Citizens Property Insurance Corp., the Florida state-run insurer of last resort, is anticipating its policyholder count will increase in 2018 for the first time since its efforts to shed policies through depopulation began several years ago.

As it moves on from a tumultuous 2017 that included a major hurricane and ongoing assignment of benefits (AOB) abuse, Citizens executives said at its board of governors meeting last week that it anticipates more than 60,000 policyholders from private insurance companies will return to the state-run insurer of last resort.

Citizens President, CEO and Executive Director Barry Gilway told the board at the Dec. 13 meeting that the Florida domestic insurance market’s combined ratio and surplus have declined, and the majority of Florida insurers experienced negative net income for the first time in five years.

While the active 2017 storm season is one factor contributing to deteriorating insurer results, the biggest factor is increasing costs from nonweather-related losses and AOB abuse fueled by attorneys and contractors. The industry has started taking steps to limit losses from AOB, with some insurers not writing in certain areas of the state where it is the rampant.

Citizens, which is statutorily obligated to offer coverage when the private market will not, will have to pick up these policies. Gilway said he expects Citizens will see significantly less depopulation next year.

“When the market is healthy, and companies are making money, depopulation soars; when it becomes negative, depopulation drops. We are not expecting a lot of depopulation next year,” Gilway said.

Instead, Gilway said, Citizens is expecting its overall policy count of 442,000 – the lowest it has been since the company was formed in 2002 – to climb back up to around 500,000. Citizens policy count reached a high of 1.4 million before the depopulation program began in 2012.

Gilway said the insurer’s personal lines accounts (PLA), where AOB is having the biggest impact, will grow by about 66,000 policies. The company expects its commercial lines policy count to continue to decline because the commercial market is so competitive.

Gilway said Citizens overall premium will likely grow by about $100 million primarily because of the growth in PLA, but he added that “the unfortunate thing is we are growing in unprofitable lines and losing business in profitable lines. It’s the nature of the beast.” Gilway said that brings more pressure to focus on finding solutions for the personal lines account segment.

Citizens took several steps in 2017 to mitigate nonweather-related losses and AOB abuse, in addition to an unsuccessful push for legislative reform. Over the summer, Florida regulators approved Citizens request for a $10,000 sublimit on nonweather-related water claims for policyholders who opt not to use the new Citizens managed repair and preferred vendor program. Citizens will also require that contractors and other third parties adhere to the same disclosure responsibilities as policyholders when they accept an assignment of benefit.

The policy changes go into effect for new and renewal policies on May 1, 2018, to coincide with the implementation of Citizens 2018 rates.

Gilway said Citizens’ other efforts to curb AOB abuse have been successful at stabilizing the overall cost of water damage claims, but added nonweather-related water claims remain double the cost of a non-litigated water damage claim in the Tri-County region of Miami-Dade, Palm Beach and Broward.

“The last couple years, at least we are maintaining the same level of severity,” he said.

Still, Citizens’ percentage of operating expenses relative to claims and litigation is increasing. The company expects AOB and litigation costs will account for about 23 percent of its 2018 operating expenses, up from 16 percent in 2017 – an increase of $17 million.

“The scam – and that’s what it is – continues. And until legislative changes are made, it will continue,” Gilway said.

Christine Ashburn, chief Communications, Legislative & External Affairs officer, told the board that the bill the industry supported last year to address AOB abuse and reform the one-way attorney statute blamed for the abuse was reintroduced by Florida Sen. Dorothy Hukill for the upcoming 2018 Florida legislative session, but she is not optimistic it will be passed next session as it has yet to have a hearing. The same bill passed by the Florida House in 2017 was also filed again this year.

“Our legislative priority remains unchanged from 2017 with our primary focus being meaningful assignment of benefits reform,” she said.

Hurricane Irma Response, New Claims System

Citizens has closed nearly 80 percent of the 63,600 Hurricane Irma claims and the company said it is continuing to work with policyholders whose claims remain open or whose closed claims need to be adjusted further. It reported about 1,476 of its total claims filed had an AOB attached, and 6,312 claims had representation. The total number of claims in the tri-county region was 58.4 percent.

Despite a projected $1.1 billion in Irma losses, Chris Gardner, chairman of Citizens Board of Governors, said the company maintains a $6.4 billion surplus and substantial reinsurance coverage following the payout of Irma claims.

Gilway told the board that Citizens is making improvements to its claims processing in the aftermath of Irma to help with efficiency and communication with its policyholders.

“There are lessons learned with every event, and we what we learned very quickly with Irma is that we did not have an online claims capability,” he said.

Gilway said Citizens was not prepared for the magnitude of calls that came in for Irma and the subsequent follow-up calls from customers requesting status updates on their claims. To meet this need after future events, Citizens is upgrading its claims system and implementing a customer portal. The new system will allow insureds and claimants to view the progress of their claims and, once fully implemented, report them online.

“From a consumer standpoint, it clearly will be a huge benefit,” he said.

Citizens will also upgrade its existing Guidewire software and storage platform, the first update since the system was implemented five years ago.

The Florida Office of Insurance Regulation (OIR) has approved statewide rate increases on 2018 personal and commercial property insurance rates for Citizens Property Insurance Corp.

OIR approved a statewide increase of 6.6 percent for homeowners multi-peril policies, but held rates steady for Monroe County policyholders until Citizens completes analyses and review of Hurricane Irma, which devastated the Florida Keys in September. Citizens’ 2018 request called for homeowners wind-only rates in the Keys to climb by 3.9 percent.

Chris Gardner, chairman of Citizens Board of Governors, said OIR’s rate order “balances the needs of policyholders facing challenges from Irma with its responsibility to maintain a healthy property insurance market.”

Under the approved rates, homeowners along the coast would see wind-only rates climb by an average of 0.9 percent. Rates for condominium unit owners would rise by a statewide average of 4.6 percent.
Citizens’ commercial property residential multi-peril rates will increase by 4.8 percent, while commercial property non-residential will increase by 8.1 percent. Wind-only commercial property residential will increase 10.3 percent.

The effective date for both new and renewal rates is no earlier than May 1, 2018.

Still, despite statewide increases, thousands of Citizens customers will see rate reductions.

OIR said the rate decision was as a result of its review of Citizens filings and the 200 comments and testimony received from policyholders and other interested parties, both by email and during a public rate hearing held on August 23, 2017, in Miami.

State insurance regulators postponed the rate filing review process, usually reached in September, on Citizens 2018 rate request to focus attention on response efforts following Hurricane Irma, a Category 4 hurricane that made landfall in the Keys on September 10, 2017.

OIR issued an emergency order to assist consumers recovering from this storm. That order expired on Dec. 3, 2017.

Industry-wide as of December 4, Hurricane Irma had resulted in more than 850,000 claims with insured losses of nearly $6.3 billion. Citizens said it expects to receive about 70,000 claims, including more than 9,000 from Monroe County. Statewide Citizens losses are expected to exceed $1.2 billion.

OIR’s new order calls on Citizens to review rating territories throughout Monroe County and analyze wind mitigation credits while working with local officials to review building codes for possible revision.

“The residents of the Florida Keys have withstood challenges and will continue to do so as they rebuild in the wake of Hurricane Irma,” said Barry Gilway, Citizens president, CEO and executive director. “We look forward to working with all stakeholders going forward to address issues discovered as a result of the storm.”

The hurricane season is officially over, but it didn’t go by without leaving a major mark on Florida and its insurance industry.

Hurricane Irma, a name most in the state won’t soon forget, first hit the Florida Keys as a category 4 storm on Sunday, Sept. 10, with 130-mile per hour winds. It then worked its way north passing over the east and west coasts.

Loss estimates from Hurricane Irma have ranged between $25 billion to $65 billion by catastrophe modelers. The Florida Office of Insurance Regulation (OIR) reported total estimated insured losses at more than $5.8 billion as of Nov. 13, with more than 689,000 residential property claims and 51,396 commercial property claims. Business interruption claims reached more than 3,700 as of Nov. 3.

In the immediate aftermath of the storm, 6.7 million homes and businesses — about 65 percent of the state — were without power.

The Florida Hurricane Catastrophe Fund said the state fund that provides backing to private insurers would pay about $5.1 billion in claims. Florida estimated it had spent nearly $650 million on emergency resources and clean up from the storm.

Florida’s state-run insurer of last resort, Citizens, expects $1.2 billion in insured losses and 70,000 Hurricane Irma claims over the next 18-24 months. The carrier said Nov. 29 it had closed nearly two-thirds of the 62,000 claims it had seen so far, including more than 42,400 claims in Miami-Dade, Broward and Monroe counties.

The damage to Florida crops was also epic. According to The Associated Press, Florida Agriculture Commissioner Adam Putnam said Irma’s path couldn’t have been “more lethal” for Florida agriculture, with few crops spared. More than half of the state’s iconic orange crop is estimated to be lost.

Could Have Been Worse

Hurricane Irma will go down as one of the top hurricanes in Florida history, but experts say it could have been worse.

As the storm tracked towards Florida in early September, some estimates put the cost of damage from Irma as high as $200 billion. But something called the “Bermuda High,” threw the hurricane slightly off course, sparing the most populated area of South Florida from the brunt of the storm. Bloomberg reported that the circular system hovering over Bermuda “jostled Irma onto Northern Cuba … where being over land sapped it of some power.”

Florida escaped the worst because “Irma’s powerful eye shifted westward, away from the biggest population center of Miami-Dade County,” Bloomberg said.

“The fact that it took a left turn at the last minute and didn’t give Miami a punch in the nose was a blessing,” said Marsh US Property Practice Leader Duncan Ellis.

Recovery Ongoing

Still, Irma did pack a powerful punch and the recovery will go on for some time. Companies are now working on getting insureds back on their feet.

One of the biggest issues in the aftermath of Irma has been a shortage of claims adjusters. The storm came just two weeks after Hurricane Harvey hit Texas and the industry has scrambled to bring in adjusters, leading to delays in resolving claims.

OIR reported in its Nov. 13 claims data that about 235,759 residential property claims reported to insurers remained open. The percentage of commercial property claims closed was 29.5 percent. 

“The biggest challenge is you get a backlog when catastrophes hit like this. [Hurricane Harvey] was so close to what happened in Florida,” said Bobby Raymond, owner of Jacksonville, Fla.-based Brightway, The Fort Caroline Agency. “There’s a limited pool of claims adjusters in the universe. We’ve warned clients carriers are doing the best they can, but they [could] take a while to get back to you.”

Raymond himself couldn’t get a claims adjuster out for almost a month after Irma caused two trees to fall on homes he owns. “That’s just typical,” he said.

Carriers have turned to technology, such as drones, to help with assessing claims.

EagleView, an aerial imagery provider, does inspections for insurance companies, including roof and structure damage, and property damage measurements. Kenneth Cook, SVP of EagleView OnSite Solutions, said its drone technology has handled thousands of Irma claims for insurers.

“It’s a new method for them to get their work done. After any kind of a storm event — especially with two major events back to back — insurance adjusters are busy around the country, and insurance companies are always looking for faster more efficient ways to help customers,” Cook said.

EagleView contracts with drone hobbyists and provides them with insurance certification training, including how to inspect a home for claims purposes. In some areas of Florida that were impacted by Irma, Cook said drones were not a good solution because of structural damage, but in other areas drones can capture detailed images of damage like missing shingles, fences blown down, or missing roof tiles.

“There are thousands of claims that drones are perfect for because in just 25 minutes the pictures are taken and uploaded, saving the carrier a lot of time,” he said.

New hurricane policies were also put to the test in the aftermath of Hurricane Irma. Policyholders of the new StormPeace product from Assured Risk Concepts (ARC) and California-based Topa Insurance Co. were reimbursed right away for hurricane expenses ranging from $1,000 to $15,000.

Alok Jha, CEO and founder of ARC, said as of mid-October about 90 percent of its customers had been paid for Irma losses.

The StormPeace product uses mobile technology to alert costumers in declared storm areas so they be paid right away for evacuation costs or damage to their homes.

“This product has no exclusions and pays promptly after a hurricane,” Jha said.

A contractor shortage has also delayed recovery efforts. Jake Morin, president of Construction for ProSight Specialty Insurance, said demand has surged for contractors in hurricane-hit areas, and so has demand for coverage. The company is working quickly to get contractors insured so they can help with rebuilding.

“Homeowners and businesses want to make sure they are working with a licensed and reputable contractor,” he said. “There is a flood of contractors trying to capitalize; make sure the work they are doing is the work they need to be doing.”

Lessons Learned

Experts are already looking at whether the state was adequately prepared for Irma and what should be done differently next time.

“Much hard work and preparation over the last few years has paid off during Citizens initial response to Hurricane Irma,” said Chris Gardner, chairman of Citizens’ board of governors, shortly after the storm. “However, given the magnitude of reported claims, we are sure to encounter unforeseen challenges. We will continue to learn, prepare and improve our response capabilities with each storm situation.”

Agency owner Raymond said despite the adjuster shortage, he’s been impressed with how carriers have improved their cat response and capabilities to process large claims volumes since Hurricane Matthew.

“We had less complaints from customers this year about not being able to get through to their carrier,” he said.

Marsh’s Ellis says Irma is a reminder of the importance of adequate insurance coverage, and that agents should take the time now to sit down with their clients and evaluate their coverage needs.

“People forget how significant these events are. It’s an eyeopener for people, especially in the residential space where flood isn’t covered,” Ellis said.

ProSight’s Morin agrees.

“Insurance is one of those items that you buy, but you don’t know what you have until you need it. Customers truly rely on their insurance agent to be their counsel and point them in the right direction and make sure they are covered,” he said.

Doug Wiles, president of Herbie Wiles Insurance Agency in St. Augustine, Fla., said Irma’s aftermath has highlighted the important work that insurance agents do. For instance, he has spent countless hours keeping information flowing between carriers and customers since the storm.

“It can be tough to get through to insurance companies and you are speaking to a different representative each time — it’s not like talking to an old friend or neighbor. The value of an agent at a time like this is incredible,” he said.

He added that the increasing frequency of catastrophes should not be overlooked.

“With the change in our climate, I am concerned we are going to see more of this activity and I am concerned about what that is going to do to the insurance industry, especially for those companies who have focused their business in Florida,” he said. “I think we need to take a careful look at how we spread that risk — and whatever that means to the companies involved.”

A Florida nursing home under investigation for the deaths of 13 patients after Hurricane Irma says in a letter to Congress that staff members did everything possible but couldn’t overcome a lack of power to the central air conditioner.

In a letter released Monday, Rehabilitation Center at Hollywood Hills attorney Geoffrey D. Smith told the House Energy and Commerce Committee that employees followed proper procedures between the air conditioner losing power on Sept. 10 and when the deaths began Sept. 13. The committee is investigating the deaths as are local police detectives and the state.

Smith said managers made repeated calls to Florida Power & Light, the state health care administration and Gov. Rick Scott in an effort to get the air conditioning power restored but got nowhere. Meanwhile, he says the facility’s main power never went out and employees used portable air conditioners and fans to cool the patients and kept them hydrated. There was no state law requiring nursing homes to have backup generators for their central air conditioners.

He said staff had been closely monitoring patients for two days when the deaths began without warning. He said the temperature inside the facility never exceeded 81 degrees, which would be within standards.

“We believe that there were multiple system failures that need to be considered and investigated before casting blame on persons who risked their own well-being to care for others during this natural disaster,” Smith wrote.

Scott’s office issued a statement Monday saying, “This facility had a responsibility to its patients to protect life during emergencies. We must learn why this facility chose not to evacuate their patients to the hospital across the street or call 911.”

Florida Power & Light says it followed the priority list for restoration as agreed to by Broward County.

Smith wrote in his letter that from Sept. 10 to 12, the staff monitored the facility’s 150 patients and none exhibited any sign of heat exhaustion.

He said about 3 a.m. on Sept. 13, several patients began showing signs of respiratory and cardiac distress. He said the staff summoned paramedics for each patient and followed proper protocols.

“The onset of heat stroke is impossible to predict and can occur in 10 to 15 minutes,” he said. He said the elderly are susceptible at 81 degrees (27 degrees Celsius).

He said about 6 a.m., Hollywood police officers and staff from Memorial Regional Hospital, the trauma center across the street, declared a mass casualty situation. Officers and hospital staff members have said the facility seemed excessively hot. Detectives took a temperature reading but that has not been released.

All patients were evacuated to Memorial over the next three hours. Three patients died at the nursing home, five later that day at Memorial and five in subsequent days at the hospital. A 14th death was later determined not to be related. The dead ranged in age from 57 to 99, with most from their 70s to 90s.

Smith rejected criticism that the center should have evacuated its patients to Memorial earlier, saying that would violate established emergency procedures.

“Hospitals are critical facilities that are supposed to be used for individual cases,” not as mass evacuation centers, he wrote.

Shortly after the evacuation, an FPL crew arrived and restored the air conditioning’s power in 20 minutes, he wrote.

He said 242 other Florida nursing homes lost power. He said he is seeking information on deaths at other facilities to see if they spiked during the blackout.

More than 63,000 recreational boats were damaged or destroyed as a result of Hurricane Harvey and Hurricane Irma, with a combined dollar damage estimate of $655 million, according to the Boat Owners Association of the United States (BoatUS).

BoatUS, a national service group for recreational boaters, noted that these numbers are strikingly close to 2012’s Hurricane Sandy, which remains the single-largest industry loss with more than 65,000 boats damaged and more than $650 million in estimated losses.

This year’s Hurricane Irma damaged or destroyed 50,000 vessels with approximately $500 million in recreational boat damage, while Hurricane Harvey inflicted a damage toll of $155 million on a toll on about 13,500 boats.

“These two storms were as different as night and day,” said BoatUS Marine Insurance Program Vice President of Claims Rick Wilson. “The boats that were hit the hardest by Harvey were located on a relatively small slice of Texas coast, while we saw damage to recreational vessels from Irma in every corner of Florida.”

BoatUS said its catastrophe team recently completed two months of field operations arranging for repairs, salvage or wreck removals for BoatUS Marine Insurance program members and GEICO Marine Insurance customers.

“While Hurricane Irma’s losses are significant, it could have been much worse,” added Wilson. “Irma ultimately traveled up Florida’s West Coast and not the East, which was initially forecast. And while locations in the right front quadrant of the storm such as Big Pine Key and Marathon were hit hard with a Category 4 storm, Irma lost strength as it approached the mainland and swept up Florida. As the storm passed east of Tampa Bay, waters receded and came back gradually, also lessening surge damage.”

The National Flood Insurance Program (NFIP) has come under intense scrutiny in the past few months after its scheduled renewal period coincided with a dramatic and costly hurricane season.

Houston faced one of the worst US flood disasters in recent history as a result of Hurricane Harvey battering the Gulf Coast – and the majority of homes didn’t have flood insurance.

The hurricanes caused projected losses of $16 billion, meaning the NFIP would completely drain its financial resources according to a letter from Office of Management and Budget Director Mick Mulvaney sent to Congress on October 04.

