Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

Additionally, the I.I.I. reports that the federal government declared on 99 separate occasions this year that a major disaster existed after a natural disaster had occurred, easily breaking the previous record of 81, which was set in 2010. The 99 disaster declarations are nearly triple the average of 34 per year dating back to 1953, the I.I.I. added.

The federal National Oceanic and Atmospheric Administration (“NOAA”) announced that the U.S. was the site of 12 separate disasters, each of which caused at least $1 billion in aggregate damage in 2011. The previous record, set in 2008, was nine.

With all of these new records, you would think that the private insurance industry would be in a lot of trouble. Not so. According to the I.I.I., policyholders’ surplus –insurers’ net worth measured according to Statutory Accounting Principles – fell only four percent to $538.6 billion as of September 30, 2011, compared to $559.2 billion at year-end 2010. You read that right. Even though the insurance industry experienced one of its worst years ever, their net worth dropped by a mere 4%.

For more information, including a list of the 12 separate billion dollar disasters click here.

The answer to this question is:

. . .there is nearly $13 billion in liability insurance protection available to be used in the event of a commercial nuclear accident. The level of available insurance protection serves as the liability cap.

Standard property/casualty insurance policies issued in the United States exclude coverage for property damage and personal injury caused by such accidents. All claims are channeled through the nuclear power plant operator.

A relevant discussion of the Japanese catastrophe and similar insurance coverage needs in the United States appeared in "Few Homes Have Insurance Coverage for Earthquake or Tsunami, Although the U.S. Is At Risk for Both." Similar to what I indicated in Insurance Coverage for Tsunami Floods and Earthquakes, the Insurance Information Institute provided the following regarding earthquake coverage:

Standard homeowners, renters and business insurance policies do not cover damage from earthquakes. Coverage is available either in the form of an endorsement or as a separate policy. Earthquake insurance provides protection from the shaking and cracking that can destroy buildings and personal possessions. Coverage for other kinds of damage that may result from earthquakes, such as fire and water damage due to burst gas and water pipes, is generally provided by standard home and renters insurance policies.

Earthquake coverage is available from private insurance companies. In California, homeowners can also get coverage from the California Earthquake Authority (CEA), a privately funded, publicly managed organization. Only about 12 percent of California residents currently have earthquake coverage, down from about 30 percent in 1996, two years after the Northridge, California, earthquake. Nationwide 86 percent to 90 percent of U.S. homeowners lack earthquake coverage. . . (emphasis added)

Regarding coverage for a tsunami, the article noted:

Flood damage from a tsunami is not covered under most standard homeowners, renters and business insurance policies. Flood insurance, however, is available from the federal government’s National Flood Insurance Program (NFIP), and some private insurance companies. It can generally be purchased through the same agents and brokers who provide home and renters insurance.

The NFIP provides coverage for up to $250,000 for the structure of the home and $100,000 for personal possessions. Private flood insurance is available for those who need additional insurance protection, known as excess coverage, over and above the basic policy or for people whose communities do not participate in the NFIP. Some insurers have introduced special policies for high-value properties. These policies may cover homes in noncoastal areas and/or provide enhancements to traditional flood coverage. The comprehensive portion of an auto insurance policy includes flood damage.

A 2010 poll by the Insurance Information Institute found that 10 percent of Americans had a flood insurance policy, down from 13 percent in 2009 and 17 percent in 2008 . . . .

Heaven help us if we suffer from a disaster like that experienced recently in Japan. The statistics clearly indicate that most of us do not have the proper insurance to soften the blow from such tragic events.

A recent Government Accounting Office (GAO) report of state sponsored catastrophe programs brought this to my attention. The report summary mentioned:

Officials from some state programs said that they limit participation in the reinsurance or ILS markets because the coverage they want is not available at a price they are willing or able to pay without significantly increasing premium rates charged to homeowners.

The result is that most state sponsored programs rely upon the luck of not having a catastrophe where they would have to call upon a state's general revenue obligations to pay for the debt. Alternatively, our state politicians hope the federal government will bail out the state's fiscal irresponsibility. The "bail out" nation mentality is alive and well in state sponsored insurance.

Claire Wilkinson's post at the Insurance Information Institute, State-Run Insurers Lack Risk-Based Pricing, brought this report to my attention. I agree with her observation and the finding of the GAO which concluded that "most state natural catastrophe programs do not charge premium rates that reflect the full risk of loss."

In Florida, I publicly commented on some of these issues while serving on the Citizens Property Insurance Mission Review Task Force, and noted some of them in Taking Tough Positions On Citizens Property Insurance Task Force. Citizen's is correcting this problem by allowing rates to rise gradually. In Texas, TWIA tries to enforce mitigation as a condition to get insurance and therefore lower severities of its expected losses.

When it comes to insurance and public policy, there are probably two concepts all should remember:

1. There is no free lunch.
2. We are all in this together.

Have a great weekend.

A Wall Street Journal article, As Hurricane Season Begins, Insurance Gets Harder to Find, also noted that Congress is not helping policyholders or the real estate market by its politics with the National Flood Program:

Congress's failure to extend the flood insurance program is delaying an estimated 1,200 real-estate closings a day across the U.S., according to the National Association of Mutual Insurance Companies. Federal law requires homes with federally backed mortgages in flood-hazard areas to have flood insurance.

I recently posted two items concerning the need for everybody to purchase supplemental flood insurance -- Time to Buy Flood Insurance Coverage and Oil and Hurricanes: Here Comes the One Two Punch. As indicated in the Wall Street Journal article, The Insurance Information Institute agrees with me and similarly notes that National Flood will pay for the oil damage if storm surge brings it on a flood covered property:

Of particular concern this hurricane season: flood damage. Storm surges could bring polluted floodwaters from the oil spill in the Gulf, potentially affecting property owners from Louisiana to Cape Hatteras, N.C.

But standard homeowners' policies generally don't cover pollution damage resulting from a flood; only supplemental flood insurance does. "In general, whatever is mixed in with the water is part of the flood, hence excluded from a [traditional] homeowner policy," says Robert Hartwig, president of the Insurance Information Institute, an industry nonprofit group.

Congress should stop playing politics with the National Flood Program. Since June 1, the program has been forced to stop writing new policies because of politics. This is not the time for politicians to be changing policy or needlessly harming others by holding National Flood hostage to get other legislation passed.

I am sending this post to my Representative and Senators. I suggest you take a minute to do the same.

Hartwig said that since the middle of 2008, employment in the P&C insurance industry has hit a record low as a result of the economic downturn. As a whole, he said that employment in the P&C industry was down almost five percent since the recession began, nearly matching the 6.1 percent decrease in employment in the overall U.S. economy.

For claim professionals, however, the news was grimmer, as statistics show the adjusting profession is taking the biggest hit.

"We have seen a very, very sharp drop in the claim adjusting area, the sharpest drop of all P&C positions in percent terms, around 14 percent since the recession began," said Hartwig. "I do not know precisely what the driver of this is at this point, but the number of people employed in the claim adjuster position today is roughly where it was in 1995."

So, what can you do if you are in the claims industry and want to stay there? I am asked career advice from a number of adjusters, regardless if they are company, independent, catastrophe or public insurance adjusters. Except for experience and reputation, the single most important and easiest thing any claims adjuster can do is prove dedication and passion to this noble business through education. The claims insurance industry "calling card" that everybody recognizes is the CPCU designation. If you enjoy what you do as an adjuster, I strongly suggest you watch this video and then sign up for the courses needed to become a CPCU: