Following the passage of recent insurance legislation, I wrote an op-ed piece for the St. Petersburg Times noting that Floridians are now a Hurricane Katrina away from financial disaster. Recently, the St. Petersburg Times and Miami Herald have run stories finding that our elected politicians have also come to the same conclusion.
Continue Reading...CFO Alex Sink and Governor Charlie Crist are still new to their elected jobs; this was obvious from statements made by Sink in her interview with the Miami Herald. In one statement, she astonishingly relates that it wasn't until last month, while driving along Ft. Lauderdale's Condo Canyons, that she realized how vulnerable Citizens Property Insurance Corporation and its insureds are in the event of a significant hurricane. She and Crist, among others, are clearly annoyed that the hopes for lower insurance rates have not materialized and are calling for an explanation and investigation.
Continue Reading...Rep. Gene Taylor proposed legislation to expand the National Flood Insurance Program (NFIP) to cover wind damage, in addition to floods. NFIP currently only covers damage from a hurricane's storm surge. Hurricane Katrina proved how difficult it can be to separate wind from water damage near shorelines. The American Insurance Association has squarely come out in oppostion to Taylor's NFIP expansion bill, having commissioned a study which found that the addition of wind coverage would increase NFIP's deficits. In response, Rep. Taylor wrote a letter to the President of AIA, Gov. Marc Racicot, asking him to retract the report because it is "yet another bad faith action by the insurance industry" alleging "wild estimates of federal encroachment into private markets also are unfounded." Taylor is not without support for his legislation, in a surprising departure from the rest of the large insurance industry segment, Nationwide and Allstate have voiced support for the NFIP expansion. The House Committee on Financial Services, Subcommitte on Housing and Community Opportunity will hold hearings on H.R. 920, the Multiple Peril Insurance Act of 2007 today, July 17, 2007, at 2pm. Click here to watch the hearings live.
Two weeks after Alex Sink was sworn into office as Florida's new chief financial officer, lawmakers embarked on a 10-day special session to come up with ways of lowering insurance rates and providing some respite for the state's beleaguered homeowners. "I was still trying to find the ladies room," recalled Sink during an interview with the Miami Herald last week. The end result of the special session was the expansion of the Florida Hurricane Catastrophe Fund to $28 billion, allowing insurers to buy less expensive back-up insurance. This special session, in conjunction with more recently passed insurance legislation expanding Citizens, came with promises of savings to policyholders, with rate cuts averaging 20 percent or so. Six months later, the promised savings have not materialized -- as a matter of fact in recent weeks atleast five homeowner insurance groups have filed requests for rate increases. With more requests for rate increases inevitable, Sink, Crist, and other state officials are left questioning the viability of Florida's plan to reduce property insurance premiums.
Federal lawmakers have filed two bills (S. 618 and H.R. 1081 ) calling for the repeal of long existing antitrust exemptions given to the insurance industry by the McCarran-Ferguson Act. (For details on how this exemption came to be see, Government Accountability Office, Legal Principles Defining the Scope of the Federal Antitrust Exemption for Insurance, Report B-304474 (March 2005) ) However, it seems pointless to talk about repealing this exemption, in light of the fact that antitrust rules which insurance companies are not exempt from are rarely investigated, much less prosecuted.
Continue Reading...Florida newspaper stories exposing the recent insurance rate hike requests should not come as a surprise to anyone. This is just the latest example of why the public needs regulation of the insurance industry. It is a business built upon future promises that are routinely broken when the return performance is due. Why the Florida legislature seemed convinced that by shifting the risk of catastrophic loss to its citizens would actually result in lower premiums is bewildering. It is an unrealistic to expect that an industry, which lives by the sharp letter of the law and fineprint of contract, will follow through on promised rate reductions in the absence of legal or contractual enforcement; this laissez-faire approach suggests that the industry still has a strong lobby in Tallahassee.
Continue Reading...It was recently reported by Paige St. John that the Florida Department of Financial Services is not keeping complete copies of consumer complaints (civil remedy notices) and insurance company responses. Instead, the Department's legal staff has determined that according to section 624.155 of the Florida Statutes they are only required to maintain two documents. One is the civil remedy notice and the other is the report of the disposition. Any other documents received (i.e. attachments, responses, etc.) are not part of their statutory duty pursuant to the Florida Sunshine Records laws or section 624.155 to be retained and are being discarded. Legal counsel having differing opinions about how to interpret the law is not new.
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