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Insurance scammers have already started preying on homeowners impacted by Hurricane Harvey.

The Federal Trade Commission has issued a warning that scammers are making robocalls in areas affected by the storm, tell homeowners that their flood insurance is overdue and must be paid immediately in order to maintain coverage.

But the Federal Emergency Management Agency, which oversees the National Flood Insurance Program, generally provides extended grace periods during natural disasters, according to a CBS News report. During the flooding in Louisiana last year, FEMA extended its usual 30-day grace period for renewals to 120 days in affected areas. So even if a homeowner’s premium payment was due at month’s end, his flood insurance wouldn’t be cancelled during the storm. 

“Every time there is a natural disaster, scammers jump in,” Lois Greisman, associate director for the FTC’s marketing practices division, told CBS News. “No one should be calling you about paying premiums right now. Everybody knows what is going on.”

Greisman also warned that FEMA representatives would never show up at your door to hand out financial aid. Some scammers go door-to-door and tell homeowners that they’re there to help – the homeowner just needs to pay an upfront “application” fee.
“That’s not the government’s method of doing business,” Greisman said.

According to the FTC, hurricane victims are much more likely to receive money from FEMA than to have to make a payment. The FTC is currently helping displaced hurricane victims cover temporary living costs, according to CBS News. The agency asks that flood victims make their initial claim online at www.disasterassistance.gov or call 1-800-621-3362.

And if you suspect someone is trying to scam you, call the FEMA Disaster Fraud Hotline at 1-866-720-5721.

Hurricane Harvey’s second act across southern Texas is turning into an economic catastrophe -- with damages likely to stretch into tens of billions of dollars and an unusually large share of victims lacking adequate insurance, according to early estimates.

Harvey’s cost could mount to $24 billion when including the impact of relentless flooding on the labor force, power grid, transportation and other elements that support the region’s energy sector, Chuck Watson, a disaster modeler with Enki Research, said by phone on Sunday. That would place it among the top eight hurricanes to ever strike the U.S.

“A historic event is currently unfolding in Texas,” Aon Plc wrote in an alert to clients. “It will take weeks until the full scope and magnitude of the damage is realized,” and already it’s clear that “an abnormally high portion of economic damage caused by flooding will not be covered,” the insurance broker said.

Many forecasters were hesitant over the weekend to make preliminary estimates for how much insurers might pay, potentially speeding recovery. Researchers were shifting from examining Harvey’s landfall Friday as a roof-lifting category 4 hurricane to the havoc it later created inland as a tropical storm. Typical insurance policies cover wind but not flooding, which often proves costlier. Blaming one or the other takes time.

In the Houston area, rainfall already has surpassed that of tropical storm Allison in 2001, which wreaked roughly $12 billion of damage in current dollars. In that case, only about $5 billion was covered by insurance, according to Aon.

Those storms are dwarfed by Hurricane Katrina, which struck in 2005 and devastated New Orleans. By some estimates, it inflicted $160 billion in total economic damage.

Most people with flood insurance buy policies backed by the federal government’s National Flood Insurance Program. As of April, less than one-sixth of homes in Houston’s Harris County had federal coverage, according to Aon. That would leave more than 1 million homes unprotected in the county. Coverage rates are similar in neighboring areas. Many cars also will be totaled.

“A lot of these people are going to be in very serious financial situations,” said Loretta Worters, a spokeswoman for the Insurance Information Institute. “Most people who are living in these areas do not have flood insurance. They may be able to collect some grants from the government, but there are not a lot, usually they’re very limited. There are no-interest to low-interest loans, but you have to pay them back.”

The federal program itself is already struggling with $25 billion of debt. The existing program is set to expire on Sept. 30 and is up for review in Congress, which ends its recess Sept. 5.

Investors Brace
Costs still will likely soar for insurance companies and their reinsurers, biting into earnings. As Harvey bore down on the coastline Friday, William Blair & Co., a securities firm that tracks the industry, said the storm could theoretically inflict $25 billion of insured losses if it landed as a “large category 3 hurricane.”