Last month, the US House of Representatives passed a $36.5 billion disaster relief bill that would forgive $16 billion in debt owed by the NFIP. But there are still serious issues Congress needs to address, according to Nat Wienecke, senior vice president, Federal Government Relations, PCI.

“Congress has never failed to meet the obligations in the NFIP program for consumers. The consensus is that promises made to consumers should be promises kept,” Wienecke told Insurance Business. “But the reality is, Congress has designed a program that is not actuarily sound. It would pass no inspection by any insurance regulator on the planet for solvency.

“The NFIP as a program, due to its subsidization rates, is not structurally designed to handle catastrophes. That’s part of the thought process behind not requiring the program to take on more debt [relieving the $16 billion]. If you were to add more debt to its interest payments, it would just make the NFIP even more structurally unsound that it already is.”  

Following the $16 billion relief, the NFIP will still owe around $46 billion in debt to US taxpayers. One major area where taxpayers are left to pick up the slack is in guaranteed mortgages, according to Wienecke.  

In Houston, around 80,000 homes suffered uninsured flood losses during Harvey. For some, the only redress would have been to get a loan to rebuild their home, which might in turn have made it unaffordable. If they abandon their homes, who’s going to cover the mortgages? The taxpayer. 

“I think Congress needs to spend more time looking at the risk floods play on mortgages that are guaranteed by the taxpayer,” Wienecke commented. “What’s the real taxpayers’ exposure for people outside of the 100-year flood zone?

“They’re going to have to pay one way or another.”
 

The owner of a Florida construction company has been arrested for allegedly obtaining a fraudulent workers’ compensation policy by underreporting the number of staff he employed, the company’s annual payroll amount and the company’s scope of work.

According to a statement from Florida Chief Financial Officer Jimmy Patronis and the Department of Financial Services (DFS) Carlos Contreras, owner of DJC Builders & Construction was arrested last month after providing false information on his insurance application and illegally avoiding paying more than $ million in premium payments for an adequate policy.

Contreras allegedly claimed his company’s annual payroll was $273,786, and thus was quoted an annual workers’ compensation policy premium of $25,311. However, between January and August 2017, DFS investigators determined that Contreras cashed at least 620 payroll checks for DJC Builders & Construction. In total, nearly $6.5 million in payroll was cashed using various money service businesses located across the state. DFS said if Contreras had accurately reported the company’s total payroll, number of employees and correct work description, the company’s proper workers’ compensation premium would have been more than $1.2 million.

Contreras was arrested on Oct. 19 and transported to the Duval County jail. He has been charged with one count of knowingly concealing payroll and one count of scheme to defraud.

The case will be prosecuted by the Duval County State Attorney’s Office and if convicted, Contreras could face up to 60 years in prison.

“When companies lie to obtain cheaper, inadequate workers’ compensation policies, staff or property owners are left vulnerable to covering sky-high medical costs if a worker gets injured on the job, and free markets are disrupted by scammers who can underbid their legitimate competitors,” Patronis said.

Florida Insurance Commissioner David Altmaier has ordered a statewide overall workers’ compensation rate decrease of 9.8 percent, a slightly higher decrease than the 9.6 percent decrease filed by the National Council on Compensation Insurance (NCCI) back in August.

Altmaier’s order disapproving NCCI’s 2018 rate filing was issued by the Florida Office of Insurance Regulation on Tuesday, and stated NCCI’s rate request be amended and refiled by Nov. 7, 2017.

Altmaier’s order cited NCCI’s 2 percent allowance for profit and contingencies in its rate filing as the reason for rates being disapproved. The order states that the refiling should contain a profit and contingencies provision no greater than 1.85 percent.

The rate decrease will come as a welcome surprise for many Florida businesses that were expecting additional rate increases after the Florida Supreme Court issued two decisions – Castellanos v. Next Door Company and Westphal v. City of St. Petersburg, – in 2016 that sent rates up by double digits this year.

“Using new data, this experience based filing proposes a decrease in rate level based on data from policy years 2014 and 2015 valued as of year-end 2016,” the order states. “While some of the experience used as the basis for this filing occurred before the recent Florida Supreme Court decisions, a portion of the experience period includes claims that occurred after the decisions.”

At a rate hearing in mid-October, NCCI said a decline in claims frequency due, in part, to safer workplaces, enhanced efficiencies in the workplace, increased use of automation, and innovative technologies were partly behind the recommended decrease. NCCI said this trend is not unique to Florida but countrywide, and is expected to continue in the future.

According to OIR’s order, from 2011 to 2015, the cumulative decreases in the indemnity and medical loss ratios were 19.9 percent and 12.3 percent, respectively. The primary reason for the declining loss ratios is a significant reduction in the lost-time claim frequency which declined by 45 percent from 2001 to 2015 with over 8 percent of the decline occurring in 2014 and 2015.

“Even after considering the impact of the Castellanos and Westphal decisions, other factors at work in the marketplace combined to contribute to the indicated decrease, which included reduced assessments, increases in investment income, decline in claim frequency, and lower loss adjustment expenses,” the order states.

However, the order also mandates that NCCI provide detailed analysis of the effects of the Castellanos decision by the Florida Supreme Court in future filings, which accounted for 10.1 percent of the 14.5 percent increase in Florida workers’ compensation rates this year.

“To ensure workers’ compensation rates are not excessive, inadequate or unfairly discriminatory … it is imperative that additional quantitative analysis be conducted to determine the effect the Castellanos decision is having on the Florida workers’ compensation market and the data used to support future rate filings,” the order states. “The analysis may include alternative data sources and should examine changes to the Florida workers’ compensation market that are attributed to or observed as a result of the recent court decision.”

Approval of a revised rate decrease is contingent on the amended filing being submitted with changes as stipulated within the order. If approved by OIR, the revised rate decrease would become effective on Jan. 1, 2018 for new and renewal business.

Hurricane Irma’s damaging rampage through Florida may require the state fund that provides backing to private insurers to pay up to $5.1 billion in claims.

Anne Bert, chief operating officer for the Florida Hurricane Catastrophe Fund, said Thursday the fund will be able to pay claims with cash. That means the fund will not have to borrow any money.

The financial health of the fund is important because the state can impose a surcharge on most insurance policies to replenish it if money runs out. Some critics have called the surcharge a “hurricane tax.”

The fund entered storm season in good financial shape and new estimates conclude the fund could borrow up to nearly $8 billion.

The $5.1 billion claims estimate is preliminary, but actuaries said they based it on experience from previous hurricanes.

Copyright 2017 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

An unlicensed contractor from Fort Myers, Fla., has been arrested after he was found to be conducting subpar roof repairs and operating without insurance in the wake of Hurricane Irma.

Chief Financial Officer Jimmy Patronis said Oscar M. Palma was arrested this month by the Department of Financial Services’ Disaster Fraud Action Strike Team.

Palma was reported to authorities after allegedly making subpar roof repairs to an area apartment complex following Hurricane Irma. A statement from DFS said an investigation was then launched where fraud detectives found Palma was advertising himself as a licensed and insured contractor, but held no workers’ compensation coverage and was not licensed as a contractor.

“When contractors fail to secure workers’ compensation coverage, a myriad of risks are presented, and we are sending a message that taking short cuts will not be tolerated,” Patronis said. “If any of Palma’s workers were to get injured, the property owners, who are already going through high-stress and costly times dealing with Hurricane Irma damages, or the employee themselves are forced to pay out-of-pocket for medical expenses. Our efforts are focused on ensuring our residents, consumers and employees don’t fall victim to Irma twice, and these types of uninsured activities could cause just that.”

The Department’s Bureau of Workers’ Compensation Compliance received a tip Oct. 12, 2017, alleging unlicensed, uninsured and careless roof work was being performed by Palma’s company. Investigators visited one of Palma’s current work sites and issued a stop work order upon confirming Palma failed to secure workers’ compensation insurance and Palma’s confession to having no professional license.

He was arrested Oct. 13, 2017, and transported to Lee County Jail.

This case will be prosecuted by the Lee County Office of the State Attorney, 20th Judicial Circuit. If convicted, Palma could face up to five years in prison.

DFS’s anti-fraud strike team consists of three teams working in areas heavily impacted by Hurricane Irma including South Florida, Miami-Dade and Monroe counties; Southwest Florida, including Lee and Collier counties; and Central Florida, including Polk and Orange counties. To report suspected fraud, call the Department’s toll-free Fraud Tip Hotline at 1-800-378-0445.

Jennifer Smith doesn’t like the term “accident.” It implies too much chance and too little culpability.

A “crash” killed her mother in 2008, she insists, when her car was broadsided by another vehicle while on her way to pick up cat food. The other driver, a 20-year-old college student, ran a red light while talking on his mobile phone, a distraction that he immediately admitted and cited as the catalyst of the fatal event.

“He was remorseful,” Smith, now 43, said. “He never changed his story.”

Yet in federal records, the death isn’t attributed to distraction or mobile-phone use. It’s just another line item on the grim annual toll taken by the National Highway Transportation Safety Administration [NHTSA]—one of 37,262 that year. Three months later, Smith quit her job as a realtor and formed Stopdistractions.org, a nonprofit lobbying and support group. Her intent was to make the tragic loss of her mother an anomaly.

To that end, she has been wildly unsuccessful. Nine years later, the problem of death-by-distraction has gotten much worse.

Over the past two years, after decades of declining deaths on the road, U.S. traffic fatalities surged by 14.4 percent. In 2016 alone, more than 100 people died every day in or near vehicles in America, the first time the country has passed that grim toll in a decade. Regulators, meanwhile, still have no good idea why crash-related deaths are spiking: People are driving longer distances but not tremendously so; total miles were up just 2.2 percent last year. Collectively, we seemed to be speeding and drinking a little more, but not much more than usual. Together, experts say these upticks don’t explain the surge in road deaths.

Three Big Clues

There are however three big clues, and they don’t rest along the highway. One, as you may have guessed, is the substantial increase in smartphone use by U.S. drivers as they drive. From 2014 to 2016, the share of Americans who owned an iPhone, Android phone, or something comparable rose from 75 percent to 81 percent.

The second is the changing way in which Americans use their phones while they drive. These days, we’re pretty much done talking. Texting, Twitter, Facebook, and Instagram are the order of the day—all activities that require far more attention than simply holding a gadget to your ear or responding to a disembodied voice. By 2015, almost 70 percent of Americans were using their phones to share photos and follow news events via social media. In just two additional years, that figure has jumped to 80 percent.

Finally, the increase in fatalities has been largely among bicyclists, motorcyclists, and pedestrians—all of whom are easier to miss from the driver’s seat than, say, a 4,000-pound SUV—especially if you’re glancing up from your phone rather than concentrating on the road. Last year, 5,987 pedestrians were killed by cars in the U.S., almost 1,100 more than in 2014—that’s a 22 percent increase in just two years.

Safety regulators and law enforcement officials certainly understand the danger of taking—or making—a phone call while operating a piece of heavy machinery. They still, however, have no idea just how dangerous it is, because the data just isn’t easily obtained. And as mobile phone traffic continues to shift away from simple voice calls and texts to encrypted social networks, officials increasingly have less of a clue than ever before.

Out of NHTSA’s full 2015 dataset, only 448 deaths were linked to mobile phones—that’s just 1.4 percent of all traffic fatalities. By that measure, drunk driving is 23 times more deadly than using a phone while driving, though studies have shown that both activities behind the wheel constitute (on average) a similar level of impairment. NHTSA has yet to fully crunch its 2016 data, but the agency said deaths tied to distraction actually declined last year.

Deadlier Than Data Shows

There are many reasons to believe mobile phones are far deadlier than NHTSA spreadsheets suggest. Some of the biggest indicators are within the data itself. In more than half of 2015 fatal crashes, motorists were simply going straight down the road—no crossing traffic, rainstorms, or blowouts. Meanwhile, drivers involved in accidents increasingly mowed down things smaller than a Honda Accord, such as pedestrians or cyclists, many of whom occupy the side of the road or the sidewalk next to it. Fatalities increased inordinately among motorcyclists (up 6.2 percent in 2016) and pedestrians (up 9 percent).

“Honestly, I think the real number of fatalities tied to cell phones is at least three times the federal figure,” Jennifer Smith said. “We’re all addicted and the scale of this is unheard of.”

In a recent study, the nonprofit National Safety Council found only about half of fatal crashes tied to known mobile phone use were coded as such in NHTSA databases. In other words, according to the NSC, NHTSA’s figures for distraction-related death are too low.

Perhaps more telling are the findings of Zendrive Inc., a San Francisco startup that analyzes smartphone data to help insurers of commercial fleets assess safety risks. In a study of 3 million people, it found drivers using their mobile phone during 88 percent of trips. The true number is probably even higher because Zendrive didn’t capture instances when phones were mounted in a fixed position—so-called hands free technology, which is also considered dangerous.

“It’s definitely frightening,” said Jonathan Matus, Zendrive’s co-founder and chief executive officer. “Pretty much everybody is using their phone while driving.”

There are, by now, myriad technological nannies that freeze smartphone activity. Most notably, a recent version of Apple’s iOS operating system can be configured to keep a phone asleep when its owner is driving and to send an automated text response to incoming messages. However, the “Do Not Disturb” function can be overridden by the person trying to get in touch. More critically, safety advocates note that such systems require an opt-in from the same users who have difficulty ignoring their phones in the first place.

State Data Collection

In NHTSA’s defense, its tally of mobile phone-related deaths is only as good as the data it gets from individual states, each of which has its own methods for diagnosing and detailing the cause of a crash. Each state in turn relies on its various municipalities to compile crash metrics—and they often do things differently, too.

The data from each state is compiled from accident reports filed by local police, most of which don’t prompt officers to consider mobile phone distraction as an underlying cause. Only 11 states use reporting forms that contain a field for police to tick-off mobile-phone distraction, while 27 have a space to note distraction in general as a potential cause of the accident.

The fine print seems to make a difference. Tennessee, for example, has one of the most thorough accident report forms in the country, a document that asks police to evaluate both distractions in general and mobile phones in particular. Of the 448 accidents involving a phone in 2015 as reported by NHTSA, 84 occurred in Tennessee. That means, a state with 2 percent of the country’s population accounted for 19 percent of its phone-related driving deaths. As in polling, it really depends on how you ask the question.

“Crash investigators are told to catch up with this technology phenomenon”

Massachusetts State Police Sergeant Christopher Sanchez, a national expert on distracted driving, said many police departments still focus on drinking or drug use when investigating a crash. Also, figuring out whether a mobile phone was in use at the time of a crash is usually is getting trickier every day—proving that it precipitated the event can be even harder to do.

Prosecutors have a similar bias. Currently, it’s illegal for drivers to use a handheld phone at all in 15 states, and texting while driving is specifically barred in 47 states. But getting mobile phone records after a crash typically involves a court order and, and even then, the records may not show much activity beyond a call or text. If police provide solid evidence of speeding, drinking, drugs or some other violation, lawyers won’t bother pursuing distraction as a cause.

“Crash investigators are told to catch up with this technology phenomenon—and it’s hard,” Sanchez said. “Every year new apps are developed that make it even more difficult.” Officers in Arizona and Montana, meanwhile, don’t have to bother, since they allow mobile phone use while you drive. And in Missouri, police only have to monitor drivers under age 21 who pick up their phone while driving.

Like Smith, Emily Stein, 36, lost a parent to the streets. Ever since her father was killed by a distracted driver in 2011, she sometimes finds herself doing unscientific surveys. She’ll sit in front of her home in the suburbs west of Boston and watch how many passing drivers glance down at their phones.

“I tell my local police department: ‘If you come here, sit on my stoop and hand out tickets. You’d generate a lot of revenue,'” she said.

Since forming the Safe Roads Alliance five years ago, Stein talks to the police regularly. “A lot of them say it surpasses drunk driving at this point,” she said. Meanwhile, grieving families and safety advocates such as her are still struggling to pass legislation mandating hands-free-only use of phones while driving—Iowa and Texas just got around to banning texting behind the wheel.

“The argument is always that it’s big government,” said Jonathan Adkins, executive director of the Governors Highway Safety Association. “The other issue is that … it’s hard to ban something that we all do, and we know that we want to do.”

“We all know what’s going on, but we don’t have a breathalyzer for a phone”

Safety advocates such as Smith say lawmakers, investigators and prosecutors won’t prioritize the danger of mobile phones in vehicles until they are seen as a sizable problem—as big as drinking, say. Yet, it won’t be measured as such until it’s a priority for lawmakers, investigators and prosecutors.

“That’s the catch-22 here,” Smith said. “We all know what’s going on, but we don’t have a breathalyzer for a phone.”

Perhaps the lawmakers who vote against curbing phone use in cars should watch the heart-wrenching 36-minute documentary filmmaker Werner Herzog made on the subject. Laudably, the piece, From One Second to the Next, was bankrolled by the country’s major cellular companies. “It’s not just an accident,” Herzog said of the fatalities. “It’s a new form of culture coming at us, and it’s coming with great vehemence.”

Adkins has watched smartphone culture overtake much of his work in 10 years at the helm of the GHSA, growing increasingly frustrated with the mounting death toll and what he calls clear underreporting of mobile phone fatalities. But he doesn’t think the numbers will come down until a backlash takes hold, one where it’s viewed as shameful to drive while using a phone. Herzog’s documentary, it appears, has had little effect in its four years on YouTube.com. At this point, Adkins is simply holding out for gains in autonomous driving technology.

“I use the cocktail party example,” he explained. “If you’re at a cocktail party and say, ‘I was so hammered the other day, and I got behind the wheel,’ people will be outraged. But if you say the same thing about using a cell phone, it won’t be a big deal. It is still acceptable, and that’s the problem.”

Florida’s famous oranges are still falling from trees and rotting on the ground weeks after Hurricane Irma, and the state’s agriculture commissioner said Thursday there will be fewer Florida vegetables on Thanksgiving tables and a shortage of poinsettias at Christmas.

Agriculture Commissioner Adam Putnam and Florida farmers updated the state Senate Agriculture Committee that the storm damaged crops of all kinds, with losses topping $2.5 billion. Losses are reported to peanuts, avocadoes, sugar, strawberries, cotton and tomatoes. The storm also affected timber, milk production and lobster and stone crab fishing.

“The fresh winter vegetables that are on people’s Thanksgiving tables won’t be there this year because of Hurricane Irma,” Putnam said. “The losses are staggering; in many cases, the tale of those losses will be multiple years … This is more than just damage contained in just one crop year.”

He said Irma’s path couldn’t have been “more lethal” for Florida agriculture, with few crops spared. The citrus industry was particularly hard hit, with some estimates of more than half the orange crop lost.

The U.S. Department of Agriculture released its Florida citrus forecast Thursday, estimating that Florida will produce 54 million boxes of oranges, down 21 percent from last year.

