This Property Insurance Coverage Blog set record visits last month. Thank you! I noticed a significant drop as the Easter weekend started. The Florida legislature took a well deserved breather last week as well. So, it seems like it is a good time to get caught back up.
For my fellow property insurance coverage fans, I suggest checking out:
- Chinese Drywall Claims May Be Covered Under Homeowners Policy–Favorable Developments in Louisiana
- The Cooperation Clause: Adjusting the Loss With An Insured
- Post-Loss Market Earnings Ignored in Mississippi – Understanding Business Interruption Claims, Part 14
On Twitter (http://twitter.com/chip_merlin), I made a Tweet over the weekend about a developing insurance market and risk which some may find interesting:
Nanotubes and Nanotechnology? Those risks are insurable @http://tinyurl.com/ydj854l
The FloridaThinks.com had a good article which summed up where insurance politics stands at the half way point– The Tally from Tallahassee, So Far:
The Senate Banking and Insurance Committee OK’d a bill last week that would allow homeowner insurance rates to rise by a statewide average of up to 33 percent over the next three years. Named the Consumer Choice bill (SB 876), the measure allows automatic average rate hikes of up to 5 percent the first year, 10 percent the second year and 15 percent the third year. Supporters, which include the Florida Chamber of Commerce and the insurance industry, say the bill will draw more insurers to the state and ensure companies have the reserves to pay claims in the event of hurricane losses. Opponents, including Gov. Charlie Crist and Insurance Commissioner Kevin McCarty, argue rates are already adequate and that higher premiums could force people from their homes. The governor vetoed a similar bill last year, but proponents hope they’ll have enough votes to override a veto this year.
I imagine most policyholders will eventually understand that this legislation should have been named the "Insurers Raise Rates as High as They Can" bill. That would be bad politics though, so it is understandable that a more palatable and populist name was given to protect those that promote this legislation.
In "More Homeowners’ Insurance Headaches" The Orlando Sentinel called on Governor Charlie Crist to veto this legislation if it passes. Its reasoning is persuasive and may give legislators some questions to ask before they vote on final passage of it:
The reason comes straight from one of the insurance industry’s top lobbyists, Mark Delegal, who represents State Farm. Mr. Delegal told a Senate committee Wednesday that, if left alone by regulators, the industry will be "the best protector of consumers."
That it will provide a "competitive marketplace where consumers get to decide what’s the best price for them."
And that the government and public need to trust the industry because, after all, it would lose business "if we jump our rates up 50 percent."
But 47 percent, Mr. Delegal, that’s palatable? That’s the rate increase State Farm tried to impose on homeowners last year.
Until, that is, regulators found the increase actuarially unjustified. And rejected it.
Mr. Delegal’s disingenuous comments are just the latest reason Mr. Crist mustn’t defang his insurance-industry watchdogs. They need plenty of bite to protect the public from more of the same. Why can’t the industry be trusted?
After State Farm didn’t honor state rules requiring the company to tell customers about discounts for hardening their homes against storms, regulators last year made it pay policyholders more than $100 million in credits and refunds.
A year earlier, the courts backed regulators who’d kept Allstate from writing new policies because the company didn’t fully divulge how it sets rates. Only after Allstate submitted documents regulators subpoenaed did the company get to solicit new business.
The property insurance issues in Florida are unique and not easy to solve. Anybody who has studied the issue has to agree with that. Our elected representatives and career insurance regulators have their work cut out trying to solve the problems of a state sticking out in the middle of Hurricane Alley. As I have said:
Most elected officials truly want to make the "world, country, state" a better place to live and work. They are not corrupt, but are truly well meaning people.
So, I feel it is important to speak up and indicate why certain laws will make things worse rather than better.
Those who say the "free market" should dictate the answer are living in a make believe state of economic bliss. Remember the spike in prices following the 2004 and 2005 storms? Remember the huge increases in rates requested by State Farm and Allstate within the past few years? What prevents an industry that is uniquely exempt from anti-trust regulations from simply raising rates in concert? The insurance industry has been regulated by the states since the mid 1940’s in return for the anti-trust exemption. Now, some in Florida want to allow these companies to raise rates without making them subject to state anti-trust rate regulations. It makes little economic sense and consumers will pay through the nose– even more than they are now. The Orlando Sentinel makes an excellent point, but it may come down to a veto if others do not point out that only the insurance industry is behind the logic of this legislation.