Policyholder-owned State Farm Mutual Automobile Insurance Co. has the largest share in the market for home coverage in Texas, followed by Allstate Corp., which is publicly traded. William Blair estimated that, in that scenario, Allstate could incur $500 million of pretax catastrophe losses, shaving 89 cents off of earnings per share.

Investors began bracing for losses last week. But many didn’t believe that Harvey could wipe out bonds that were issued to protect insurers against storm damage in the region, according to Brett Houghton, a managing principal at Fermat Capital Management. His firm manages more than $5 billion, with allocations to catastrophe bonds.

The Swiss Re Cat Bond Price Return Index dropped 0.44 percent in the week ended Aug. 25, the steepest decline since January. The benchmark is recalculated every Friday, so it’s unclear how the debt performed as the storm continued through Sunday. Reinsurers, which provide a backstop for primary carriers, also may get burned. That group include Bermuda-based companies Arch Capital Group Ltd., Axis Capital Holdings Ltd. and RenaissanceRe Holdings Ltd., according to a note last week from Meyer Shields, an analyst at Keefe, Bruyette & Woods.

Interrupting Business
Businesses are probably better covered than individuals. Companies across the retailing, manufacturing, health-care and hospitality industries will be seeking reimbursements from insurers for lost revenue during the storm and subsequent repairs, said Aon’s Jill Dalton, who helps manage claims.

But for Texas’s massive energy industry, it’s still too early to project how badly the storm will disrupt supply and distribution. That’s because the devastation keeps spreading.

“If it continues to rain, I just don’t think the situation is going to get better any time soon,” said Rick Miller, who leads Aon’s U.S. property practice. “In fact, it could get a lot worse.”
 

Just a day after being downgraded by ratings agency Demotech, Florida-based insurer Sawgrass Mutual Insurance Company has revealed it is under administrative supervision by the Florida Office of Insurance Regulation.

According to an amended consent order for administrative supervision dated Aug. 22, 2017, Sawgrass notified OIR of a plan for “orderly wind-down of the company’s operations” on Aug. 18, through a confidential consent order. The amended consent order said that plan is no longer feasible and that the move for administrative supervision should be made public “in order to facilitate the consideration of other plans for the orderly transition of Sawgrass’s business.”

Under Florida Law, administrative supervision is confidential unless otherwise specified. OIR may open the proceedings or hearings or make public the information.

The amended order states that “The Office finds and Sawgrass agrees, that it is in the best interest of its policyholders and the public to make this Consent Order public…” The order was signed by Sawgrass CEO Daniel O’Neal.

In a statement, OIR said “Under an Order of Administrative Supervision, the Office is working with Sawgrass Mutual Insurance Company and interested parties to develop a wind-down plan for the company, which includes the orderly transition of policies from Sawgrass to another insurer. Coverage for current Sawgrass policyholders remains in force until a plan is implemented. In the interim, policyholders may contact the Florida Market Assistance Plan to explore other options. Consumers may also research homeowners insurance companies through the Office’s CHOICES homeowners rate comparison tool via our website at www.floir.com.”

Sawgrass first became licensed in Florida in 2009 and currently has about 20,000 policies throughout the state with $35 million in premium written in the first quarter of 2017. The mutual insurer wrote voluntary homeowners through a network of independent agents. It bound just 222 new policies in Q1 of 2017, and had more than $39 million in exposure for policies in force that exclude wind coverage, according to OIR’s Quarterly Supplemental Report – Market Share Report system.

Sawgrass notified its agencies of the administrative supervision in an Aug. 22 email that was obtained by Insurance Journal. The email said the move is necessary “to allow Sawgrass and interested parties to develop a run-off plan for the company which includes the orderly transition of policies from Sawgrass to another insurer.”

The email further stated the plan could include the cancellation of all Sawgrass policies with at least 45 days’ notice and a guaranteed offer of coverage for those policies from another licensed insurer.