But the Florida Citrus Mutual said the federal government should have delayed the forecast because it’s still too early to tell just how hard hit the industry was after the storm. It said production would be closer to 31 million boxes of oranges, or a 55 percent drop from the 68.7 million boxes produced in the 2016-2017 season.

“Irma hit us just a month ago and although we respect the skill and professionalism of the USDA, there is no way they can put out a reliable number in that short time period,” said Michael W. Sparks, CEO of the Florida Citrus Mutual.

The agricultural losses are expected to affect consumers, but how much so is still to be determined.

“I would expect prices to rise as a result of the winter vegetable capital of America being put out of the production going into the holiday season,” Putnam said, but he added that there could be a flood of foreign fruit and produce entering the market that could keep prices from rising – something he said could further hurt Florida farmers.

“That could, over time, replace market share that should be going to Florida’s farmers,” he said.

Committee Chairwoman Sen. Denise Grimsley talked about the damage she’s seen in her family’s orange groves.

“The fruit on the ground was so thick it was hard to walk through, and the smell is now bad because of the rotting fruit,” she said.

Putnam’s family also farms orange groves. He told reporters they’ve lost about half the crop.

“It’s not good,” he said. “You can stand in the grove and continue to hear fruit fall. It’s a double kick in the gut because this was the best crop we’ve set in years. We had better crop, better crop size, more fruit on the trees than I’ve seen in years. It was finally a crop to be proud of and now it’s laying on the ground.”

House lawmakers unveiled a bill Tuesday night that would provide $36.5 billion in emergency funding for hurricane and wildfire relief requested by the Trump administration.

With Congress under pressure to provide urgent help to storm victims in Texas, Florida and Puerto Rico, the House measure includes $18.7 billion for the Federal Emergency Management Agency’s disaster relief fund, as well as $16 billion to replenish the nation’s flood insurance program.

The FEMA funding includes a provision that would give Puerto Rico and the U.S. Virgin Islands access to $4.9 billion in low-interest Treasury loans so they doesn’t run out of cash as the islands recovers. That funding is needed to help the territory pay government salaries and other expenses after Oct. 31. House Speaker Paul Ryan said the bill will be on the House floor Thursday for a vote, after which it could taken up by the Senate when that chamber returns next week.

“Harvey, Irma, Maria, they’ve been devastating for Texas, Florida, Puerto Rico,” Ryan said at a news conference Wednesday. “This is a time when we here in Congress need to respond because that is our responsibility.”

House Appropriations Chairman Rodney Frelinghuysen of New Jersey said, “You have a lot of people in pain,” adding that he expects the next tranche of aid to be passed before December. “I think there is some momentum to get some money out the door as quickly as possible.”

Congress needs to act quickly, particularly when it comes to flood insurance. The National Flood Insurance Program needs additional funding to cover claims from all the recent storms.

The bill will be brought to a vote as soon as Thursday under a fast-track procedure that will require Democratic votes to pass. Minority Leader Nancy Pelosi of California praised the measure.

An aide to Pelosi said she fought for two items included in the bill: loans for Puerto Rico and the U.S. Virgin Islands, also suffering from hurricane damage, and $1 billion in disaster funds over the White House request in light of California wildfires. The bill includes no flood insurance policy changes, which the aide said is a victory, after Republicans had discussed revisions to the program.

Representative Mark Walker of North Carolina, who heads the conservative Republican Study Committee, said he is disappointed the measure doesn’t include any spending cuts to offset the disaster funding and still trying to decide whether to vote for it.

“This is a very frustrating place,” he said Wednesday.

Jim Jordan, an Ohio Republican and member of the conservative Freedom Caucus, said he won’t support the bill because there aren’t plans to offset the costs and because there aren’t changes to the flood insurance program.

Several other lawmakers, from both parties, said they’d support the legislation.

Texas Republican Blake Farenthold said: “They don’t have to sell me on that one.”

Nita Lowey, a New York Democrat, said disaster victims deserve help from the federal government. “This package provides critical public and individual disaster assistance, flood insurance aid, liquidity for Puerto Rico’s government, and help for communities devastated by wildfires,” she said in a statement.

The loan authority for Puerto Rico is also a needed financial lifeline for the U.S. territory of 3.4 million people that’s been operating in bankruptcy since May, which makes it difficult — if not impossible — for the government to borrow on its own.

With the island still recovering from the storm, much of the economy there has ground to a halt, radically curtailing the government’s tax collections. Puerto Rico’s treasury secretary, Raul Maldonado, said last week that the territory faces a government shutdown on Oct. 31 that would halt its hurricane recovery efforts if Congress doesn’t intervene.

The package includes a $150 million advance to cover a matching-funds requirement from the commonwealth, an administration official said. It would be available for easing short-term expenses such as payroll and pension payments, though not for debt service on bonds.

The devastation wrought by Hurricane Maria is threatening to exacerbate the financial crisis that had already pushed the island into a series of record-setting defaults on its $74 billion of debt. The scale of the damage, which has left most of the island without electricity almost three weeks after the storm, has caused Puerto Rico bond prices to tumble as investors speculate they’re likely to recoup even less of their investments.

Puerto Rico’s delegate to Congress, Jenniffer Gonzalez Colon, said at a news conference with House Republican leaders Wednesday that she was pleased that the aid plan will help the island deal with the “humanitarian crisis.”

“We still have a dire situation on the island,” Gonzalez said. “It’s not easy when you’re used to living in an American way of life and then somebody tells you that you’re going to be without power for six or eight months.”

“We’re still counting the fatalities,” she said, with 45 dead as of Wednesday. More than 86 percent of the population still lacks electricity and more than 44 percent is without running water, Gonzalez said.

One notable omission from the broader funding measure is additional funding for the Community Development Block Grant Program at the Department of Housing and Urban Development, which a bipartisan group of Texas lawmakers had asked to be included in this measure.

“I am counting on the next supplemental having the extra funds for Texas” Representative John Carter of Texas, the chairman of the House Homeland Security Appropriations subcommittee said.

Anti-fraud strike teams comprised of investigators working for the Department of Financial Services’ Division of Investigative and Forensic Services will soon be deployed across the state in an effort to to protect Floridians from post-storm fraud, according to a statement from the Florida Department of Financial Services.

CFO Patronis announced the formation of three teams that will work in areas heavily impacted by Hurricane Irma: South Florida, including Miami-Dade and Monroe counties; Southwest Florida, including Lee and Collier counties; and Central Florida, including Polk and Orange counties.

Patronis is working directly with prosecutors housed within each of the respective State Attorney’s Office, to “ensure that law-breakers are prosecuted to the fullest extent of Florida law,” the statement says.

“The unfortunate truth is that some individuals will attempt to take advantage of consumers during this high-stress time,” Patronis said. “To combat fraudsters attempts to swindle Floridians, we’re putting boots on the ground to ward off fraud and swiftly address any scams that may arise.”

These strike teams are trained insurance fraud investigators with specialized knowledge of property & casualty fraud and workers’ compensation fraud. In addition to identifying active fraud operations in the field, investigators will work with each community to educate homeowners, homeowners’ associations and local law enforcement about the red flags of fraud.

Floridians can report suspicious behavior by calling the Department’s anti-fraud hotline at 1-800-378-0445, or by contacting one of the Department’s regional insurance fraud offices. To find a map of the Department’s insurance fraud offices in Florida, click here. Callers are asked to provide as many details as possible, and callers may request to remain anonymous.

More information on the the Department of Financial Services’ anti-fraud efforts is available on its website.

Hurricane Deductibles

From June 1^st to November 30^th, the Gulf of Mexico and eastern coast of the United States is on alert for Hurricane Season. Eyes turn to the National Hurricane Center during this season to watch and prepare for any storm threats.

According to the Florida Office of Insurance Regulation, wind damage is considered hurricane damage if the damage occurred DURING a hurricane named by the National Hurricane Center of the National Weather Service. The duration of a hurricane is defined by the following:

• Begins when a hurricane Watch or Warning is issued for any part of Florida by the National Hurricane Center;
• While hurricane conditions continue to exist in Florida; and
• Ends 72 hours after the hurricane watches and warnings are lifted in Florida.

The National Hurricane Center declared Hurricane Irma’s duration for the state of Florida to be from 11 a.m. on September 7, 2017 to 5 a.m. on September 14, 2017. Any wind-related damages occurring within this time frame would be subject to your hurricane deductible.

So just how much is a hurricane deductible and when does it apply?

Hurricane deductibles are a percentage of your Coverage A – Dwelling amount. In Florida, a typical homeowners insurance policy hurricane deductible is 2% of Coverage A – Dwelling amount.

For example, if your Coverage A amount is $200,000, then your hurricane deductible would be $4,000.

Your deductible is subtracted from your claims loss amount as you are required to cover the deductible amount BEFORE your insurance kicks in. After this amount is met, any other hurricane related damage is covered by your insurance for the remainder of the calendar year. Since hurricane deductibles are a calendar year deductible (January 1 – December 31), if you do not meet your hurricane deductible amount and experience a second hurricane loss, the deductible will be either the remainder of the hurricane deductible or the AOP (All Other Perils) deductible, whichever is greater. If you did meet your hurricane deductible, then the AOP deductible will apply for any subsequent hurricane loss.

It is important to keep ALL of your receipts and a running tally of your out-of-pocket expenses. This way when a storm strikes, you’re prepared to show how much of your deductible you’ve met after filing a claim.

Although insured losses as a result of Hurricane Irma will not be as severe as originally forecast, the storm still represents a sizeable catastrophe event that will test the infrastructure and potentially strain the financial wherewithal of some local and regional carriers in Florida, particularly those that are geographically concentrated, according to a new briefing from A.M. Best.

The Best’s Briefing, titled, “Hurricane Irma Tests Newer Participants in Florida Market,” notes that over the past decade, the number of more concentrated local/regional writers in Florida’s insurance market has increased as national writers pulled back on the state.

The state-formed Citizens Property Casualty Insurance Corporation took on much of that risk exposure, and as a result, experienced significant financial pressure. This led to a fairly successful depopulation program, whereby private insurers were given incentives to assume policies from Citizens. This, along with other factors that included benign weather in Florida and favorable reinsurance pricing, prompted many new insurance companies to form.

According to the report, a number of new insurance companies were formed since 2007, writing nearly a fifth of the property market lines: homeowners, farmowners, fire and allied, and commercial multiperil (non-liability). Hurricane Irma represents the first severe event to test the strength of these business models, particularly with regard to risk selection, loss mitigation and potentially their reinsurance programs.

The report also states that with Hurricane Irma occurring in such close proximity to Hurricane Harvey, the demand for independent catastrophe claim adjusters has increased. A.M. Best-rated entities had already started strengthening their claims processes in response to the state’s Assignment of Benefit issues. Newer companies may face additional pressure from a lack of experience as well as limitations due to scale.

The report warns that Hurricane Irma has the potential to amplify the AOB issue, which had already led to performance constraints in the Florida market from an increase in the frequency and severity of litigated water claims. A.M. Best said insurer performance had deteriorated in recent years in large part due to the AOB issue.

“A.M. Best expects that Hurricane Irma and AOB losses will have a much greater impact on operating results for the concentrated insurers, and will continue to monitor the effects of risk-adjusted capitalization,” the report states.

A.M. Best does not expect a significant number of rating actions on its rated insurers to result solely from Hurricane Irma, but reinsurance programs that respond differently from what is anticipated could increase ratings pressure.

A.M. Best said that ultimately, although the aftermath of Hurricane Irma may be bleak for some regional and local carriers, particularly overexposed companies with earnings and potential capital concerns, it believes opportunities will emerge for others.

“An insurer that can effectively navigate through the storm and potentially others during this hurricane season may attract displaced insureds,” the briefing states.

Insurers also may need to rethink their risk selection, risk tolerances and reinsurance purchases, and some may consider diversifying outside of Florida or revamping products. Smaller or struggling companies in the Florida insurance market also could become merger and acquisition targets, the ratings agency said.

A full copy of the special report is available through A.M. Best.

With two Florida landfalls in the same day, Hurricane Irma‘s destructive wind and flood damage could cost up to $65 billion for both insured and uninsured losses, according to a recent estimate by CoreLogic.

Residential property flood loss is estimated at up to $38 billion, CoreLogic reported, noting that includes storm surge, inland and flash flooding in five states – Florida, Alabama, Georgia, North Carolina and South Carolina.

80 percent of the flood damage is uninsured, the company said.

Reported insured flood loss for commercial properties could top out at $8 billion.

AIR Worldwide estimated insured losses for the U.S. States resulting from Irma will range between $25 billion – $35 billion.

The catastrophe modeling firm noted the hurricane-force winds extended 80 miles from the eye and tropical storm–force winds extended more than 400 miles, covering the entire state and driving storm surge into both the Atlantic and Gulf coasts.

Downed trees, signs and utility poles and flooded or debris-strewn streets could be seen in the southern regions of the state, AIR Worldwide reported.

Karen Clark & Company estimated losses in the U.S and Caribbean at $25 billion. Of the $18 billion insured loss in the U.S., the majority is in Florida, followed by Georgia, South Carolina and Alabama, KCC reported.

As of Thursday, Sept. 21, the Florida Office of Insurance Regulation reported more than 397,000 residential property claims and just over 17,000 commercial property claims had been filed. Including all types of losses, total estimated insured losses thus far had passed the $3 billion mark. OIR has been updating claims data daily.

According to A.M. Best, the top five homeowners’ insurers in Florida are: Universal Insurance Holdings Group, Tower Hill Group, State Farm, Federated National Insurance Co., and Citizens Property Insurance Corp.

In response to the storm, Universal Property & Casualty Insurance Company reported it has more than $300 million in surplus, as well as a catastrophe reinsurance program that provides $2.65 billion in coverage to cover an event like Hurricane Irma. The insurer stated its projected losses from the hurricane are considerably lower than the limits of its catastrophe reinsurance program. UPCIC has not reported on the claims it has received to date.

As of September 18, Tower Hill reported receiving 20,000 claims resulting from Irma. The company has 300 catastrophe adjusters stationed in Florida. The insurer commented that many of its customers reported light to moderate damage, with most claims not requiring a visit from an adjuster before settlement.

As of September 14, State Farm reported it had received 26,700 homeowner and 7,700 auto claims from Irma.

Federated National Insurance Company and Monarch National Insurance Company (partially owned by Federated National) both write homeowners’ insurance in Florida, according to a press release issued after Irma. Each company purchases its own separate reinsurance program. Federated National’s single event pre-tax retention for a catastrophic event in Florida is $18 million. Monarch National’s reinsurance program covers Florida exposures and all private layers of protection have prepaid automatic reinstatement protection which affords Monarch National additional coverage for subsequent events. Neither company reported the claims it received resulting from Irma to date.

Citizens Property Insurance began opening catastrophe response centers across Florida to handle Irma claims. The state-run insurer has not released claims figures to date.

Texas-based Interstate Restoration, a disaster restoration firm, reported it had 90 employees stationed in Florida prior to the storm, with another 60 new hires ready to go.

CEO Stacy Mazur said the firm’s workers face the same challenges Florida residents are experiencing.

“Those challenges include lodging, power outages and scarcity of fuel,” said Mazur.

An additional 500 subcontractors in the southeast U.S. will join the Florida crew, he said.

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.

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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

Assistance provided by insurance experts working Florida’s Insurance Consumer Helpline led to the recovery of more than $16.6 million during the first half of 2017, according to a statement by Chief Financial Officer Jimmy Patronis.

Helpline experts answered more than 141,000 calls from Floridians during the first six months of the year and aided in the recovery of funds that included insurance claim payments and premium refunds that consumers sought the Department of Financial Services’ help collecting.

The Insurance Consumer Helpline is a free service offered to all Floridians that assists callers with financial and insurance-related matters including disaster preparation and insurance fraud, as well as questions and complaints regarding auto, home, health, life, and small business insurance.

According to DFS, one such claim related a homeowner after they received payment following Hurricane Matthew. The Pinellas County consumer contacted the helpline when her insurance company denied coverage for additional damage that had been discovered. Even after sending in additional documentation, she was unable to resolve the issue. Upon calling the company, helpline experts were told that a simple processing error was to blame, not a denial. The company promptly processed the claim, paying out an additional $4,700 to the consumer.

Another customer in Brevard County contacted the Helpline when medical claims payments related to treatment for her son never arrived. The company explained to helpline experts that the payments had been processed but the company could not explain why they had not been received. A widespread system error was discovered and the company realized that payment checks for 53 consumers had never been mailed. In total, more than $24,000 in unmailed payments went out to the 53 consumers, including the original caller.

Patronis said calls to the helpline also create a record of complaints on if a company is engaged in a practice that leaves a lot of consumers feeling mistreated. That alerts regulators and gives the public a way to keep track of companies that may be be stirring up problems.

Insurers have widely feared the entrance of big tech players like Amazon into the market - but now one major insurer has actually secured a partnership with the online retail giant.

US insurance giant Nationwide has teamed up with Amazon Alexa as part of its SmartRide safe-driving scheme. Clients of the scheme will be able to use special plug-in devices to access personalized driving information that might help to bring their insurance premiums down.

Members of the usage-based insurance program can gain telematic information through Alexa via devices like Amazon Echo, according to a report by The Columbus Dispatch.

Sam Rassekh, Nationwide’s vice president of enterprise digital optimization, said in a statement: “We recognize that digital voice technologies are becoming an increasingly popular method of communication, enabling consumers to quickly gain access to information, products and services through voice-recognition technology.”

The statement continued: “The Nationwide skill for Amazon Alexa gives our members an exciting way to connect with us. And, we are encouraged to know that the data they receive about their personal driving habits through the SmartRide capability within the Nationwide skill serves the greater purpose of promoting safe driving.”

Florida’s home insurers hope the public doesn’t blame them as they implement rate increases, initiate coverage changes and nonrenew policies.

They say they have no choice after the Florida Legislature for the fifth year in a row failed to address the crisis in water damage claims abuse.

“We keep saying help us try to solve this problem,” said Michael Carlson, president of the Personal Insurance Federation of Florida.

Since lawmakers reneged on enacting reforms, insurance carriers are now taking matters into their own hands and the state’s regulator is warning consumers to be prepared.

“We will continue to see homeowners’ insurance companies raise their rates for our consumers in a best-case scenario, and in a worst case scenario just simply stop offering their products in certain regions of the state,” Insurance Commissioner David Altmaier told the Florida Cabinet last month.

Altmaier said that worst-case scenario has the potential to “undo a lot of the great work” that has been done in depopulating the state-run insurer of last resort, Citizens, which has taken the brunt of the abuse, particularly in South Florida.

“This remains one of our number one priorities on the property and casualty side,” Altmaier said.

He was referring to escalating assignment of benefits (AOB) abuse from unlicensed water remediation and roofing contractors working with attorneys to cash in on a homeowners’ insurance policy for water damage claims. The problem has begun to spread to other segments of insurance, with auto glass claims using AOBs also on the rise.

