insurance companies use!!! Click the link to Post Your Comments.
http://www.floridainsurancereform.org/sound-off-credit-ratings.php

Aug 12

The 5 most common homeowners insurance shortcomings

 

PropertyCasualty360 News Flash
August 12, 2014 PropertyCasualty360.com
By Tim Sprinkle, PropertyCasualty360.com
The 5 most common homeowners insurance shortcomings: Are your clients covered?
By Tim Sprinkle, PropertyCasualty360.com
The ‘good’ news? If you’re underinsured you’re far from alone.…Read more
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Aug 04

Consumer Advocate Defends Citizens Property Insurance

The recent Palm Beach Post article critical of Citizens Property Insurance Corporation’s alleged lavish travel junkets to buy reinsurance was unbalanced, unfair, and frankly over-the-top.

My defense of Citizens may seem unlikely to some.  During my tenure with FAIR, our members have filed not one, but two, class action lawsuits against Citizen’s practices which we believed were unfair to policyholders.

But FAIR is FAIR (pun intended).  Over the last two years, we have witnessed a positive cultural change in Citizens, a change that, if it continues, will bring lasting benefits to the people and policyholders of the state of Florida.  The folks at Citizens still have a long way to go.  But when you criticize someone and they start to fix the problem, don’t you owe them a good word?

The Post article covered four areas:  denied coverage because of a roof condition, handling of water claims, reinsurance purchases, and so-called lavish travel.  The article unfairly attempts to weave these issues together in such a way to suggest that Citizens would prefer to go on junkets to exotic travel spots and waste millions on unneeded reinsurance than to provide coverage to senior citizens and pay legitimate claims.

Indeed, the roof policies and claims handling need work.  Citizens must operate like any private insurance company.  But they must also serve as the insurer of last resort for those Florida homeowners who simply cannot obtain affordable coverage from the private market.  This is a difficult balance.  Two years ago Citizens would have likely resisted change.  But today, the “new Citizens” has a much better understanding of the need for balance, and a senior management team willing to roll up their sleeves, sit down with stakeholders, and work to improve their policies.

That gets us to reinsurance.  Reinsurance is simply insurance for insurance companies.  Much like those of us with a mortgage are required to buy homeowner’s insurance, private insurance companies are required by regulators and rating agencies to buy reinsurance.  It’s expensive.  Roughly half of total collected premium goes to pay for it.  On the other hand, much like homeowners who do not have a mortgage, Citizens is not required to buy reinsurance.  With the power to assess, or tax, Florida’s insurance consumers if they run out of money to pay claims, Citizens has a deep well from which to draw.  The policyholders hardest hit are at Citizens, but every other property insurance consumer in Florida, including auto insurance consumers, are also on the hook.  Citizens has to determine each year whether buying reinsurance coverage and minimizing the possible tax they would need to levy is worth the cost of that reinsurance.

In our view, Citizens management made a smart and reasoned choice.  They spent $300 million on reinsurance which secured $3.39 billion of coverage and contributed to a reduction in assessment risk from $11.6 billion to $2.3 billion.  The transaction had negligible impact on the terms private insurance carriers received and paved the way for potentially more favorable terms from the investment community in the future when we really need it.  Even slightly better terms in such a scenario could mean billions of dollars in savings for Florida insurance consumers.

That gets us to travel.  Travel is unavoidable when buying reinsurance.  Almost two thirds of reinsurance companies are located in Bermuda with a bunch more in London.  Investors who make multi-billion dollar deals want to see principals face to face, ask tough questions, and take the full measure of who they are dealing with.  Citizens has a new CFO, a new Chief Risk Officer, and a new Board Chair.  Along with other key executives, all three needed to be physically present and play an active visible role during the negotiations.  Hotels in these locations are expensive.  A quick search on one of those budget travel sites showed the cheapest room in all of Bermuda at $352 per night, with several choices at twice that rate.  Citizens had a travel expense problem in the past that was fixed.  Their employees now have the same travel standards as any other state or federal agency.  Chris Gardner, as Board Chair, serves as an unpaid volunteer, not an employee.  Still, he reimbursed Citizens for the $104 ($52 per night for 2 nights) over the travel guidelines.  Was this really newsworthy?  The Brits have a name for frivolous news stories in the heat of summer when there is little else to print.  It’s called “Silly Season”.

As the legendary Sam Rayburn, the longest serving speaker of the US House of Representatives once said: “Any jackass can burn down a barn, but it takes a carpenter to build one.”  We at FAIR prefer to work with the new Citizens to find better ways for them to operate a smart business that covers Floridians who have nowhere else to go and treats them fairly when they have a claim.

Jay Neal is President and CEO of FAIR, the Florida Association for Insurance Reform

Jun 23

FAIR Joins with Florida PACE Funding Agency to Promote Wind Mitigation and Energy Efficient Property Improvements

$400 million pledged for first phase
Orlando, FL : PACE (Property Assessed Clean Energy) was passed by the Florida legislature to provide funding for property owners to harden homes against hurricanes and save on energy costs. FAIR has reached an agreement to represent the Florida PACE Funding Agency (FPFA) to Florida’s counties and cities. FPFA is a government agency formed under the
PACE statute. Cities and counties can enter into an interlocal agreement to allow their residents access to the benefits of the program. How it works: Property owners apply to make property improvements that enhance wind mitigation and/or energy savings. Funds are advanced to pay for improvements then are paid back through property tax assessments. The assessment term is determined by the expected life of the improvements up to 20 years.
State Senator Jeff Clemens of Palm Beach county has joined FAIR full time as a Vice President to lead the PACE subscription efforts.
“We are pleased to have Jeff join our team to promote PACE,” said FAIR CEO Jay Neal
“His strong background in energy and work with local governments gives us the leadership we need. His knowledge of insurance issues as Vice Chair of the Senate Banking and Insurance Committee gives him a keen understanding of the need to harden Florida homes against hurricanes.”

In addition to securing city and county subscriptions to the program, FAIR is introducing a new and improved version of the
“My Florida Safe Home Program”.
Home inspections will help property owners understand the benefits of wind mitigation improvements for safety and property insurance savings. FAIR Director Jeff Reamer is leading a
program that will recruit, train, and employ returning veterans from Iraq and Afghanistan to perform the inspections.
For more information go to www.floridainsurancereform.org and click on the PACE tab.

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