Julie Patel, of the Sun Sentinel, reported that Florida officials and State Farm appear to be working towards a mutual solution to keep State Farm selling property insurance in Florida:
Insurance Commissioner Kevin McCarty told the Florida Cabinet Tuesday that State Farm may not leave the state’s property insurance market as planned and the state is developing a report card on insurers to help consumers and increase competition.
“We’d like them to be a good neighbor so long as they are a fair neighbor," Gov. Charlie Crist said about McCarty’s prediction that State Farm will stay in Florida in a smaller form.
Increasing property insurance capacity in Florida is a significant public objective. Our governmental leaders should encourage this. Given the lack of a true open or free market as a result of limited capacity, many insurers attempt to charge rates which are unfair because there are no, or limited, alternatives to buyers. I disagree that complete rate deregulation of Florida’s non-free insurance market, which some legislators and State Farm lobbyists were calling for last year, will cure the problem.
Dan Luby reported in Florida Insurance News that the Florida Office of Insurance Regulation has approved another form policy without the appraisal process.
On 11/16/2009 the Florida Office of Insurance Regulation (OIR) approved the elimination of the Appraisal Clause from the homeowners multi-peril policy for Liberty Mutual Fire Insurance Company (NAIC Company Code 23035) and The First Liberty Insurance Corporation (NAIC Company Code 33588). This change is effective 12/14/2009 for new business and 02/04/2010 for renewals.
This is a definite trend. Some claims executives have confided with me that they feel the process is unfair to them for several reasons.
First, they complain that many public adjusters use appraisal as a means to obtain a split between an outrageously high estimate and a "fair" estimate. They complain the appraisal panel, more often than not, simply splits the differences of the estimates.
Second, they feel that many coverage issues get intertwined with appraisal. Thus, they complain that uncovered causes of loss often wrongly get included into appraisal awards.
Third, the process becomes ripe with gamesmanship involving millions of dollars with larger claims. They complain that the informal nature of the appraisal process does not protect then from improper conduct and activities.
I am not going to comment on these complaints because I am not going to change any insurance company executive’s perspective on this issue. From my perspective, policyholder’s with professional representation at appraisals are doing much better than a decade ago, when they often went without professionals experienced in the appraisal process. My impression is that these higher awards are why some insurers no longer want to allow appraisal to continue.
The important aspect for the policyholder is that increasingly, there will no longer be a binding alternative dispute resolution process. Public adjusters may have to start preparing their work for litigation rather than appraisal. The exactness required in litigation is much higher than most appraisals because there will usually be greater critical analysis of the damage and coverage issues.
The bottom line is that I expect this trend to continue. Appraisals could become rare as more companies change their forms, removing the clause. Some policyholders may simply "give up" on a claim because litigation is a much more risky and demanding process than an informal appraisal of damages.