The Florida Department of Financial Services has stepped up its abuse investigations. Former Florida CFO Atwater told Insurance Journal in May before he left office that the DFS is counting on the industry to alert it to any abuse it sees happening.

“This is a real financial crime. These people are making money off of these really exploited AOB claims –it is just sophisticated robbery from thousands of people who are having to embed that cost in their next premium payment. It is real,” Atwater said.

Insurance carriers say the marketplace has no choice but to respond by moving to cover the costs.

They are raising rates for homeowners’ policies across the state but say that is not enough after several years of the unchecked AOB abuse. So they are also appealing to the Florida Office of Insurance Regulation (OIR) to be able to do more.

“AOB will ultimately be addressed by the marketplace if lawmakers don’t do anything. The question is how harmful is that to a policyholder that isn’t out to cheat an insurance company – and it is harmful,” said Scott Johnson, who has worked on insurance issues for 40 years and currently runs his own consulting firm, Johnson Strategies. “AOB is the worst crisis I have seen.”

Citizens led the pack in lobbying for reform this past session, warning Florida lawmakers that without it the insurer’s policy count will start to climb again after years of depopulation efforts, and that homeowners could expect to see statutorily allowed rate increases of up to 10 percent for the foreseeable future.

Last month the warning became a reality when Citizens announced it would seek an overall statewide rate increase again this year, citing AOB as the reason.

Citizens also said it would submit a series of policy changes to the OIR that it hopes will reduce claims costs for nonweather water losses.

Among the major policy changes is a $10,000 cap on water loss repairs for customers who decide not to participate in Citizens’ Managed Repair Program.

Other policy changes include expanding obligations to third parties that accept an assignment of benefits. Currently, contractors who accept an assignment are not bound by the same obligations, including allowing Citizens adjusters to inspect a claim in a timely manner or providing proof that a loss has occurred.

“We were hoping for legislative change and a surgical solution,” said Barry Gilway, Citizens president/CEO and executive director. “Given that this did not occur in 2017, we cannot wait for the trends to worsen and take no corrective action.”

Commissioner Altmaier told the Cabinet that OIR is discussing changes to policy forms “in an attempt to curb what we believe are an unacceptable rise in costs in this market.”

Many insurers in the state are watching and waiting to see what happens with Citizens proposals, and will base their own requests to OIR on what is approved for Citizens.

“We will see further rate increases being filed [by insurers]. But as far as doing their due diligence as an insurance company, they will pursue whatever avenue they can get,” said Logan McFaddin, regional director for the Property Casualty Insurers Association of America (PCI).

Managed Repair, Preferred Vendors, Premium Discounts

Citizens is already employing one strategy – a managed repair program that provides its policyholders with free water extraction and drying services if they have a nonweather-related water loss. The Citizens Managed Repair Program also includes access to a network of licensed contractors through Contractor Connection. Policyholders can use the network to find a contractor to repair damage to its pre-loss condition with repairs guaranteed for a minimum of three years.

Citizens policyholders who do not want to use the program can hire their own contractors to do permanent repairs, but reimbursement may be limited to $10,000 starting in 2018, if approved by Florida regulators.

Other companies are exploring managed repair or preferred vendor programs as well.

Castle Key Insurance Co. and Castle Key Indemnity Co., Allstate Insurance subsidiaries that write about 2 percent of Florida’s homeowners market, offer preferred vendors to customers in the event of a claim.

“Who the customer chooses to work with on repairs is entirely their decision, however we do make vendors available if the customer does not have a contractor of choice,” said Cathy Mayo, Allstate Florida Region’s Field Corporate Relations manager.

“Preferred vendor programs are definitely helpful because an insurer is not going to use a vendor that turns around and sues them – it gets rid of that motivation to have an attorney enter the agreement,” said PCI’s McFaddin. “Other insurers could follow what Citizens does if they can make headway with OIR.”

In a statement to Insurance Journal, OIR said it wouldn’t comment on the Citizens filing, but anticipates that a public hearing will be held for Citizens annual rate filings, “where this issue may be presented in more detail by the company.”

OIR did say that it has approved some managed repair programs for other carriers in the past as allowed under Florida statutes, but hasn’t seen any new filings recently.

Those outside the industry – including public adjusters and law firms – have voiced opposition to such programs, saying they restrict policyholder rights.

Johnson says that response is not surprising.

“Guess I would say that too if I was a public adjuster or trial attorney. What is fair to them is something that inflates the claim by at least 20 percent because that’s how they get paid. What’s fair to an attorney is if there is a controversy. They need the conflict because that’s how they make their fees,” Johnson said.

He noted that more than half of water losses have been handled by firms that don’t use an AOB and there have not been consumer complaints on the work done. Preferred vendor programs are a tool for carriers to minimize their AOB losses, he said.

“Insurance companies are responding to the crisis by doing what they can to guide people to providers that don’t use AOBs,” he said.

Tampa-based VetCor, which provides restoration services across the state, works with 17 carriers as a preferred vendor and said it has never used an AOB on more than 2,200 jobs in its three years in business.

“There are disreputable contractors saying they can’t perform work because of big bad insurance carriers. That is accurate if you are going beyond the scope of needed work. These contractors are creating an adversarial relationship,” said Paul Huszar, president, VetCor LLC, which provides new careers for military veterans no longer on active duty.

Huszar said his business relies on referrals from carriers, which he said are “usually legitimate claims from people who need help.”

He said his company has found itself becoming an advocate against AOB abuse, including letting carriers know if they see abuse taking place.

“There have been a few incidents where we have been called to put a tarp on a roof and we get out there and there is no damage. The customer says, ‘someone told me to put a claim in and I’ll get a new roof.’ If we see that we call the insurance company and let them know something smells funny. We represent consumers if we think it’s fraud and we represent carriers if they are getting screwed,” he said.

Huszar said all affected parties need to work together in fighting AOB abuse, and managed repair and preferred vendor programs are just one option until lawmakers take up the issue.

“The companies have to do something to combat uncontrollable rising claim costs from AOB,” he said. “But frankly, without legislation this problem is not going to be solved.”

Companies are also looking at premium discounts for customers who take proactive measures to protect against water damage, such as outfitting their homes with water damage protection systems.

Neil Schwartzman is the owner of the Coral Gables, Fla.-based company H20 protection, which sells PipeBurst Pro water damage prevention technology.

The Whole Home Water Detection product works by detecting when a pipe bursts and shutting off the main water supply almost immediately to prevent water damage.

Schwartzman said there has been increased interest from carriers in the last several months as they try to find new ways to reduce AOB losses.

He said several dozen, mostly high-value homeowner carriers, already offer incentives to have this type of a program.

He is currently working with several Florida insurance carriers seeking approval from regulators to offer premium discounts when a system is installed.

“If the [water damage protection] discount was available to all in Florida, then systems would be installed [and] the number of water damage claims would be reduced significantly,” Schwartzman said.

What Comes Next?

The industry and regulators agree that substantial progress has been made in educating on the abuse. Commissioner Altmaier said this year’s visibility and media attention has put his office in a good position for proposals to be heard during the 2018 legislative session.

McFaddin said the industry did an “impeccable job” staying on message this session and supporting the OIR and Citizens proposal, which died shortly after being introduced in a Senate committee.

Even though the reforms failed, McFaddin said the industry learned that working together is an effective strategy and that needs to continue.

McFaddin added that at least next year the industry won’t have to “waste time educating the legislature” about the abuse because it is now widely known and watched.

“Will we get something done for sure, 100 percent?” she asked. “I can’t say that, but I am hopeful – optimistically hopeful.”

Former CFO Atwater said the industry did a better job of getting its message out this session, but there is still “tremendous rate sensitivity” among consumers.

The industry, he said, has not effectively communicated why AOB abuse is translating into higher rates and, until then, consumers will not support legislative efforts.

“I think consumers believe that the rates come [because] the insurance company just wants more rates and the government just keeps giving it to them. I don’t think that most consumers understand that these losses are required to be built into the rate filing. And they’re going to be granted,” he said.

He urged the industry to share with the public “the actual evidence that it has in its databases” on the magnitude of the losses that are being built into rates.

PIFF’s Carlson said carriers’ data is out there through OIR’s data call done in 2016, and Citizens plethora of public information on rising losses, claims and litigation. He said some lawmakers have accused the industry of not being transparent to avoid fixing the issue.

“What else do you need us to give you that you don’t have? I fear that is a political request and not a policy request,” he said.

Until the next session, the industry and regulators say all they can do is continue to beat the drum about AOB abuse and take steps to protect company solvency and their policyholders.

“I do believe there is light at the end of the tunnel,” Altmaier told Florida Cabinet members. “I do believe there are ideas on the table that not only maintain consumer protections and their ability to have their claims paid, but also protects their ability to pay affordable insurance rates and shop insurance products across a wide range of carriers.”

The Southeast has seen its fair share of natural disasters and flooding in the last several years, including two hurricanes in Florida last year – the first hurricanes to hit the state in more than a decade. But none of these events have come close to reaching the potential impact a serious storm surge event could have on the region.

According to CoreLogic’s 2017 Storm Surge Report, which examines risk from hurricane-driven storm surge for homes along the Atlantic and Gulf coastlines across 19 states and the District of Columbia, as well as 86 metro areas, the total reconstruction cost value (RCV) in the event of a hurricane storm surge inundation in these regions would be more $1.5 trillion.

The total number of homes that could be affected along the Gulf and Atlantic coasts, defined by CoreLogic as the 3,700 miles of coastline extending from Maine to Texas, is nearly 6.9 million. In the Gulf Coast region – running from Texas through the tip of South Florida – almost 3 million homes are at risk with a total RCV of $593 billion. The Atlantic Coast accounts for 3.9 million homes and a RCV of more than $970 billion.

To estimate the value of property exposure of single-family residences, CoreLogic uses its reconstruction cost valuation (RCV) methodology which estimates the cost to rebuild the home in the event of a total loss. The reconstruction cost estimates more accurately reflect the actual cost of damage or destruction of residential buildings that would occur from hurricane-driven storm surge since they include the cost of materials, equipment and labor needed to rebuild and also factor in geographical pricing differences. Actual land values are not included in the estimates. The values in this report are based on 100 percent, or total, destruction of the residential structure.

The Southeast coastal states CoreLogic examined in its report of Alabama, Florida, Georgia, Mississippi, South Carolina and North Carolina, account for at least 3.6 million of the 6.9 million homes at risk along the Gulf and Atlantic Coast.

Unsurprisingly, the majority of those homes – about 2.7 million – are in Florida, which carries a whopping $536 billion reconstruction cost value, the highest of any of the 19 states.

The Southeast also accounts for nine of CoreLogic’s top 15 metropolitan areas at greatest risk of storm surge, with six of those being Florida cities.

It’s common knowledge that Florida is at risk of hurricanes, but the state has gone many years without experiencing significant damage from a major storm. Dr. Tom Jeffery, senior hazard scientist at CoreLogic, said that can often lead to “hurricane amnesia,” among citizens and municipalities and that can impact whether they are adequately prepared for when a big storm event does occur.

“This report is about making people aware of the fact that we are in hurricane season. We don’t know when or where they will happen, but they have the opportunity to affect the coastal U.S. and we want to put it on people’s radar,” Jeffery said. “A lot of these areas don’t realize what the risk is once you are outside the 100-year flood plain.”

He added that many people in these communities don’t realize what their storm surge risk is, outside of the 100-year flood plain.

“Large hurricanes especially can really push surge water quite a bit inland, but after big events people say they didn’t realize their property was at risk,” Jeffery said. “Hopefully, this information can give them the incentive to go to their insurer and find out if they are in a high-risk area and adequately prepare.”

CoreLogic included a probabilistic storm surge analysis focused on Florida in this year’s report, with specific emphasis on storm surge from Hurricane Matthew, which changed course before making landfall last year, sparing the state from the worst possible scenario. The goal of probabilistic modeling of hurricane perils, CoreLogic’s report said, is to provide risk managers with greater insight as to what could happen in order for them to better plan and manage their businesses.

“Probabilistic loss provides an evaluation of the specific amount of damage that could be expected from a single storm event or a set of simulated events, called probabilistic events, which are informed by historical storm records that are similar in size and scope,” the report states.

This analysis focused on the historical storms in Florida that have caused storm surge damage beginning in 1900, and how Hurricane Matthew compares. Of the 97 catastrophic hurricanes in Florida since 1900, Hurricane Matthew ranked No. 19 among historical storm surge events. CoreLogic said the storm surge damage from Matthew made up less than 10 percent of the total financial loss, with the rest being a result of wind damage.

Number one on the list was the “13^th hurricane of 1944″ (before hurricanes were given actual names), which caused $15 billion worth of damage on 471,000 homes in today’s terms. Hurricane Andrew, which hit in 1992, was ranked No. 4, and Wilma, which hit in 2005, was ranked No. 15.

Though Florida’s first hurricanes in 11 years were not as devastating as they could have been, the two storms that did occur – Hurricane Hermine, which hit in September of 2016, and Hurricane Matthew – caused more than $3.2 billion combined in damage to Florida.

Jeffery said the state got lucky last year. He added that awareness is key to minimizing loss in the future, and the modeling company has seen an increased interest in information and proactive mitigation discussions this year.

“Florida went a long stretch without an impactful landfall hurricane and last year was an eye opener, an awakening to get people to think about it since we don’t know when that next one is going to come ashore,” he said.

Private auto net incurred losses are set to hit a new record in 2017, according to a report by S&P Global Market Intelligence.

S&P projected that auto losses will increase by almost 7% in 2017, hitting about $154 billion. That number reflects a skyrocketing volume of costs and claims. Auto losses also spiked by 13% last year, prompting many carriers to pursue rate increases, S&P reported. Those rate increases may pinch customers’ pocketbooks in the near term, but they’re expected to begin increasing industry profitability.

“Though underwriting results in many business lines will deteriorate in 2017, we expect the P&C industry to produce only a modest underwriting loss for the year,” said Tim Zawacki, senior insurance research analyst for S&P Global Market Intelligence. “Needed rate increases for the personal and commercial auto businesses will begin to positively impact industry results in 2017. We expect additional improvement in those lines to take place over the next several years.”

The industry experienced historically high loss ratios last year, S&P reported. Those losses – combined with more time spent on the road by motorists – should continue to push auto insurance premiums higher.

Among the other findings from S&P’s recent US Property & Casualty Insurance Market Report:

• Soft market conditions continue to prevail in most non-auto lines, which means competition remains fierce. S&P projected only slow improvements in investment returns from the historic lows of 2016.
• S&P Global Market Intelligence predicts an industrywide combined ratio of 100.7% across business lines this year. It also projects growth of 4.3% in direct premiums, reflecting higher auto rates.

The large-scale global ransomware cyber-attack over the weekend should serve as a wake-up call to many small and medium-sized businesses.

While the market for large corporations’ cyber insurance needs has significant penetration, small and medium-sized businesses take out far fewer cyber policies. But as the global ransomware attack illustrated: every business is potentially at risk from cyber criminals.

“I think this demonstrates the need for being insured, whether you’re a small or a large company,” NAS chief underwriter Mike Palotay said.

“This has been an indiscriminate attack. It’s not targeted,” he explained. “You don’t have a hacker behind each attack on each company – it’s really more of an automated thing. It’s basically just spray and pray, really. So you’ve got small companies who are experiencing outages and disruptions and having to pay extortions. And then you’ve got FedEx and the National Health Service [in the UK] and a bunch of much larger organizations experiencing problems.

“Small and medium-sized business are very, very underinsured. The last figures I saw for small businesses that buy cyber insurance were in the single digits. This might be a wake-up call.”

The number of companies attacked who have paid out – or claimed with insurers – is low. A UK company tracking ransom payments through Bitcoin (the cyber criminals’ payment choice in this attack) was only about $50,000 yesterday. The attack was launched on Friday.

However, the widespread attack also brought to the fore a potential problem in the way insurance is priced, Palotay said.

“It does speak to why underwriting large books of cyber insurance is so challenging,” he said. “The aggregation potential is certainly there, and there’s been a big focus on that in the last few years. And rightly so. There are big, big aggregate numbers out there for the leading insurers and when something like this happens I think it’s a big wake-up call to everyone that maybe rates are getting too low and maybe we should be more careful. Hopefully it’s a kind of come-to-Jesus moment.

“The market has been growing fast and rate pressures are getting pretty significant. I don’t think the rates are really taking into account the substantial aggregation exposure from something like this, where you’ve got an automated malicious-code attack that targets a widespread vulnerability. This is not about a hacker using a specific tool to attack a company, this is about a self-replicating virus that spreads throughout the internet targeting millions of computers. That kind of thing is what keeps me up at night.”

Davy Andrews is so adept at technology that he’s become the de facto IT troubleshooter in his office. But there’s one bit of tech he won’t touch: self-driving cars.

“I wouldn’t want to be the first to jump into something with that kind of risk,” said Andrews, 33, an administrative assistant at a New York investment firm. “I would have to see enough evidence that it is safer, considerably safer. From where we are right now, it’s hard to imagine getting to that point.”

Autonomous autos are advancing so rapidly that companies like Uber Technologies Inc. and Alphabet Inc.’s Waymo are beginning to offer robot rides to everyday consumers. But it turns out the traveling public may not be ready. A recent survey by the American Automobile Association found that more than three-quarters of Americans are afraid to ride in a self-driving car. And it’s not just Baby Boomers growing increasingly fearful of giving up the wheel to a computer, a J.D. Power study shows — it’s almost every generation.

“One of the greatest deterrents to progress in this field is consumer acceptance,” U.S. Transportation Secretary Elaine Chao told Bloomberg News last week at a department-sponsored conference in Detroit. “If there’s public concern about safety, security and privacy, we will be limited in our ability to help advance this technology.”

Most commuters don’t have access to a self-driving car, so Chao has called on Silicon Valley to ” step up” and explain how they work. She and other regulators advocate for autonomy as a solution for curbing the hundreds of horrific collisions that happen every day in regular automobiles. Among those that end up being fatal, 94 percent are caused by human error, according to U.S. authorities.

Consumers will only become comfortable with driverless cars after they ride in them, Mary Barra, the chief executive officer of General Motors Co., said this week. The largest U.S. automaker is testing 180 self-driving Chevrolet Bolts and ultimately plans to put them in ride-hailing fleets, though it won’t say when.

“You can talk about it, but until you experience it,” self-driving cars are hard to comprehend, Barra told reporters at the GM factory building the Bolts north of Detroit. “Once you’re in the vehicle and you see the technology, you understand how it works.”

The opportunity for autonomy to make a meaningful impact on public safety is immense. Last year, 40,200 people died in motor-vehicle accidents on U.S. roads, the National Safety Council estimates. That was up 6 percent from the year before.

“Forty thousand people a year is unacceptable,” Alex Epstein, the council’s senior director of digital strategy, said during a panel discussion at the TU-Automotive technology conference in Detroit last week. “It’s a jumbo jet going down every couple days.”