It appears Sawgrass’s problems began to brew after its second quarter earnings report, based on a downgrade in its Financial Stability Rating (FSR) of A (Exceptional) to L (licensed) from ratings agency Demotech on Aug. 21. Demotech released a statement saying the action was necessary despite a number of potential transactions in negotiation by the company.

“The company filed its initial year-end 2016 financial statement, reporting surplus in excess of $20 million, in a timely manner,” said Joseph Petrelli, Demotech president. “The company secured an effective reinsurance program prior to storm season. The focus of the company was to identify suitors and negotiate a transaction that was favorable to their policyholders rather than write additional new business.”

Demotech added the Sawgrass missed the deadline to report to Demotech the results of an independent audit and its second quarter 2017 financial statement, presented to Demotech on Aug. 16, as well as a revised year-end 2016 financial statement, “present surplus and other financial metrics at levels that no longer support the current FSR.”

It has been 25 years since Hurricane Andrew swept through South Florida leaving $26.5 billion (1992 USD) of economic damage in its deadly wake. Of that astonishing figure, only $15.5 billion was insured, dumping the remaining $11 billion economic loss on American society.

But what impact would Hurricane Andrew have if it struck today?

A new report from global reinsurer Swiss Re reveals that a similar event today would totally dwarf the losses experienced a quarter of a century ago. The company modelled the outcome of the exact same storm in 2017 and found that economic losses would be estimated at $80-100 billion in current US dollars, of which only $50-60 billion would be covered by insurance.

Celebrate excellence in insurance. Nominate a worthy colleague for the Insurance Business Awards!

Swiss Re also studied a scenario in which Andrew’s track shifted 20 miles north today, to directly strike Miami. Losses in this case would range from $100-300 billion, making it the costliest natural disaster ever in the US. Again, just over 50% of the damage would be covered by insurance, leaving a huge shortfall to be made up by taxpayers and the government.

“The results serve as a wake-up call to the insurance industry, homeowners, small businesses, public officials and the private sector,” said Marla Schwartz, atmospheric perils specialist, Swiss Re. “A common response is ‘sticker shock,’ as some of the numbers are hard to fathom and rather unsettling. Although it is certainly difficult to wrap your mind around an economic loss in the range of USD 300 billion, it is critical in order to truly address present-day hurricane risk.”

The levels of underinsurance are some of the most shocking statistics in the Swiss Re report. For lower-income residents or smaller enterprises in Florida, underinsurance can be blamed on the cost of coverage (premiums and deductibles), according to Schwartz.

“In emerging and developing markets, there seems to be a rather low level of risk awareness and risk culture,” she added. “Some people in these markets have never had insurance before or are not familiar with insurance products, so it is difficult to penetrate these markets with traditional products. This highlights the need to develop innovative products that address the unique needs of underinsured communities or those with historically poor risk awareness.

“Additionally, the US has not experienced a major (Category 3 or greater) hurricane landfall since Wilma in 2005. This extended quiet period can lead to complacency, and insurance take up rates begin to drop as memories of hurricanes fade. However, it is critical to point out that this quiet period does not translate to decreased risk: it’s not a matter of if a major hurricane will barrel through South Florida, but when.”

Preparing Florida for Andrew’s second strike requires team work, communication and education, according to Schwartz. Brokers need to share this “profound protection gap” with clients so that they fully understand their risk and have as much mitigation and protection in place as possible.

“Overall, our findings have the same take-away message for primary insurers, consumers and brokers,” Schwartz commented. “It is more important than ever to better understand hurricane risk, to learn about new solutions that address the protection gap, and to consider if insurance instruments are sufficient to cover financial needs in the event of a significant loss, like an Andrew.”

It has been 25 years since Hurricane Andrew swept through South Florida leaving $26.5 billion (1992 USD) of economic damage in its deadly wake. Of that astonishing figure, only $15.5 billion was insured, dumping the remaining $11 billion economic loss on American society.

But what impact would Hurricane Andrew have if it struck today?

