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Florida’s property insurance industry is in the middle of the hurricane season — the political hurricane season.
The state’s politicians promised voters their insurance premiums would go down after the state enacted reforms in January but the politicians and voters have been disappointed.
Gov. Charlie Crist has charged that some insurers may be deliberately ignoring the reform law known as House Bill 1A. This law among other things provided insurers with less expensive reinsurance from the state and officials hoped that insurers would pass the savings along to insureds.
But Crist has said some insurers might be buying more private reinsurance than they need, thereby undermining the state’s effort to lower rates.
Florida Insurance Commissioner Kevin McCarty has sounded the same theme in rejecting insurers’ rate decreases that he thinks are not big enough.
“HB1A made $12 billion of less expensive reinsurance available from the state, and the law requires the insurance companies to pass along that savings to their policyholders in the form of lower rates, not to be invested in extra, duplicative reinsurance contracts or profit margins,” McCarty has said.
McCarty’s staff says average savings should be around 24 percent. Insurers say they never agreed to that and when their filings started being made, they were showing much smaller savings, around 12 percent on average. Some insurance companies filed for increased rates.
“It’s all about rates,” maintains Sam Miller, of the industry’s Florida Insurance Council, who was one of the experts at the recent Demotech-Insurance Journal Private Sector Summit on Florida Property Insurance in Orlando.
“The savings promised by our governor and other key policy makers following the January special session have materialized for citizens in the subsidized residual market but not for the private market.”
Miller said lawmakers rolled back the rates for the residual market, Citizen’s Property Insurance Corp., “waiting until the next hurricane to worry about how they’re going to pay all those claims, and they will pay those claims through a statewide surcharge or even a tax increase.”
But private insurers can’t assess surcharges after a storm and have had to “respond to the insurance needs that their [hurricane] models demonstrate.” While some insurers have filed for rate cuts, the decreases have not been as numerous or deep as regulators want.
“And so now there is a furor. There’s even talk about bringing insurance company executives to Tallahassee…and forcing them to testify under oath,” noted Miller.
The forum for that may have just disappeared. A special legislative session scheduled for Sept. 18 in Tallahassee has been postponed.
Yet even if the private insurance executives were to go to Tallahassee, would anyone listen to them? Attendees at the Demotech summit were told that many in Tallahassee and across the state have tuned out.
“The legislators aren’t listening to us anymore. In fact, they’re listening to their constituents who are screaming about insurance back home,” Jeff Grady, of the Florida Association of Insurance Agents, said.
The executive summit was organized by Demotech, an Ohio-based financial analysis and actuarial services firm and an official research partner of Insurance Journal. Demotech has assigned its Financial Stability Ratings to the majority of the Florida-domiciled homeowners carriers,
Joseph Petrelli, an actuary and president of Demotech, organized the summit in part because he felt too much emphasis was being placed on the public sector at a time when a broader approach is needed in Florida.
“The preamble to Florida’s recent property insurance legislation states that ‘there is no single, quick, or easy solution to the current crisis, a comprehensive and creative approach is required,'” Petrelli told attendees. He said the summit was developed “to provide insurance professionals with a meaningful analysis of options and expertise available to supplement the efforts of the public sector.”
Petrelli pulled together experts on reinsurance, legislation, catastrophe modeling and what emerged as a key concern: how the industry communicates with the public at a time when nobody seems to be listening to anything except rate cuts.
At the summit, independent agents’ representative Grady hinted at a new Web-based program his association will soon launch that it hopes will bridge the communications gap between the industry and consumers.
Among the private sector executives who are talking if anyone will listen is Susan Straker, the president and one of the founders of Coral Insurance Co., a Florida only insurer. Straker thinks the reform passed in January that has stirred the latest political storm missed its target.
“I believe that it was aimed largely at the larger insurance companies. I don’t think that it was aimed specifically at the small domestic carriers such as Coral. But we were in the same situation that they were, and we were much less capable of diversifying where our underwriting activity in response to what could be considered largely punitive provisions,” Straker pointed out.
For a video report from the summit and video interviews with Demotech and key speakers, visit https://www.insurancejournal.com/broadcasts/. Also, for more information, see the Sept. 24 issue of Insurance Journal magazine.