Dangerous as it may be to operate cars themselves, many drivers are anxious about autonomous technology because they associate it with the fragility of electronic devices. Laptops crash and calls drop with nagging regularity. The consequence of a computerized car crash is much greater.

“While it might be convenient to have a car drive for you, driving is a very high-stakes pursuit,” said Andrews, who has no interest in letting a robot take the wheel of his Volvo. “When things go wrong, it’s not the same as a normal computer error.”

Another culprit killing consumer confidence has been automakers over-hyping the capabilities of today’s driver-assist technologies. That’s led some drivers to drop their hands from the wheel even with systems built to require constant attention of the traffic environment, as was the case with the fatal crash last year of a driver in a Tesla operating in the semi-autonomous Autopilot mode.

Respondents to J.D. Power’s survey made mention of Tesla crash and recognized vehicles with autonomous features can still get into accidents, said Kristin Kolodge, executive director of J.D. Power’s driver-interaction research.

“When you’re not in control and the vehicle is in control, now you’re in this dark space where you wonder ‘What actually happens if the technology fails?”‘ she said. “This fear of failure is the major reason” consumers are wary. 

Regulators investigated the Tesla crash and cleared the company’s Autopilot system of fault in January. And the company hasn’t been the only one to come under scrutiny — Daimler AG last year pulled Mercedes-Benz ads that consumer groups complained had wrongly suggested its E-Class sedan with driver-assist features was fully autonomous.

The television spot showed the driver removing his hands from the wheel, even though the automaker’s Drive Pilot system requires resuming control every 30 seconds.

“The fastest way to make sure the public does not accept these technologies is to over-promise and then have some horrific crash because the consumer believed the capability was higher than it actually was,” Epstein said.

Another impediment to consumer acceptance may arise from semi-autonomous features, which should inspire confidence and instead feel unnatural and annoying, said Lukas Kuhn, chief technology officer at Tourmaline Labs Inc., a California company that analyzes driving behavior for insurance and ride-sharing companies.

Driver-assist features like adaptive cruise control, which adjusts speed to the flow of traffic and lane keeping that steers a car back into the lines, can feel intrusive rather than intuitive.

“In order to make the user buy into the feature, we have to make it feel more natural,” Kuhn said. “If I can drive this car way better than the machine, why should I take my hands off the wheel?”

Homeowners in South Florida, as well as in many other parts of the state, should expect additional rate increases next year from the state-run insurer of last resort.

Citizens Board of Governors approved recommended rates and policy changes for 2018 that the company said reflect rising nonweather water losses, abuse of a policyholder right referred to as assignment of benefits (AOB) and out-of-control litigation that, left unchecked, will force rate hikes for years to come.

By unanimous vote, board members recommended a 5.3 percent statewide increase for personal lines policyholders – homeowners, condominium unit owners and renters – with most increases concentrated in three South Florida counties where, according to Citizens data, water losses, AOB abuse and litigation are disproportionately severe.

Board members also approved a series of policy changes that the insurer hopes to implement to reduce claims costs for nonweather water losses that it says have been pushing rates higher for South Florida customers over the last few years. If approved by the Florida Office of Insurance Regulation (OIR), the changes would take effect in February 2018.

Among the major policy changes is a $10,000 cap on water loss repairs for customers who decide not to participate in the Citizens Managed Repair Program, which links customers with a network of vetted contractors. The voluntary managed repair program, coupled with a free emergency water removal service, will become available to new Citizens policyholders after July 1, 2017, and for existing customers when their policies renew.

Other policy changes include expanding obligations to third parties that accept an assignment of benefits. Currently, contractors who accept an assignment are not bound by the same obligations, including allowing Citizens adjusters to inspect a claim in a timely manner or providing proof that a loss has occurred.

“These proposed rate increases and product changes are critical for Citizens’ efforts to bring some relief to a market that is being made increasingly expensive by unnecessary litigation and out-of-control water loss claims,” said Chris Gardner, chairman of the Citizens Board of Governors. “Unfortunately, we are making it more expensive for many of our customers to own a home.”

The 2017 legislative session concluded in May without making significant changes to state law regarding assignment of benefits and the “one-way attorney fee” statute that many stakeholders agree are driving up costs that must be paid through higher premiums. Citizens joined other insurers, business and consumer groups pushing for reform.

“It’s ironic that our rates for wind coverage are coming down, but Citizens policyholders in South Florida still must brace themselves for continued rate increases,” Gardner said. “We don’t want to raise premiums, but Citizens is obligated by statute to set actuarially sound rates.”

The 2018 rate proposal continues a recent trend in Miami-Dade, Broward and Palm Beach counties. Homeowners with multiperil coverage in Miami Dade County, for example, will see an average increase of 10.5 percent, or $359, from 2017 premiums. Broward and Palm Beach county homeowners will see rates increase by 10.4 percent and 9.3 percent respectively.

Outside of the Tricounty area, many policyholders will see rates decrease or remain flat. Citizens’ homeowners policyholders in 56 of 67 counties will see average rates decrease under the set of proposed rates.

Proposed rates and policy changes must be approved by OIR, which oversees all Florida property insurers. Both the new rates and policy changes would take effect in February 2018.

“We were hoping for legislative change and a surgical solution,” said Barry Gilway, Citizens president/CEO and executive director. “Given that this did not occur in 2017, we cannot wait for the trends to worsen and take no corrective action.”

The full rate kit can be viewed on Citizens website.

Almost five years after Superstorm Sandy, one third of homeowners in several coastal states are still unaware of hurricane deductibles and how they work, new insurance research has found.

Not only did 33 percent of respondents say they had never heard of these deductibles or were not sure what they were, one quarter of respondents lacked an understanding of deductibles in general.

The Insurance Research Council (IRC) released its poll results as the National Oceanic and Atmospheric Administration projects two to four major hurricanes this hurricane season, which lasts from June 1 through November 1.

Homeowners in New Jersey, North Carolina, South Carolina, Florida and Texas were asked whether they were familiar with hurricane deductibles, which is a higher deductible found in homeowners insurance policies that applies when a hurricane occurs.

“The findings from this survey suggest that ample room exists for educating homeowners about a key feature of every homeowners insurance policy—deductibles,” said Elizabeth Sprinkel, senior vice president of the IRC. “The need is especially acute as the 2017 hurricane season gets underway and insurers hope to minimize post-event misunderstandings with their policyholders regarding deductibles.”

Hurricane deductibles were a prominent issue in 2012, with misunderstanding and confusion due to the fact that Sandy did not make landfall as a hurricane. These deductibles, which became more common after insurers suffered heavy losses from Hurricane Andrew in 1992, are often calculated as a percentage of the insured value of a home — another concept the IRC survey found unfamiliar to homeowners.

One in three respondents with percentage-based hurricane deductibles did not know or were unsure of the percentage applicable to their deductible, and four in 10 did not understand the basis for calculating the deductible. One in four respondents incorrectly thought the percentage was applied to the total amount of their claim.

The survey also found that the level of understanding of hurricane deductibles varied across the five states studied. Compared with respondents in the other states, New Jersey respondents demonstrated the lowest level of awareness and understanding of several hurricane deductible issues, despite the fact that about 346,000 homes in New Jersey were damaged or destroyed by Sandy.

The report, “Public Understanding of Hurricane Deductibles, Need for Consumer Education Persists,” is based on an online survey conducted by GfK Public Affairs & Corporate Communications on behalf of the IRC. A total of 1,047 homeowners were surveyed – 200 or more in each of the five states studied. Only homeowners living in selected counties where the home involved was their primary residence and with insurance coverage purchased exclusively from private insurance companies were included in the survey.

https://www.thig.com/hurricane-tracker/

https://www.thig.com/learning-center/natural-disasters/hurricane-season-2017-need-know/

http://www.stjohnsinsurance.com/claims-hurricane.aspx

Hurricane Information

Weathering A Hurricane

Hurricanes are not strangers to homeowners in the Southeast. Knowing what to do can make the difference when it comes to protecting yourself and your home.

Before Hurricane Season Begins

• Plan an escape route.
• Have a stockpile of emergency supplies on hand (drinking water, canned goods, non-perishable foods, manual can opener, flashlights, batteries, candles, first aid kit, essential medications, matches in waterproof containers, portable radio, etc.)
• Develop an emergency communication plan in case you’re separated from loved ones.
• Hurricane shutters are your best protection. If you do not have them, you can use marine plywood panels cut to fit your windows. Pre-drill holes every 18 inches for screws and mark which board fits which window.
• Keep trees free of weak or dead branches.
• Have a video or photographic inventory of your possessions stored in a safe place away from your home. If your home’s damaged it will be invaluable in settling the claim.
• Review your homeowners insurance to ensure it is adequate. Remember, flooding is generally not covered by a homeowners policy. So if you do not have flood insurance, you may want to talk to your agent.

During A Hurricane Watch And Warning

• Pay close attention to progress reports.
• Protect windows.
• Check emergency supplies, make sure you have a full tank of gas in your car and review your evacuation plan.
• Bring outdoor furniture, etc. inside. Anchor items that can not be brought in.
• Set your freezer and refrigerator at the highest setting in case you lose power. (If power is lost, turn off major appliances to avoid power surge.)
• If you are in a surge zone, elevate your furniture to protect it.
• Store valuables and papers in a watertight container at the highest level of your home.
• If evacuation is necessary, unplug appliances, turn off electricity and the main water valve and leave as quickly as possible.

After The Hurricane

• If you evacuated, return home only after authorities say that it is safe. Stay away from flooded roads and washed-out bridges.
• Avoid dangling power lines and report them immediately to the power company, police or fire department.
• Enter your home cautiously. Sometimes snakes, insects and animals are driven to higher ground by flood water.
• Open windows and doors to ventilate and dry your home.
• If your home has been damaged, check for gas leaks (open a window, leave and call the gas company if you find one), obvious electrical problems and sewer and water line damage.
• Take pictures of the damage – inside and out. You will need it for your insurance company.

The First District Court of Appeal in Tallahassee has upheld the 14.5% rate increase in Florida workers’ compensation rates that was approved by the Office of Insurance Regulation (OIR) in October of last year.­ The rate increase, which took effect for all new and renewal policies starting December 1, 2016, had been challenged in court but will now remain in effect as a result of the Court’s order.­

The District Court of Appeal overturned and reversed a Leon County Circuit judge who had ruled that NCCI’s rate filing and the Insurance Commissioner’s subsequent rate order approving the 14.5% increase was invalid because the process violated Florida’s Sunshine Law.­ In a lengthy opinion, the Court ruled that both NCCI and OIR had properly complied with the laws governing rate-making for workers’ compensation insurance in Florida.

The effect of the Court’s Order is that the 14.5% rate increase that has been in effect since December 1, 2016, will remain in effect.

It goes without saying that June 1 has a special meaning to Floridians: the start of the Atlantic Hurricane Season. Last fall, Florida's 10-year hurricane-free streak was broken as Hurricane Hermine made landfall near the coast of St. Marks. About one month later, Hurricane Matthew made landfall over Haiti as a Category 4 hurricane, later embarking on a three-day journey up Florida's east coast and into Georgia and the Carolinas, causing damage that exceeded $729 million generated by 112,000 insurance claims. In total, Floridians last year filed nearly 130,000 insurance claims totaling roughly $800 million in losses. The question now is: If a storm were to reach Florida's shores next week, would you be prepared?

Last year's hurricane season affected a large majority of our state, leaving many of us with wind-damaged property, flooded homes and one big headache. As some of us learned, sandbags and boarded windows will only get you so far. In some ways, our destiny will be defined by Mother Nature, regardless of what may lay in her path. Experts are predicting that the United States should prepare for another active season with an estimated 11-14 named storms and four to seven hurricanes, with two to three of those storms growing to category 3 or higher. But remember, it only takes one.

With the start of the 2017 Hurricane Season quickly approaching, it is up to you to make sure your emergency preparedness efforts reach beyond bottled water and batteries and include being financially prepared for a hurricane event. I encourage all Floridians to start putting together an insurance and financial packet that you can easily take with you should you need to leave your home in a hurry. Be sure to include documentation associated with property and health insurance policies as well as financial account information and contact information for banks and insurance companies. Having these documents put together ahead of time allows you to have ready access to all of the information necessary to file an insurance claim during an emergency evacuation.

If you need a hand getting your insurance-related preparation underway -- no problem. We've created a simple, easy-to-use financial preparedness toolkit to assist with this process. Our toolkit provides a single place to jot down and keep track of all of your insurance information. In the event that a storm directly affects you and your family, this toolkit can help you keep a list of adjuster contacts, emergency service contacts such as the Red Cross, FEMA and the Department's consumer helpline, as well as a log of any calls you've made to insurance companies or agents about claims you may have to file.

Our toolkit can be downloaded in ENGLISH, SPANISH and CREOLE and serves as an essential tool to supplement your preparation efforts. To learn more, please visit our website for additional tips and tools at http://www.myfloridacfo.com/division/Consumers/Storm/.

Take a minute and dust off your preparation materials and ensure you and your family will be financially prepared for this year's hurricane season.

Property insurance rates in Florida are on a steady climb.

Pundits blame claims abuse as the primary culprit, specifically the abuse of assignment of benefits which makes the claims process litigious and costly.

Assignment of benefits (AOBs) involves allowing policyholders to sign over their claims to a contractor, which gives the contractor the right to collect payments from the insurance firm. Local media outfit Naples Daily News reports that these AOBs cost state-owned Citizens Property Insurance Corp $27 million in losses last year.

Michael Peltier, a Citizens spokesman, also said in the report, “The disturbing part is we are expecting an even greater loss for the upcoming year.”

The rising premiums from the past five years were also less to do with natural catastrophes than broken pipes, dishwashers and water heaters. Insurers say the rise in claims is largely due to fraudulent activity.

“The private market is experiencing the same trend that Citizen is, from all of the indications we’ve gotten,” Peltier added. “It’s not just our problem.”

Legislators are acting to address the abuse. State Senator Kathleen Passidomo recently sponsored a bill that would curb claims abuses, but it did not pass legislative muster.

“It was really a consumer protection bill that would allow consumers to get out of some of those contracts that they unknowingly signed,” she told the Daily News. 

“It had some really good provisions that the Office of Insurance Regulation, the insurance industry and consumer advocates all supported. That bill was not heard.”

Passidomo and Senator Dorothy Hukill are currently working on another bill that they plan to file in the next congressional session and they’re “going to pursue this with a vengeance,” the senator said in the report.

She added that legislative remedies are needed because the fraud is spreading to other parts of the state.

Democrats and Republicans, who have agreed on little this year, have found common ground on plans to give private insurers greater access to the $5 billion flood insurance program and to offer more buyouts for homeowners in areas likely to be repeatedly submerged.

“Flood insurance seems to be one of those few areas where Democrats and Republicans see the same problems and, in a lot of instances, see the same solutions,” Rob Moore, a senior policy analyst with the National Resources Defense Council, said in an interview.

At issue is the National Flood Insurance Program, which is $25 billion in debt. Congress has until the end of September to reauthorize the federal program. If it doesn’t act the real estate market along coasts and rivers will come to a halt, because homeowners need that insurance to qualify for federally-backed mortgages. In the wake of Hurricane Sandy the program paid out $8.4 billion to help cover the costs of rebuilding.

Last Thursday, Republican Congressman Sean Duffy of Wisconsin, chairman of the subcommittee that oversees the program, released draft legislation to overhaul it. Those changes overlap heavily with change House Democrats are seeking, according to a document from the Democrats on the House Financial Services Subcommittee on Housing & Insurance obtained by Bloomberg.

The bipartisan agreement among the House lawmakers covers a range of topics, including expanding the role of private flood insurers, getting the federal program to buy more reinsurance on the private market, and making it easier for homeowners that keep getting flooded to move somewhere else.

“This shows an incredible amount of work,” Roy Wright, the deputy associate administrator at FEMA who oversees the National Flood Insurance Program, said in an interview. He said the odds are good of Democrats and Republicans eventually reaching a deal.

The process has a long way to go before these changes would become law. Even if the House agrees on these reforms, the Senate and President Donald Trump must agree as well. And, as happened in the last flood insurance overhaul, changes may end up being rescinded after they become law if they cause premiums to skyrocket.

And some areas of disagreement remain among the House lawmakers.

In the draft legislation released Thursday, Republicans propose ejecting from the program homeowners who keep getting flooded but don’t want to sell their houses. Democrats wouldn’t eject them. And Republicans would impose fewer conditions on private insurers who want to sell flood insurance.

Still the main areas of agreement between the parties is large. The “draft incorporates ideas from both Republicans and Democrats,” Mark Bednar, Duffy’s spokesman, said in an email.

Under these plans, insurers and reinsurers would see an increase in their potential market. The federal flood insurance program takes in about $3.5 billion in revenue each year, and covers about $1 trillion in risk. While private insurers can partner with the program, signing people up in return for a share of their premiums, few private insurers sell their own policies. The program recently bought reinsurance for the first time.

Expanding the space for private insurers could benefit Marsh & McLennan Cos. and Aon Plc, the largest insurance brokers by revenue in the U.S., according to data compiled by Bloomberg. Swiss Re AG, Munich Re and Transatlantic Reinsurance Co. have signed reinsurance agreements with the Federal Emergency Management Agency, which runs the program.

The changes could also reshape coastal neighborhoods. Both parties say they support more voluntary buyouts of homes that repeatedly flood. Under that approach, the federal government uses money that comes in through flood insurance policies to purchase high-risk homes, then demolishes them. Expanding those buyouts could shrink neighborhoods along the Atlantic and Gulf Coasts, in such places as New Jersey, Virginia, Florida and Louisiana.

Both parties also want the federal government to shield poorer households from rising flood insurance premiums, by offering vouchers or other subsidies based on people’s incomes. They would increase the amount of money available to protect homes from flooding, such as moving buildings onto stilts.

“A fair amount of this will be part of the final legislation,” Larry Larson, senior policy adviser for the Association of State Floodplain Managers, said by email after the Republican draft was released. Still, “it has a long way to go yet.”

Lead by example, so goes an old adage.

Especially in driving, as a new study has found that teenage drivers, who are most susceptible to car crash fatalities, take their cue from their parents when it comes to driving behaviour.

The Chicago Tribune reports that a joint study by Students against Destructive Decisions (SADD) and Liberty Mutual found that parents set a pretty bad example for teens to follow, particularly with regard to using their cell phone.

“Parents are not great role models,” Gene Beresin, SADD senior adviser, said in the Tribune report. “As a matter of fact, they’re pretty poor role models for teenage driving.”

Specifically, the study noted that distracted driving now accounts for one in four car crashes.

The study surveyed 2,500 teens and 1,000 parents. Among others, it found that 55% of parents use apps while driving and 62% say they use their phone to take calls while behind the wheel.

Thirty three per cent of teens have asked their parents to put a stop to such behavior, the study also found.

The risky behavior also extends to parents calling their teens even if they know that the youngster is behind the wheel: 50% said they were guilty of calling their teens, while one third expect a response before their teenager reaches their destination.