A new report from global reinsurer Swiss Re reveals that a similar event today would totally dwarf the losses experienced a quarter of a century ago. The company modelled the outcome of the exact same storm in 2017 and found that economic losses would be estimated at $80-100 billion in current US dollars, of which only $50-60 billion would be covered by insurance.

Celebrate excellence in insurance. Nominate a worthy colleague for the Insurance Business Awards!

Swiss Re also studied a scenario in which Andrew’s track shifted 20 miles north today, to directly strike Miami. Losses in this case would range from $100-300 billion, making it the costliest natural disaster ever in the US. Again, just over 50% of the damage would be covered by insurance, leaving a huge shortfall to be made up by taxpayers and the government.

“The results serve as a wake-up call to the insurance industry, homeowners, small businesses, public officials and the private sector,” said Marla Schwartz, atmospheric perils specialist, Swiss Re. “A common response is ‘sticker shock,’ as some of the numbers are hard to fathom and rather unsettling. Although it is certainly difficult to wrap your mind around an economic loss in the range of USD 300 billion, it is critical in order to truly address present-day hurricane risk.”

The levels of underinsurance are some of the most shocking statistics in the Swiss Re report. For lower-income residents or smaller enterprises in Florida, underinsurance can be blamed on the cost of coverage (premiums and deductibles), according to Schwartz.

“In emerging and developing markets, there seems to be a rather low level of risk awareness and risk culture,” she added. “Some people in these markets have never had insurance before or are not familiar with insurance products, so it is difficult to penetrate these markets with traditional products. This highlights the need to develop innovative products that address the unique needs of underinsured communities or those with historically poor risk awareness.

“Additionally, the US has not experienced a major (Category 3 or greater) hurricane landfall since Wilma in 2005. This extended quiet period can lead to complacency, and insurance take up rates begin to drop as memories of hurricanes fade. However, it is critical to point out that this quiet period does not translate to decreased risk: it’s not a matter of if a major hurricane will barrel through South Florida, but when.”

Preparing Florida for Andrew’s second strike requires team work, communication and education, according to Schwartz. Brokers need to share this “profound protection gap” with clients so that they fully understand their risk and have as much mitigation and protection in place as possible.

“Overall, our findings have the same take-away message for primary insurers, consumers and brokers,” Schwartz commented. “It is more important than ever to better understand hurricane risk, to learn about new solutions that address the protection gap, and to consider if insurance instruments are sufficient to cover financial needs in the event of a significant loss, like an Andrew.”

The majority of homeowners do not view internal water leak damage as the most concerning home threat, despite the fact that water leaks are a more frequent risk than fire and theft, a new Chubb survey revealed.

“The time between when a leak occurs and when it is discovered is the single greatest factor in determining the amount of damage,” said Fran O’Brien, division president of Chubb North America Personal Risk Services. “As a result, leaks that occur while you’re away result in greater amounts of damage, in terms of both cost and severity.”

Nearly 80 percent of homeowners overlook threat of costly water leaks while on vacation, the survey found.

Instances of water damage have been rising dramatically. In the past 10 years, the frequency of sudden pipe bursts has nearly doubled. In 2015, water damage accounted for nearly half of all property damage, according to the Insurance Information Institute. Chubb’s new Homeowners’ Water Risk Survey measures homeowners’ attitudes toward home protection, the risks they’re most concerned about and what they are overlooking. The online survey of 1,200 homeowners finds that just 8 percent of homeowners correctly identify August as the month with the most water leak events, and when subsequently heading out on a late-summer vacation, just 22 percent shut off the water main (despite 88 percent knowing where it is located within their home).

While homeowners are particularly vulnerable during the summer travel season, the study finds many face year-round water exposures. For instance, despite the fact that 91 percent of homeowners rate themselves as “vigilant” or “doing an okay job” at preventative home maintenance, and that close to half (45 percent) have or know someone who has experienced a water leak in the past two years, only 18 percent have installed a water leak detection device.

Windshield-replacement schemes are causing a spike in the price of auto insurance throughout Florida, the state’s insurance commissioner has said.