“The good news is this sets the stage for a conversation between parents and teenagers,” Beresin observed.

The report outlines some suggestions to prevent fatal teen car crashes. Among them:
 

• Do not let your teen drive when they are tired. Encourage them to call you to pick them up or call a cab to ride home because the survey found that 10% of teens have admitted to falling asleep behind the wheel due to tiredness
• Program navigation and music apps prior to a trip. These are the two most commonly used apps by teens and have often been a source of distraction. “Program a playlist ahead of time. If the phone is within reach and you hear or see a notification, you’re going to be very tempted to either look down or pick it up. And the bottom line is you don’t need to,” Beresin emphasized.
• Set a distinctive ring and text tone for emergencies so your teen can ignore their phone when the call is not urgent

In its second seasonal tropical forecast for the North Atlantic basin for the 2017 season, IBM’s The Weather Co. said it now expects a total of 14 named storms, seven hurricanes, and three major hurricanes, a slight increase in activity from its forecast in April.

In April, the firm predicted 12 named storms, seven hurricanes, and three major hurricanes

The new numbers include Tropical Storm Arlene, which formed in April.

The current forecast numbers are more than the long-term 1950-2016 normals of 12/7/3 but slightly fewer than the recent “active period” (1995-2016) normals of 15/8/3.

According to Dr. Todd Crawford, chief meteorologist at The Weather Co., there could be more increases in the numbers ahead.

“There has been a clear trend over the past month towards warmer North Atlantic ocean temperatures and a less bullish view on El Nino development/magnitude, both of which favor a more active 2017 Atlantic tropical season than originally thought,” Crawford said. “Dynamical model forecasts are also more aggressive this month relative to last. The big North Atlantic blocking in May has favored continued increases in Atlantic water temperatures, which suggests that we may need to move our numbers up a bit more in our June update.”

The National Oceanic and Atmospheric Administration (NOAA) and the National Weather Service are scheduled to announce their initial outlook for the 2017 Atlantic hurricane season this Thursday.

Four automakers agreed to a $553 million settlement to address class-action economic loss claims covering owners of nearly 16 million recalled vehicles with potentially defective Takata airbag inflators, court documents filed on Thursday showed.

Toyota Motor Corp.’s share of the settlement costs is $278.5 million, followed by BMW AG at $131 million, Mazda Motor Co. at $76 million and Subaru Corp. at $68 million.

While the settlement does not mean an end to legal headaches faced by Takata Corp or its car maker clients, the resolution could help the embattled Japanese air bag maker’s efforts to search for a financial sponsor by removing one litigation uncertainty.

Shares of Takata, which was not named as a plaintiff in the case, jumped 20 percent in Tokyo on Friday. Takata has been searching for more than a year to find a financial sponsor to pay for costs to replace its inflators which are at the center of the auto industry’s biggest-ever recall.

U.S. auto components maker Key Safety Systems (KSS) and private equity fund Bain Capital are trying to strike a rescue deal worth around 200 billion yen with Takata’s steering committee and its automaker customers.

The settlement highlights the knock-on effect of the recalls, which began around 2008 and covers around 100 million inflators around the world used in vehicles made by 19 automakers.

Takata’s inflators can explode with excessive force and unleash metal shrapnel inside cars and trucks, and are blamed for at least 16 deaths and more than 180 injuries worldwide.

“This is a settlement between us and our customers,” said a Tokyo-based spokeswoman for Mazda.

Lawsuits against Honda Motor Co., Ford Motor Co. and Nissan Motor Co. have not been settled, lawyers said.

Takata declined to comment on the settlement.

The four automakers that settled said in a joint statement they agreed to the deal “given the size, scope and severity of the Takata recall,” but did not admit fault or liability. The automakers said the settlements, if approved by a Florida judge, will be overseen by a court-appointed administrator.

The settlement includes an outreach program to contact owners; compensation for economic losses including out-of-pocket expenses; a possible residual distribution payment of up to $500; rental cars for some owners; and a customer support program for repairs and adjustments, including an extended warranty.

In January, Takata agreed to plead guilty to U.S. charges of criminal wrongdoing and to pay $1 billion to resolve a federal investigation into its inflators. The majority of the air bag-related fatalities and injuries have occurred in the United States.

Automakers have recalled 46 million Takata air bag inflators in 29 million U.S. vehicles. By 2019, automakers will recall 64 million to 69 million U.S. inflators in 42 million vehicles, regulators said in December. Most inflators have not been fixed.

Florida businesses shouldn’t expect relief for workers’ compensation rates, this year at least. The Florida Legislature failed to pass legislation this session addressing 2016 decisions by the Florida Supreme Court that sent the state’s workers’ comp system into disarray and led to a rate increase of 14.5 percent.

After much back and forth between the House and Senate over their respective bills, it came down to attorney fees, which the industry says are to blame for the majority of the rate increase.

Lawmakers sought to reform the state’s workers’ comp system through two bills – House Bill 7085 and Senate Bill 1582 – in response to decisions by the Florida Supreme Court that found aspects of the Florida Workers’ Comp Act unconstitutional.

[Lawmakers also failed to pass other closely-watched insurance reforms addressing insurance claims (assignment of benefits) abuse. Watch for Insurance Journal’s upcoming report on the AOB legislation.]

Debate over the Senate and House bill went on throughout the final legislative day on Friday with the House, in an attempt to lure the Senate to its side, passing an amendment capping attorney fees at $180 an hour on approval by a judge of compensation claims. The Senate version of the bill capped attorney fees at $250 an hour versus the House’s previous $150 an hour cap. On Friday, the Senate voted not to lower the cap in its bill to $200 an hour, but the House still tried later to compromise with the $180 cap.

Another key difference in the Senate version was a provision moving Florida to a loss-cost system. Rep. Danny Burgess, who sponsored the House bill, told House members “the jury’s still out” on whether a loss cost system leads to a premium reduction, based on data from states that had switched to this model.

Burgess said he hoped the Senate would agree to the attorney fee compromise so lawmakers could get “something across the finish line.”

“The bill, as it stands today is on the end of the rope,” he told House members Friday. “[We are] trying to provide substantial reform to address rising rates from recent court decisions…We have to solve this problem before us. Every small business in the state of Florida is watching us now.”

The Florida Supreme Court’s decisions that caused the upheaval came in two cases – Castellanos v. Next Door Company and Westphal v. City of St. Petersburg. The biggest cost driver behind the 14.5 percent rate increase, according to the National Council on Compensation Insurance (NCCI), was Castellanos. That decision found the state’s mandatory attorneys’ fee schedule for workers’ compensation cases eliminated the right of a claimant to get a reasonable attorney’s fee — a “critical feature” of the workers’ compensation law. The impact of the Castellanos decision equaled 10.1 percent of the 14.5 rate increase, while Westphal accounted for 2.2 percent.

Burgess said the House version could offer up to a 5 percent reduction in rates and the Senate’s version would offer only about a 1 percent reduction.

The insurance industry supported the House version, agreeing that attorney fees are the main cost driver behind rate increases. The Property Casualty Insurers Association of America (PCI) said the bill would have addressed “decisions by the Florida Supreme Court rulings that could cause workers compensation rates to increase by 14.5 percent in the state, costing Florida job creators more than $1.5 billion.”

But ultimately, the two branches couldn’t reach an agreement before time ran out for lawmakers on Friday night.

Florida businesses now have the rate increase to contend with and the possibility of additional rate increases next year. An actuary from the National Council on Compensation Insurance (NCCI) told the Florida House at a hearing last month that it is reasonable to expect that there would be continued pressure on rates without legislative reform.

The Florida Chamber of Commerce called lawmakers’ failure to enact reform a “failed fix to Florida’s broken workers’ comp system” and said it was a missed opportunity by lawmakers to make Florida more competitive.

(Bloomberg) -- State Farm Mutual Automobile Insurance Co., the largest U.S. home and auto insurer, plans to shut 11 U.S. facilities, displacing about 4,200 workers, after a $7 billion annual underwriting loss last year on auto policies.

The insurer will exit Parsippany, New Jersey, and Petaluma, California, in 2018 and the other locations by 2021, the Bloomington, Illinois-based company said Thursday in a statement on its website. The work will move to the headquarters and offices in cities including Atlanta, Dallas and Phoenix. The company said employees in affected facilities will have opportunities at other State Farm locations.

State Farm, Allstate Corp., Hartford Financial Services Group Inc. and Warren Buffett’s Berkshire Hathaway Inc. are among companies that have been burned in recent years by higher claims expenses from car crashes as more drivers are distracted by electronic devices. Higher repair costs have also hurt in an era when drivers are logging more miles behind the wheel. Companies have been charging more for coverage and looking for ways to reduce costs.

Chief Executive Officer Michael Tipsord is working to improve results at the insurer after being named in 2015 to replace Ed Rust, who led the policyholder-owned company for three decades. Net income dropped to $400 million last year from $6.2 billion in 2015, hurt by the auto insurance results. The company posted better returns on businesses including residential coverage, banking and mutual funds. State Farm has almost 70,000 employees.

This morning. House and Senate committees debated and passed bills that repeal Florida’s no fault auto insurance law.

House Bill 1063 by Rep. Erin Grall passed the Commerce Committee, its last committee of reference, by a vote of 22–5. It’s now headed to the floor so the full House of Representatives can debate and vote on the proposal. Senate Bill 1766 by Senator Tom Lee passed its first committee of reference, Banking and Insurance, by a vote of 8–1. 

The bills are very different at this point, BUT procedurally two steps closer to passage.

The House bill:

• Repeals PIP and replaces it with mandatory bodily injury with 25/50 limits.
• Effective January 1, 2018.

The Senate bill:

• Repeals PIP, effective January 1, 2018.
• Mandates medical payments coverage of $5,000.
• Mandates bodily injury coverage with 20/40 limits, beginning January 1, 2018.
• Mandates bodily injury coverage with 25/50 limits, beginning January 1, 2020.
• Mandates bodily injury coverage with 30/60 limits, beginning January 1, 2022.
• Retains the $10,000 financial responsibility requirement for property damage.

It’s still very difficult to predict whether or not PIP repeal passes this year, but the idea certainly has a lot more traction than in previous years.

Florida drivers are among the most dangerous menaces on the road, ranking second worst in the nation for being distracted while behind the wheel, according to a study of driving habits.

Florida’s score was 49th, ahead of only Louisiana in a state-by-state analysis which indicated that 92 percent of U.S. drivers with cell phones use them while moving in a car.

“Those are shocking numbers proving we have a lot of careless and complacent drivers out there,” said Ryan Ruffing, director of communications for EverQuote, which collected the data. “Traffic fatalities have increased the past two years and phone use is a primary reason.”

Florida’s notoriously bad drivers ranked 39th in overall driving safety, while up in Montana’s wide open spaces, drivers ranked No. 1. By region, Midwesterners are the safest drivers, confirming their reputation as the nicest Americans, while edgy Northeasterners negotiating the roads of their dense cities are the least safe. Southern drivers use their phones the most, on 41 percent of all trips.

On the other end of the spectrum from phone-addicted Floridians are Vermonters, who rank as the nation’s least distracted drivers. They live in the second least-populous state.

It’s never a good time to text, talk, type, tweet, surf, chat, check Facebook or take selfies in the car, but especially not during April, which is Distracted Driving Awareness Month. It’s also the spring session of the Florida Legislature, where lawmakers are considering bills that would toughen phone use penalties.

Florida is one of only four states that does not make texting while driving a primary offense, which means that police cannot cite drivers for texting unless they stop them for another infraction, such as speeding. Texting has been a secondary offense in Florida since 2013.

One bill that would toughen penalties is sponsored by state Sen. Rene Garcia, R-Hialeah, and has received heavy lobbying from Miami high school junior Mark Merwitzer, who is particularly concerned about his distracted teen peers. The American Automobile Association recommends a ban on wireless devices for all drivers under age 18.

It’s no coincidence that states with strict laws — such as Vermont — have the lowest distracted driving rates, Ruffing said.

“It seems clear that law enforcement is effective because there is a correlation between the prohibition of phone use and safer driving,” Ruffing said.

If you think you can text or check emails and still maintain control of your car, you are wrong. Each day in the U.S., eight people are killed and 1,161 are injured in crashes that involved a distracted driver, according to the federal Centers for Disease Control and Prevention.

If you think using your phone does not impair cognitive function, you are wrong again. If texting distracts you for five seconds at 55 mph, you are essentially driving the entire length of a football field with your eyes closed, according to the National Highway Transportation Safety Administration. Phone use causes a lingering diversion or “latency effect” for 27 seconds after you’ve stopped texting or talking, according to research by the American Automobile Association, which cautions that “distracted driving is deadly behavior, and hands-free does not mean brain-free.” AAA found that 60 percent of teen crashes are caused by distracted driving.

“Our horrible traffic, the awful accidents you see everywhere — so much of it is due to texting,” said Carmen Caldwell, who has lived in South Florida for 50 years. She is executive director of Citizens’ Crime Watch of Miami-Dade County and forbids her staff members from texting on the road. “It can take me an hour to drive the four miles from work in Doral to home in Hialeah. My brother lives in Idaho and he thinks I’m kidding. Today I was behind a fool in a Mercedes on the Palmetto driving with the left hand and texting with the right.

“Part of our issue here is that we have a lot of drivers from a lot of other countries.”

Ruffing said 96 percent of drivers believe they are safe drivers, but 56 percent of them admitted to phone use, creating an “awareness gap.”

“It only takes a second to cause a wreck and it’s frightening that people think they have it under control,” Caldwell said. “Police officers should be able to stop someone for texting the same way they can stop you for not wearing your seatbelt.”

One way to prevent distracted driving is to pressure the driver to stop using the phone, according to research commissioned by AT&T that revealed 57 percent of people will not text if a friend or passenger asks them not to do it. AT&T has launched two campaigns to encourage drivers to change what many admit is a compulsion. Take the pledge at www.itcanwait.com. Or load the free AT&T DriveMode app to break the texting habit.

“Our goal with the It Can Wait public awareness campaign and #TagYourHalf is to help save lives,” said AT&T spokesperson Kelly Layne Starling. “And now more than ever, we’re calling on the public, law enforcement, educators, retailers, corporations, consumer safety groups and more to join the movement to help raise awareness of the dangers of smartphone use behind the wheel.”

EverQuote collected data on 2.7 million trips and 230 million miles driven with its EverDrive app that encourages safe driving and improved driving skills by scoring drivers on phone use, speeding, risky acceleration, hard braking and hard turns.

You are a driver for a transportation network company and then the unfortunate happens. Someone sideswipes your vehicle. In the chaotic moments after the accident, a question about your personal auto insurance coverage arises. Are you fully covered for ridesharing?

Perhaps not, GEICO warns.

“If you are driving for a rideshare company with a personal auto insurance policy, you might be taking a huge risk,” said Othello Powell, GEICO director of commercial lines. “Most personal auto policies were never designed to protect you or your vehicle for commercial purposes.”

A typical personal auto policy contains coverage gaps and limitations for ridesharing and package delivery. If an accident does happen with drivers’ personal auto policies, they have to provide their insurance carriers with specific details, including the phase of the ride they were in, said GEICO in a statement.

For example: Was the app on or off? Was the vehicle carrying any passengers or packages? Depending on the answers, drivers may not have the coverage they thought they had, GEICO said.

Colorado State University hurricane researchers are predicting a slightly below-average Atlantic hurricane season in 2017, citing the potential development of El Niño as well as recent anomalous cooling in the tropical Atlantic as primary factors.

The CSU Tropical Meteorology Project team is predicting 11 named storms during the Atlantic hurricane season, which runs from June 1 to November 30. Of those, researchers expect four to become hurricanes and two to reach major hurricane strength (Saffir/Simpson category 3-4-5) with sustained winds of 111 miles per hour or greater.

The team bases its forecasts on 60 years of historical data that include Atlantic sea surface temperatures, sea level pressures, vertical wind shear levels (the change in wind direction and speed with height in the atmosphere), El Niño (warming of waters in the central and eastern tropical Pacific), and other factors.

So far, the 2017 hurricane season is exhibiting characteristics similar to 1957, 1965, 1972, 1976, and 2002. “The years 1957, 1965, 1976 and 2002 had slightly below-average hurricane activity, while 1972 was a well below-average season,” said Phil Klotzbach, research scientist in the Department of Atmospheric Science and lead author of the report.

The team predicts that 2017 hurricane activity will be about 85 percent of the average season. By comparison, 2016’s hurricane activity was about 135 percent of the average season.

Recently, the Tropical Meteorology Project team expanded to include Michael Bell, associate professor in the Department of Atmospheric Science. William Gray launched the report in 1984 and continued to be an author on them until his death last year.

Landfall Probability

The report also includes the probability of major hurricanes making landfall:

• 42 percent for the entire U.S. coastline (average for the last century is 52 percent)
• 24 percent for the U.S. East Coast including the Florida peninsula (average for the last century is 31 percent)
• 24 percent for the Gulf Coast from the Florida panhandle westward to Brownsville (average for the last century is 30 percent)
• 34 percent for the Caribbean (average for the last century is 42 percent)

The forecast team also tracks the likelihood of tropical storm-force, hurricane-force and major hurricane-force winds occurring at specific locations along the coastal United States, the Caribbean and Central America through its Landfall Probability website. The site provides information for all coastal states as well as 11 regions and 205 individual counties along the U.S. coastline from Brownsville, Texas, to Eastport, Maine. Landfall probabilities for regions and counties are adjusted based on the current climate and its projected effects on the upcoming hurricane season.

Directors and officers liability policies are likely to become broader and continue getting cheaper in 2017. This is among the likely trends expected for the financial and professional liability insurance marketplace in the months ahead, insurance broker Marsh said in a new report, “The U.S. Financial and Professional Market in 2017: Our Top 10 List.”

Marsh said that public directors and officers (D&O) liability insurance rates will keep dropping in 2017, following nine continuous quarters of rate decreases. But the rate of decline should slow somewhat, despite a spike in federal filings, according to the report.

There was a notable spike in federal filings in 2016 — the most since 2002. However, “the impact from those claims will take months, perhaps years, to be reflected in insurance rates,” Marsh said.

As price declines continue, however, the market is seeing a related trend: pure individual D&O coverage policies are fading, with insurers focusing on broadening their D&O offerings and making them unique to stay competitive, Marsh said.

Among the ways insurers are trying to keep their D&O offerings unique: providing or improving entity investigation cost coverage, adding reinstatement of limits for full coverage, and continuing increases in excess derivative investigative cost sublimits. Excess insurers are also reimbursing a percentage of an insured’s retention, if able to successfully obtain an early securities class action dismissal with prejudice, Marsh said.

You paid for your Benefits. Shouldn't you keep them???

What is an Assignment of Benefits?

An Assignment of Benefits (AOB) is a contract between you and a contractor (such as a plumber, water remediation firm, roofer, etc.) where you give the contractor control of your claims benefits. They file a claim for their services and direct the insurance company to pay them directly.