The schemes, which are most rampant in the Tampa Bay area, involve drivers with cracked windshields signing over insurance benefits to repair contractors. Some of those contractors then charge insurance companies inflated prices for their work.

Insurers say that the “assignment of benefits,” as the practice is known, has become a magnet for fraud and abuse, according to a report by local news station ABC 27. That fraud and abuse often occurs through no fault of the policyholder.

Florida law mandates that windshield-replacement claims cost nothing out-of-pocket for insured drivers. That creates an opportunity for repair contractors looking to bilk insurers, ABC 27 reported.

“Consumers are told that there is a crack in their windshield, and ‘We can replace it right here in the parking lot for you,’” Florida Insurance Commissioner David Altmaier said. “‘We just need you to sign this form, please.’ What this is, is an assignment of benefits. They replace the windshield, and there is a dispute between the windshield company and the insurance company that goes to litigation. It begins to start to drive costs up.”

Altmaier said that there were 19,000 “assignment of benefits” windshield-claim lawsuits in Florida in 2016 alone. A decade before, there were less than 500.

Dozens of antique vehicles were destroyed when a fire swept through a garage outside the southern Illinois community of Staunton.

Staunton Fire Protection District Chief Rick Haase says about a third of the building that served as Country Classic Cars’ showroom and warehouse was engulfed in flames when firefighters arrived late Tuesday.

Firefighters from 13 departments tackled the blaze. Haase says the majority of the personnel were used to shuttle water to the site, which had no access to fire hydrants due to its rural location.

Business owner Russ Noel estimates about 150 classic cars likely worth millions were damaged.

Investigators with the Illinois State Fire Marshall’s Office were on scene Wednesday to look into the cause of the blaze. Haase says determining the origin of fires in a single large room is difficult.

Researchers again boosted the number of storms the Atlantic may produce before the hurricane season ends as a missing Pacific El Nino and warm waters present favorable storm conditions.

As many as 16 named storms may form in the Atlantic before the hurricane season ends Nov. 30, Colorado State University forecasters said in a report Friday, each with the potential to disrupt agriculture and energy markets. Of those, eight could become hurricanes and three major systems with winds of 111 miles (179 kilometers) per hour or more.

Agriculture in Florida, the world’s largest producer of orange juice behind Brazil, is vulnerable, while an estimated $28.3 trillion worth of homes, businesses and infrastructure are at risk in 18 Atlantic states, according to the Insurance Information Institute. Oil and natural gas rigs in the Gulf of Mexico are also exposed.

Overall, “conditions are more conducive than not for a more active season,” Phil Klotzbach, lead author of the report, said by telephone. “I think the biggest story this year is that we are not going to have El Nino.”

Without an El Nino in the Pacific, wind shear across the Atlantic that can tear apart tropical storms and hurricanes won’t be as severe, Klotzbach said. As a result, storms fueled by abnormally warm water in the Atlantic may have more time to develop and strengthen.

The forecast for storm activity has inched up from 11 in April, 14 in June and 15 last month, mainly because an El Nino that can dampen Atlantic systems has failed to emerge in the Pacific. The basin produces 12 named storms in an average season, with the most powerful ones usually forming between Aug. 20 and the start of October.

The potential for more storms translates into a 62 percent chance of a hit along the Atlantic coastline, higher than the 20th century average of 52 percent, Klotzbach said.

In June, relatively weak Tropical Storm Cindy managed to shut down 17 percent of Gulf of Mexico oil output and forced evacuations of rigs and production platforms. The rise of onshore fracking for gas has lowered Gulf of Mexico output to 4.1 percent of total U.S. production this year, down from 14 percent about a decade ago, Energy Information Administration data show.

“I think we care more about the remnants of tropical storms cooling down the Texas appetite for natural gas, rather than the storm impact on supply,” said Teri Viswanath, managing director for natural gas at PIRA Energy Group in New York.

The Atlantic has produced five storms so far this season, a threshold that typically isn’t crossed until Aug. 31, according to the National Hurricane Center. The first hurricane, which hasn’t happened yet, usually occurs by Aug. 10.

Last August’s prediction for 15 storms hit the actual number on the head. In 2015, Colorado State predicted eight storms with 11 ultimately forming.

U.S. teenagers are more reckless after their first few years of driving, often becoming overconfident in their abilities and putting themselves at higher risk for accidents, a new study shows.

More than half of high school seniors have car accidents or near misses, compared with 34 percent of sophomores, according to the study conducted by Liberty Mutual Insurance Co. and the group Students Against Destructive Decisions.

More people, including “hyper-connected” teenagers, are distracted by their phones while driving, and insurers are seeking to counter reckless behaviors amid an increase in car accidents in recent years. According to the study, 75 percent of high school seniors “feel confident” in their driving abilities, and 71 percent use a phone behind the wheel. The study said the misplaced confidence could stem from parents who taper off punishment for poor driving after their kids have a year or two of practice under their belts.

“Older teens are still inexperienced drivers — even if they feel otherwise,” Mike Sample, lead driving-safety consultant at Liberty Mutual, said in the report. “Using an app behind the wheel, even glancing away for a second, can impair your driving ability and set off a chain reaction that could lead to a near miss or crash.”

Phones aren’t the only issue. Driving while drowsy, speeding, having multiple passengers and browsing music become more prevalent as new drivers gain confidence.

Sam Bessette, a 16-year-old from Topeka, Kansas, said she sticks her phone in the cupholder of her 2009 Ford Escape while she drives.

“My mom is very against it,” Bessette said of distracted driving, “despite the fact she uses her phone all the time. But she tells me she’ll take my car.”

Bessette said she’s a “fairly good” driver, and her friends trust her behind the wheel. She was in a fender bender once, when the driver in front of her slammed on his brakes. She said she’d just barely glanced away to change the radio station and didn’t have enough time to react.

Dr. Gene Beresin, a senior adviser on adolescent psychiatry at SADD, said teens naturally gain confidence as they drive more.

“As a result, it is even more important for parents and teens to have conversations about safe driving practices to avoid potentially putting themselves and others at risk on the road,” Beresin said in the report.

Liberty Mutual, the third-largest U.S. property/casualty insurer, surveyed almost 3,000 teens from high schools across the country and 1,000 parents of young drivers for the study.

The insurer encourages parents to continue teaching their kids, even after they get licenses. Also, adults can use tracking devices that monitor driver habits and reward teens for safety behind the wheel, the Boston-based company said.

The Florida Office of Insurance Regulation has approved the following companies to participate in the October Citizens Property Insurance Corporation take-out period.

For the Oct. 17, 2017 Personal Residential Take-Out Period:

• Safepoint Insurance Company – approved to remove up to 35,000 personal residential policies (20,000 Personal Lines Account/15,000 Coastal Account)
• Southern Oaks Insurance Company – approved to remove up to 15,000 personal residential policies (5,000 Personal Lines Account/10,000 Coastal Account)

This approval brings the total number of potential personal and commercial residential policies approved for take-outs in 2017 to 139,244; the actual number of policies removed from Citizens so far in 2017 was 13,460 as of July 11. These take-outs are part of ongoing depopulation efforts to reduce the number of policies in state-created Citizens and transfer them back into the private insurance market. Policyholders who receive a take-out offer may choose to remain covered by Citizens through the opt-out process.

Citizens policies generally fall into three categories: Personal Residential (PR), such as a single family home or mobile home; Commercial Residential (CR), such as condominiums or apartments owned by a company or a condominium/homeowners association; and Commercial Non-Residential (CNR), such as a traditional business. Policies in those three categories fall into one of the following Account Lines: Citizen’s Personal Lines Accounts (PLA) and Commercial Lines Accounts (CLA) are mostly non-coastal properties; and the Coastal Account (CA) is coastal properties.

The companies approved to participate in a personal residential and/or commercial residential take-out along with the number of policies approved for removal are available on the OIR webpage. Typically, monthly approvals are posted to this webpage within a week of Citizens’ deadline for OIR to issue an approval.

Source: Florida Office of Insurance Regulation