What's in it for the contractor?

Once you sign an AOB, you lose control of the direction of your claim. The contractor takes control, and can submit whatever they like to your insurance company, sometimes billing the company two, three, four, five times the going market rate for their services, and sometimes including work that was never performed. You don't see this, and you can't verify what they did.

What are the potential pitfalls in signing an AOB?

You have committed to this contractor, and you have little to no recourse if you're not satisfied with their work. You can no longer comparison shop if you are not satisfied with their work. Even if they walk off the job with their work incomplete, they can still claim compensation from the insurance company which gets deducted from your benefits. Both you, and the contractor, are still bound by the terms and conditions of the policy, and if the contractor violates those terms and conditions, those actions could potentially jeopardize coverage for your entire loss.

What's in it for the contractor?

This is where the age old mantra of "if it seems too good to be true, it probably is," comes into play.

Has the contractor done any of the following?
 

• Solicits a job from you unannounced for damages you didn't even know were allegedly present?

• The contractor is offering you something for nothing, such as a free roof or kitchen

• Wants to start work immediately and advises you to delay contacting your insurance company?

• Offered to "take care of" your deductible.

Any of these issues could potentially lead to a fraud investigation which could jeopardize your coverage.

Possible Litigation:
As mentioned above, there is no standard for what the contractor can submit to the insurance company, and if the company questions the scope and/or the pricing submitted by the contractor the company can be sued directly by the contractor. And while you may not be a party to this lawsuit, more likely than not you will end up being a witness.

U.S. personal auto underwriters increased premium rates “significantly” in 2016. But here’s the thing: it wasn’t enough.

Loss trends are still outpacing rate changes. Also, the U.S. P/C industry statutory combined ratio will likely hit 108 in the coming months, a 3.5 percentage point rise and the weakest result in 15 years, Fitch Ratings noted in a new report.

“Results are likely to improve moderately in 2017, but competitive forces and market fundamentals will inhibit a shift back to an underwriting profit in personal auto for some time,” the Fitch report asserted.

A number of factors are at play that mean the market is still weakening, Fitch said.  GAAP auto segment results show higher combined ratios for nearly all of a group of 10 publicly traded insurers in 2016, Fitch said, with an average combined ratio increase of 3.3 points from 2014 to 2016.

As Fitch pointed out, carriers including Progressive and Infinity Property & Casualty Corp. continued to generate major underwriting profit for personal auto despite industry weakness. But the overall market continues to weaken in terms of annual underwriting performance because of higher catastrophe related losses and unfavorable claims experience. State Farm Mutual Insurance Group is a major example of this, Fitch said, due to its reported $7 billion underwriting loss (18 percent of earned premium).

Also, personal auto underwriters continue to face adverse loss trends that drove higher claims costs over the last two years. They include claims frequency jumps from more miles driven, more distracted driving, higher physical damage losses because of more complex and sophisticated automobile parts, and higher bodily injury costs from more severe accidents.

As well, the Consumer Price Index data for auto insurance costs grew by 7.6 percent in February 2017. Fitch said that that points to continuing rate increases in the short term, which should lead to some modest underwriting improvements through the year.

Underscoring the challenges ahead, Fitch said that risk modeling for the sector, among the most sophisticated efforts in the industry, has not done its job the way it should.

“Personal auto insurance is technologically the most advanced P/C market segment with tremendous progress over time in data analytics that enhance risk selection, price segmentation and predictive claims models,” Fitch said. “Recent poorer results in auto insurance reveal that the most sophisticated models may not fully anticipate changes in loss cost trends.”

There’s another potential challenge for the sector. Fitch added that underwriters may not be paying complete attention to what risk modeling tells them “due to competitive pressures and an interest in maintaining premium volume and policy retention levels.”

State Farm lost $7 billion on its auto insurance underwriting in 2016.  In 2015, the underwriting loss was $4.4 billion.

State Farm is far from alone in seeing deteriorating results in its auto insurance line.  GEICO, Travelers, Allstate, The Hartford and other insurers are also looking for ways to counter rising auto costs. Analysts have reported that the auto line has been a drag on P/C insurers’ results.

In Travelers’ fourth quarter report, CEO Alan Schnitzer acknowledged the difficulty of the personal auto business.

“While homeowners profitability remains strong, we are disappointed with the underwriting results in personal auto and are taking pricing and other actions to improve its profitability,” Schnitzer said.

A recent crash involving an Uber Technologies Inc. driverless car suggests autonomous software sometimes takes the same risks as the humans it may one day replace.

The accident on Friday in Tempe, Arizona, caused no major injuries. Another human-driven car turning left failed to yield, hit the Uber car and flipped it on its side. After a short pause, the company’s self-driving test fleet was back on public roads in Tempe, Pittsburgh and San Francisco early this week.

But the Tempe Police Department report, released Wednesday, recounts a complex story.

The Uber Volvo SUV, outfitted with autonomous driving sensors, was heading south on a wide boulevard with a 40 miles-per-hour speed limit. It had two of the company’s test drivers in front and no paying passengers. The light turned yellow as the vehicle entered an intersection. A green Honda on the other side of the road was trying to make a left at the light. The driver thought it was clear and turned into the oncoming Uber SUV, according to the police report.

In a statement to police, Patrick Murphy, an Uber employee in the car, said the Volvo SUV was traveling 38 miles per hour, a notch below the speed limit. He said the traffic signal turned yellow as the Uber vehicle entered the intersection. He then saw the Honda turning left, but “there was no time to react as there was a blind spot” created by traffic. The Honda hit Uber’s car, pushing it into a traffic pole and causing it to turn on its side.

During the event, the Uber vehicle was in autonomous mode, a spokeswoman for the company and the Tempe police said.

Others involved in the accident, though, didn’t imagine a robot behind the wheel. Alexandra Cole, the driver of the Honda, told police that she could not see any cars coming when she decided to make the left turn. “Right as I got to the middle lane about to cross,” she wrote, “I saw a car flying through the intersection.”

Another witness told police that Cole was not at fault. “It was the other driver’s fault for trying to beat the light and hitting the gas so hard,” Brayan Torres told police in a statement. “The other person just wanted to beat the light and kept going.”

Eyewitness accounts can often be unreliable, and other witnesses in the police report did not say that the Uber car was at fault — something the police agreed with. Still, Torres’s account raises the question of whether Uber’s self-driving sensors spotted the light turning yellow and, if so, whether it decided it could safely continue through the intersection.

One of Uber’s self-driving SUVs ran a red light in San Francisco last year, and on five other occasions the company’s mapping system for its cars failed to recognize traffic lights in the area, the New York Times reported in February.

Uber’s problems show the potential hurdles to winning approval for autonomous vehicles from the public and regulators. The company, and rivals like Alphabet Inc.’s Waymo and major automakers, are working to tweak software to handle “edge cases,” like unusual driving conditions.

Self-driving cars have more often been criticized for driving too cautiously, slowing or stopping when human drivers would be more aggressive. Autonomous vehicles operated by Waymo have been rear-ended due to such issues and the company has been working to make its system more human.

There is a potential upside for Uber from the Tempe crash: It now has rich, unique data to use for its self-driving program. Last year, after a Waymo car car bumped into a bus, the company said it used the incident, and “thousands of variations on it,” to refine its software.

“This is a classic example of the negotiation that’s a normal part of driving — we’re all trying to predict each other’s movements,” it added.

When my wife fell on the ice a few years ago, she thought her wrist was broken. She went to see her doctor, who advised her to have an X-ray taken in the same building. Since her wrist was still crooked months later, she had a second X-ray done at an imaging facility nearby.

Afterward, her health insurance company sent the “explanation of benefits” for each X-ray. The initial one was billed at $1,200, while the second one cost only $100.

Why the big discrepancy? Her doctor’s practice, the X-ray facility and the building they’re in are owned by a corporation that also owns several area hospitals. When she called its corporate office, a spokesperson told her the $1,200 X-ray was taken at a “hospital” and was therefore billed at the “hospital rate.”

She pointed out that the so-called “hospital” had no emergency room, no beds for patient admission and, furthermore, wasn’t even listed on our state’s insurance website as a hospital. The corporation caved and reluctantly refunded her the $1,100 difference in the price of the two X-rays.

While my wife’s predicament had a satisfactory ending, in most instances, hospital corporations win. And this winds up costing everyone, including Medicare and Medicaid, health insurers, Americans with high-deductible insurance policies and, ultimately, the taxpayer “tens of billions of dollars,” according to Dr. Ezekiel Emanuel, chairman of the Department of Medical Ethics at the Wharton School of Business who’s a doctor of oncology.

Emanuel is only one of many medical experts, including members of the federal Medicare Payment Advisory Commission (MedPAC), who are incensed by the way hospital chains are buying up doctors’ practices and outpatient facilities to maximize profits. And this comes at a time when Congress continues to search -- so far in vain -- for a plan to salvage a health care system described as “broken,” hemorrhaging dollars and about to implode.

There’s a way to do it, said Emanuel, whose efforts to reform health care include serving as an architect of President Barack Obama’s Affordable Care Act, and who has now offered advice to President Donald Trump.

But a solution really needs to understand the problems. And this is one of them.

“Across the country hospital systems are scouring the market in attempts to acquire physician groups,” said Medical Billing Advocates of America in an article on its website. “This has contributed to increased costs so far, because some of the services and procedures that were formerly billed as doctor visits are now being billed as outpatient services – even if it is the same office. In one year, this [facilities fee] added up to $1.5 billion more in charges to the Medicare program.”

Medical Billing Advocates referred to this practice as “a real cash cow for hospital systems.”

But Medicare is only one source of funds for hospitals, which also collect from Medicaid, health insurers, uninsured patients or those insured with high deductibles. “Many are concerned, and rightfully so, that the excuse to charge a facilities fee is one of the main reasons hospital systems want to buy up practices,” said the article.

The American Medical Association did not respond to a request for information on how many doctors’ practices had been bought by hospital corporations, but the number is presumed to be large and growing. One hospital chain cited by Modern Healthcare, a magazine for health care executives, had an 86 percent jump in physicians and providers between 2009 and 2014. 

And doctors’ practices aren’t the only targets. Outpatient surgery centers, clinics and imaging facilities are also on their radar.

This maneuver allows hospital chains to submit bills with coding that infers that the patient was treated at a “hospital,” even if the location is just an office or outpatient facility. It also encourages these doctors, who are now hospital employees, to advise patients to use the hospital for routine procedures that could be done cheaper elsewhere.

That’s often a huge waste of money, said many experts, including Gerard Anderson, professor of medicine at Johns Hopkins University School of Medicine, one of the nation’s foremost hospitals. 

“There is no reason for anyone to pay more because the care was provided in a hospital instead of a doctor’s office. The doctor is the person providing most of the care, and for most procedures care can be provided in the doctor’s office,” said Anderson. “Paying twice as much for your annual exam in a hospital outpatient department simply makes no sense.”

But it does makes sense for the hospital. Government-set payment methodologies allow for different payments depending on the setting. Medicare alone uses a dozen different payment systems, according to the journal Health Policy. This allows for “dramatically different payment rates.”

Knowing how to place the patient in the right “setting” nets the hospital a lot more money. One study in the Journal of the American Medical Association suggests $75 more per visit without any increase in the level of care.

But Emanuel said it’s more likely a “ten-fold difference” in the amount charged. He added that “If there’s no difference in quality, you shouldn’t be paying more. They are profit-maximizing at our expense.”

In studies and briefs, hospitals argue that the services provided and the overhead associated with running a huge facility justifies the increased cost -- even though most patients don’t need to have a routine procedure such as a colonoscopy done in a hospital.

With additional funds from patients with health insurance, hospitals “cross-subsidize” those who walk through the door with emergencies but have little or no insurance, said Dr. Emanuel.

So he and others are proposing a simple solution: “site-neutral payments.” In other words, a procedure is a procedure, no matter where it’s done. “The address and the four walls around you shouldn’t make a difference, as long as the quality is the same.”

You may be reading about a recently approved endorsement for work comp policies which allows insurance companies to charge up to 2 times estimated annual premium, if the policyholder is uncooperative with the premium audit.  This endorsement does not apply in Florida, as it is unnecessary, because the penalty in Florida is far more punitive.

If a Florida employer does not cooperate with the final premium audit, then the carrier may charge a premium up to 3 times the estimated annual premium.  For example, let's assume a business has an estimated annual premium of $50,000, and they refuse to cooperate with the audit process.  The carrier may charge the employer a $150,000 penalty on top of the estimated premium of $50,000.

But that's not all ...

If the employer conceals payroll or misrepresents employee duties as to avoid misclassifications, then the carrier can charge 10 times the difference between what the employer paid, and what they should have paid.  In addition, employers could be subject to criminal penalties.  

Risk to U.S. property from thunderstorms is as high as from hurricanes, according to new research finding that for the past decade, severe convective storms have been the largest annual aggregated risk peril to the U.S. insurance industry.

The average annual loss from severe convective storms (SCS) including tornadoes and hailstorms was $11.23 billion, compared with $11.28 billion from hurricanes for the period 2003 to 2015, according to research published by Willis Re, the reinsurance division of global consultant and brokerage Willis Towers Watson.  The report, Managing Severe Thunderstorm Risk, was compiled with Columbia University using Verisk Analytics’ Property Claims Services loss statistics.

The research reviews the impact on SCS activity of the El Nino-Southern Oscillation (ENSO) effect of warming seat surface temperatures in the eastern and central tropical Pacific. ENSO is the main source for forecasting seasonal temperatures and rainfall, especially during the fall and winter, the report notes.

According to the report, the number of tornado and hail reports was actually low in 2015 and 2016 compared to previous years, which could have been related to the strong El Nino warming conditions around the same time.

“Regional variability in increased or reduced severe convective storm frequency due to the El Niño-Southern Oscillation (ENSO) phase can have a significant impact on regional and single state property insurance companies,” according to Prasad Gunturi, executive vice-president, Willis Re.

He said Willis Re is working with Columbia University to develop a set of severe convective storm probabilistic loss estimates to help companies “understand, manage and mitigate the regional and year over year variability in severe convective storm losses.” 

Willis Re plans to produce monthly forecasts of tornado and hail activity for client use.

“The latest research shows that ENSO and other climate signals modulate the frequency of tornado and hail activity in the U.S. We’re excited to be using that research as a scientific basis for making long-range (up to a month) forecasts of the meteorological factors that go along with severe convective storms,” said Michael Tippett, associate professor in Columbia Engineering’s Department of Applied Physics and Applied Mathematics. 

Most commercial insurance prices in the U.S. were nearly flat during the fourth quarter of 2016, although prices continued to go up for commercial auto.

The most recent Commercial Lines Insurance Pricing Survey (CLIPS) from brokerage and advisory firm Willis Towers Watson compared prices charged on policies written during the fourth quarter of 2016 to those charged for the same coverage during the equivalent quarter in 2015.

Most price changes were comparable with those reported in the third quarter. Data for two lines — workers’ compensation and commercial property — indicated modest price decreases, while directors and officers data continued to suggest more significant, albeit moderating, price reductions. In contrast, commercial auto once again experienced meaningful price increases, according to the report.

For most other lines, price increases were in the low single digits. Price changes were fairly similar across segments, though slightly negative for large accounts and marginally positive for small and mid-market ones.

“The rapid growth in the rate of price increases seen in 2012 has since slowed for much of the commercial market, but not for commercial auto. This line’s cumulative price increase since 2012 is over 25 percent, compared to about 10 percent for the surveyed commercial market as a whole,” said Alejandra Nolibos, director in Willis Towers Watson’s Americas Property & Casualty Insurance practice. “Loss experience has been benign for many of the other lines, but the dynamics of the auto business are changing quickly and dramatically, ultimately driving challenging results and rate need for the line.”

Assignment of benefits abuse has escalated over the last five years to the point where it is now a serious disruption to Florida’s insurance market.

The abuse, which is especially rampant in South Florida, stems from unscrupulous contractors and attorneys cashing in on homeowners dealing with a water loss, such as a burst pipe or roof leak. The “bad actors,” as they have been dubbed by the industry, use an AOB to acquire the homeowners’ insurance benefits, file inflated claims, and then pursue lawsuits against insurers when those claims are disputed or denied.

Because of Florida’s one-way attorney fee statute, insurers are left footing the bill for the inflated claim and the attorney fees.

“We believe the [one-way attorney fee statute] provides an extraordinary incentive for people to get into a dispute with the insurance company and inflate the claim so the company has to pay attorney fees,” said Florida Insurance Commissioner David Altmaier at the Feb. 7 Florida Cabinet meeting.

The industry hopes this will be the year that the Florida Legislature addresses the problem.

AOB is such a hot topic in Florida right now that it dominated discussions on almost every panel and between attendees of the Florida Chamber of Commerce’s Florida Insurance Summit held Feb. 1-3 in Miami. A glance at the numbers from various Florida sources tells the story of why:
•    Frequency of water claims rose 46 percent and severity increased 28 percent between 2010 and 2015 (OIR 2015 Data Call)
•    AOB property insurance claims totaled 28,000 in 2016, up from 843 in 2010 and 405 in 2006 (Florida CFO Jeff Atwater)
•    Florida’s Citizens saw a 30 percent increase in new lawsuits filed against the insurer between January and November 2016 (Citizens)
•    50 percent of Citizens’ water-related claims resulted in litigation in 2016, up from 15 percent in 2011 (Citizens)
•    As of October 2016, Citizens had 9,306 litigated claims pending and continues to receive an average of approximately 850 new claims per month (average of approximately 980 per month from August to October)
•    In South Florida, the average AOB claim costs more than $32,000, nearly triple the average of non-AOB claims (Florida Consumer Protection Coalition)
Non-cat water loss claims accompanied by an AOB are increasingly coming to insurance companies in the form of a lawsuit before the insurer has even seen the claim. Data from Citizens found that 76 percent of water loss claims in 2016 were submitted to the company in the form of a lawsuit, up from the 2.5 percent of litigated water claims in 2012.

Citizens CEO and Executive Director Barry Gilway said the average water damage claim is received by Citizens 50 days after the date of loss.

“We are not getting these lawsuits from the insured,” he said. “In many of those cases we have never even seen the claim, we’ve never had an opportunity to adjust it or received a statement of loss… it’s just ‘here is a lawsuit and a bill for $30,000.'”

National homeowners carriers have also seen a significant rise in the abuse in Florida.

“Assignment of benefits started out as a convenience for Florida residents, allowing them to sign over the benefits of their property insurance policy to a vendor to facilitate direct payment for repairs,” said State Farm Florida Spokesperson Michal Brower. “However, it has become a vehicle for fraud and claim build-up by some vendors escalating the scope and cost of remediation or repairs beyond actual damage to the home.”

“The effect that assignment of benefits abuse is having on the property/casualty insurance industry in Florida is extensive and if not addressed will ultimately be devastating to consumers.  The abuse is not only fueling the need by insurers to seek rate increases to cover rising claims costs, it’s also likely to affect consumer choices in the future, as more insurers are forced to consider leaving the areas where the abuse is the heaviest,” said Liz Reynolds, State Affairs Director, Southeast Region of the National Association of Mutual Insurance Companies (NAMIC).

Industry Response
As the situation continues to deteriorate, insurers say they can no longer afford to just watch the trend and are instead taking action to ensure that the increasing frequency and severity of claims won’t deplete their surplus and ability to pay claims.

According to the Florida Office of Insurance Regulation, nearly 73 percent of the rate filings received by insurance companies and approved by OIR were for a rate increase, largely because of AOB claims.*

Insurers are responding in ways other than raising rates, as well, including pulling out of certain areas of the state, filing for policy wording changes, and accepting fewer take-out offers from Citizens. The company has reached its lowest policyholder count in its history, but there are concerns those efforts will be reversed if the AOB problem continues.

Citizens’ Gilway has been one of the loudest voices in Florida on the AOB problem, first calling attention to the issue at Citizens OIR rate hearing in August 2015.

Gilway says as a non-profit insurer, Citizens is in a unique position to bring attention to how the problem is really hurting the consumer and not just a way for insurance companies to raise rates so they can make more money.

“I don’t have any axe to grind here. My bottom line is I feel very, very sorry for the insureds. They are getting ripped off by signing one of these things. Most of the time when they sign them, they are under duress,” Gilway said.

Florida insurance companies are just starting to quantify the AOB abuse and its impact on their bottom lines. The industry has seen increased water loss claims and litigation, but hasn’t necessarily been tracking the frequency of AOB with those claims. In OIR’s 2015 Data Call, only four companies were able to provide consistent indicators of AOB for the analysis.

Because private companies have not put forth concrete data like Citizens has, some have questioned if the abuse is as great as the industry has claimed.

Belinda Miller, chief of staff for OIR, said regulators have closely examined if the problem is an abuse of the system or if insurance companies are somehow complicit in the increased litigation. To reach that determination, OIR evaluated consumer complaints over the last five years and if they had increased at the same rate as lawsuits. Miller said that wasn’t the case.

“The argument that maybe it’s just the companies aren’t doing a very good job and aren’t paying when they should, we don’t see any evidence of that,” Miller said.

And as AOB costs insurers more money in claims, they can raise rates in response.

“Insurance companies pass through these costs,” said Miller. “The insurance company can raise rates and keep paying. It doesn’t necessarily mean they are going to make more money – they are going to pass these costs on to their policyholder.”

Ratings company Demotech is holding off on issuing large-scale ratings downgrades of Florida property insurers for now, after a number of insurers heeded its warning of last month about the effects of assignment of benefits abuse and state court rulings by boosting their claims reserves and policyholder surplus.

After warning in February that at least 10 to 15 Florida property/casualty carriers would face downgrades if they did not take immediate action to shore up their reserves in light of deteriorating conditions in the state, Demotech said March 16 that, after working with insurers to make adjustments, it slightly downgraded only one carrier.

The ratings firm said it is also monitoring three insurers — Prepared, Mount Beacon and Elements— that have been or are in the process of being sold as a result of the situation in Florida.

Joseph Petrelli, president and CEO of Ohio-based Demotech, which rates 57 carriers in Florida and 397 nationwide, said his company worked individually with companies in Florida to analyze their financial standing, strengthen their claims reserves, and provide other guidance on what they could do to avoid a ratings downgrade. The result has been $355 million in additional reserves and policyholder surplus among the Florida carriers it rates, Petrelli said.

Demotech said last month that Florida’s property insurers are facing an “uncertain operating environment” as a result of the escalating AOB crisis that has caused the number of litigated water loss claims to skyrocket over the past few years, particularly for the state-run insurer Citizens.

As the abuse spreads from south Florida across the state, Florida’s private market insurers have also started feeling the effects, with some pulling out of areas of the state and filing for rate increases.

Demotech said AOB, as well as two court cases decided at the end of 2016 that reversed industry claims procedures have lead to unanticipated challenges for insurers. Demotech also warned about the effects of Florida Supreme Court decisions involving the reversal of claims procedures, protocols and practices as contributing to the state’s uncertainties.

“In an industry where past is prologue of the future, this is extremely detrimental to efficiently operating an insurance company,” Demotech said in its March 16 release.

In response to the events, Demotech last month withdrew its ratings guidance for Florida’s property insurance writers and undertook what it said was a “comprehensive effort” to review the financial statements and business models of 57 Florida carriers to “determine if they continued to meet or exceed the objective financial criteria associated with the assignment of Financial Stability Ratings (FSRs),” which reflect Demotech’s opinion as to an insurer’s financial stability and provide a baseline of the future solvency of an insurer.

According to Petrelli, Demotech advised carriers to take advantage of statutory accounting rules before Feb. 28 to infuse capital into their surplus to improve their year-end results and avoid ratings downgrades. Petrelli estimated that about 10 to 15 companies would face downgrades if they didn’t strengthen their claims reserves.

Demotech said March 16 that the carriers it reviews and rates in Florida responded by adding approximately $200 million in loss and loss adjustment expense reserves, as well as approximately $155 million to policyholders’ surplus (net worth) through capital contributions or operating results.

“This additional $355 million to benefit policyholders or claimants indicate the insurers’ recommitment to Floridians and financial stability,” Demotech said.

Demotech said that in certain cases, it also reviewed carriers’ rate levels for adequacy and found that “the overwhelming majority of the carriers reviewed appeared to have the situation under control.”

Demotech said that based upon its review of information including year-end financial statements, its interpretation of the deterioration of the operating environment in Florida, and discussions with rated clients, the FSRs of the carriers were affirmed as appropriate, saying “due to recommitments and recapitalization to meet the requirements of maintaining an FSR of A or better, downgrades have been largely avoided at this time.”

Only one company was slightly downgraded – Cypress Property & Casualty Insurance Co. was revised from A′ (A Prime) to A (Exceptional). Demotech said this move was made in part due to Cypress’ significant underwriting loss reported in 2016, but added “based on our interpretation of the current operating environment in Florida, FSRs above A are extremely difficult for Florida property writers to achieve and maintain.”

Demotech warned that in the long run, absent meaningful improvement in the AOB situation, it is likely insurers could face downgrades in the future, consumers may face higher and frequent rate increases, and investors who would otherwise capitalize or fund Florida-based insurance companies will deploy their capital elsewhere.

“Whether a property insurance carrier is privately-held or owned by a publicly traded entity, Demotech believes the primary focus of carriers should be adequate loss and loss adjustment expense reserves, realistic pricing in support of a business plan, along with a catastrophe reinsurance program whose horizontal and vertical protection addresses the needs of policyholders and investors by assuring, at a high yet reasonable level of maximum loss, the survival of the insurer,” the company said.

Demotech said it will not make any further moves until completing its reviews of carriers’ March 31 financial statements as well as its reviews of preliminary and final catastrophe reinsurance programs by June 1.

Demotech noted, however, that it is monitoring several other companies:

Elements Property Insurance Co. / Avatar
Although the company met or exceeded the level of capital and surplus required and management has committed to do so into the future, the company did not report financials acceptable to Demotech.  The investors controlling the company have opted to sell the company rather than recommit to Florida or adapt its business model to the emerging operating environment.  Elements Property Insurance Co. has been acquired by Avatar Partners LP, the parent company of Avatar Property & Casualty Insurance Co.  Elements will maintain the FSR previously assigned as the pending transaction proceeds towards closure, Demotech said.

Mount Beacon Insurance Co. / Florida Specialty
Although the company met or exceeded the level of capital and surplus required, the company did not report financials acceptable to Demotech.  The investors controlling the company opted to sell the company rather than recommit to Florida or adapt its business model to the emerging operating environment.  Mount Beacon Insurance Co. has been acquired by Florida Specialty Acquisition, LLC.  Mount Beacon will maintain the FSR previously assigned while the remainder of its policies are moved to Florida Specialty Insurance Co. by May 15, 2017, according to Demotech.

Mount Beacon is a home and manufactured home insurance company specific to the state and is located in St. Petersburg. Florida Specialty said it will conclude the last part of its acquisition of the Mount Beacon Insurance Co. effective May 15, 2017 when all of the remaining Mount Beacon policies will be moved onto Florida Specialty paper.

Susan Patschak, CEO and Rick Loden, president/COO of Florida Specialty Insurance Co., are heading up the newly-acquired company. Before acquiring Safeway Property Insurance Co. (re-named Florida Specialty) in August of 2015, Patschak was formerly the CEO of Canopius Bermuda and Loden, president and CEO of Insurance Servicing and Adjusting Company located in Ft. Lauderdale, Florida. Dan Lavin is Florida Specialty’s Chief Underwriting Officer.

Prepared Insurance Co. / PLW Investments, LLC 
Although the company raised additional capital to meet the level requested by Demotech, the successful implementation of its business model and plan under the current operating environment would have likely required additional capitalization in the future.  In response, the investors controlling the company recommitted to Floridians by selling a majority interest to PLW Investments, LLC.  The FSR assigned to Prepared Insurance Co. has been affirmed based on their current situation, business plan, and management underlying future operations, Demotech said.

Legislative Action
Under Florida’s current law, policyholders suing their insurer over a claim dispute can recover their attorney’s fees if the insurer is shown to have underpaid the claim, by any amount. The industry says third party contractors and attorneys have been abusing the policyholder benefit, particularly for water losses, to inflate claims and fees.

“Is there an incentive in the market currently that entices people to abuse the system. We think that the answer is yes,” Florida Insurance Commissioner David Altmaier said in an interview with Insurance Journal. “The logical step, in our opinion, would be to take that incentive out of the marketplace.”

Public officials including Altmaier and private insurers are pressuring the state Legislature to act during its current session, which opened March 7.

“It’s going to be a hard battle,” Barry Gilway, CEO and executive director of Citizens, told the Florida Chamber of Commerce last month. “Let’s face it, the trial bar is extremely powerful and there’s absolutely no question they are going to fight this hard. They are going to fight anything that in any way shape or form impacts their ability to take on vendors as clients and eliminates any possibility for them to get fees.” 

A Canadian man lost much of his multi-million dollar car collection Thursday when the barn the vehicles were kept in caught fire, CTV News Calgary reports.

The central Alberta man lost farm equipment, trucks, and vintage cars-none of which were covered by any sort of insurance. The value of the vehicles lost tallied to more than $3 million in Canadian dollars, according to the collector.

It is what is, said Bert Curtiss to CTV News Calgary. I guess I've lost 45 years of work.

The 27,000-square foot barn that the cars were kept erupted into flames erupted Thursday afternoon. The cause of the fire has not yet been released. Officials said the fire may have started in a nearby garage, CTV News Calgary reports.

Some of these cars I've had for 40 years. [I've spent] hundreds of thousands of hours working on them," Curtiss said to the news station.

According to Curtiss, there were more than 40 classic cars and 40 collectible tractors in the barn when the took occurred.

Curtiss will probably not return to car collecting following this incident, he told CTV News.

Progressive’s Flo Returns to Grab Business as Competitors Raise Rates

Progressive Corp., the fourth-largest U.S. auto insurer, boosted spending on marketing this year to win customers after scaling back in the second half of 2016 when increased costs from car accidents threatened the company’s profit goals.

“We’re excited to be back in, with full advertising,” Chief Executive Officer Tricia Griffith said Friday in a conference call discussing results at the Mayfield Village, Ohio-based company. Now is the time to highlight the brand because more drivers will be getting “rate shock” from rivals that are raising premiums, she said.

Insurers have been hit by higher-than-expected claims as more drivers take to the road and succumb to distractions, such as texting on their smartphones. State Farm Mutual Automobile Insurance Co., the largest company in the industry, said this week that it had a $7 billion underwriting loss on car coverage last year. Progressive has been an industry leader in gathering data on driving trends, and prides itself on being quick to raise rates when necessary, and then win market share when rivals follow.

Progressive, which relies on the charisma of its spunky saleswoman Flo, has gained 12 percent this year, the best advance in the the 21-company S&P 500 Insurance Index. The stock traded for $39.68 at 12:04 p.m. in New York, unchanged from Thursday’s close.

Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said in his most recent annual letter that the company’s Geico unit is poised to benefit from disruption in the industry. While some auto insurers may be reluctant to write more policies due to the unpredictability of the loss costs, Buffett said, Geico is accelerating new business efforts.

Buffett Makes Hay

“We like to make hay while the sun sets, knowing that it will surely rise again,” Buffett said in the letter posted online Saturday.

Griffith, who became CEO last year, highlighted Flo this week in a letter to shareholders, noting that she got a nod from hip-hop artist Drake in a Saturday Night Live appearance and was mentioned in a Stephen King novel.

“She represents what we strive to be for consumers — helpful, unique, and providing a product that is competitive,” Griffith wrote.

New technologies are improving workers’ compensation programs in everything from communications and training to health care delivery and claims, according to experts.

Tom Ryan, market research leader for Marsh’s Workers Compensation Center of Excellence, speaking during a recent Marsh broadcast, identified several areas of workers’ compensation that can benefit from technology:

• In communications with employees. Information critical to prevent injuries and claim updates can be provided to employees via smartphone mobile applications.
• In sharing workforce training via an employer’s intranet or through smartphone applications.
• In delivering care to injured workers through telemedicine and via mobile apps that can direct injured workers to preferred medical providers.
• In managing claims by providing customizable email alerts, such as notifications when prescriptions are ready.

Wearable technology is also having an impact. Wearables can monitor employee movements and alert co-workers of danger, as well as monitor fatigue, body temperature and repetitive motion. The information can be used in training, fraud prevention and wellness programs, Ryan said.

Construction industry wearables include high tech vests and helmets that have lights or vibrate to alert employees of potentially dangerous changes in surroundings.

Some firms are equipping forklifts to sound an alarm or flash lights to warn employees and the public. Many pieces of equipment require both hands to operate and can be fitted with vibrating sensors to alert the operators of changes in their surroundings.

Joseph Molloy, vice president of workforce safety at Northwell Health, offered a case example of improvements his firm realized after it created a centralized workforce safety department and revamped its employee injury reporting system.

Previously, injuries were reported to different parts of the company. He said employees were confused throughout the life of an injury on whom to report to and what to report. Completion of forms by employees was inconsistent, he said, and penmanship was an issue. For example, asking where an accident occurred resulted in answers that ranged from an address to a building floor to a hospital.

Molloy said Northwell used technology improve its incident reporting rate. The company added automated forms and connected employee data so that the forms could be partially pre-filled. It also added multiple ways to report an incident, including a mobile app and an 800-number. Completed employee reports of injury were then sent to the supervisor, safety officer, human resources, Broadspire (its third party claims administrator) and to its workforce safety department that triages cases to determine potential nurse case management opportunities.

According to Molloy, the new system has resulted in more employees being placed in transitional return to work assignments and a positive response from employees.

Molloy said the keys to success when implementing these types of changes include engaging senior leadership and sharing the mission’s method and rationale for the change.

Donna Sides, senior insurance manager and workers’ compensation supervisor with Bank of America, offered another case study showing how technology can improve workers’ compensation programs.

Bank of America implemented a telenursing program for insured employees. This included a dedicated 24/7 reporting line that allowed injured workers to speak to a registered nurse and directly report a claim.

The nurse assesses the medical history, injury, pain level, obtains an accident description and offers a first aid type of treatment recommendation. If additional treatment is warranted, the nurse will direct employees to an in-network provider where allowed and then schedule the appointment. Call notes are uploaded to the Bank of America claims system and are viewable by adjusters.

Sides said the use of telemedicine at Bank of America has resulted in higher network penetration, lower claims severity and lower claims costs.

According to David Lupinsky, vice president at CorVel Corp., telehealth was originally created to bring healthcare to rural areas. Now it brings healthcare to employees and allows employers the ability to create virtual clinics which, in turn, drives greater productivity. Telehealth also removes the need for a larger provider network, he said.

Lupinsky said telehealth is a viable option for employers of all sizes, meaning they no longer need to make a large investment in onsite clinics. While it is not for every case, telehealth can take care of 40 percent of claims, he said.

The Florida Division of Workers’ Compensation has formed an online insurance company database to assist Florida business owners with obtaining workers’ compensation coverage that protects employees from the impacts of on-the-job injuries. According to a statement from the Florida Department of Financial Services, the new online database, called the Coverage Assistance Program (CAP), allows employers to search for insurance companies that are actively offering workers’ compensation policies for their industry type.

“Ensuring that Florida businesses have proper workers’ compensation coverage is crucial to the success of the entire workers’ compensation system,” said Tanner Holloman, director of the Division of Workers’ Compensation. “Employers can use the information provided in the CAP to inform conversations with their insurance agents and to help facilitate a smoother, faster policy purchasing process.”

The Division of Workers’ Compensation works to ensure that injured workers have access to medical care, that claims are adjusted and reimbursed efficiently, and that health care providers are compensated fairly for electing to participate as a workers’ compensation care provider. The Division also aims to provide the resources necessary to help all participants in the process remain in compliance with Florida workers’ compensation laws.

U.S. motor vehicle accident deaths last year topped 40,000 for the first time since 2007 as cheap gasoline and a healthy economy encouraged motorists to drive more, according to new estimates released by the National Safety Council.

Roadside fatalities last year hit 40,200, a 6 percent gain from 2015 and up 14 percent from 2014, according to the group. The trend reflects similar findings by the National Highway Traffic Safety Administration, which in January reported an 8 percent rise in deadly crashes in the first nine months of 2016 compared to the prior-year period.

The National Safety Council, a nonprofit safety advocacy group, also released survey findings showing that 47 percent of motorists are comfortable texting while driving. Some 10 percent of drivers reported driving drunk, and 43 percent of them were involved in a crash while impaired, the group said. The survey also found that 16 percent said they don’t wear seatbelts on every trip, while 25 percent are comfortable speeding on residential streets.

“These results underscore how our complacency is killing us,” Deborah Hersman, chief executive of the National Safety Council, said during a press conference Wednesday. She added that a 3 percent rise in vehicle miles traveled fails to fully explain the 6 percent rise in deaths seen last year.

To stem the tide, the group renewed a call for a total ban on mobile phone use behind the wheel, even hands-free systems. It also called for mandatory ignition interlocks for convicted drunk drivers, a three-tiered driver licensing system for all new drivers under 21 and other steps to curb crashes.

The group also estimated that crashes cost about $432.5 billion last year, including those stemming from motor vehicle deaths, injuries and property damage.

The National Safety Council measures roadside deaths differently than NHTSA. The group counts traffic and non-traffic deaths within one year of an accident. NHTSA counts only traffic deaths within 30 days of a crash.

A U.S. weather forecaster on Thursday said La Niña has faded and neutral conditions are likely to continue in the coming months, though it noted some chance that the El Niño phenomenon may reappear as early as the Northern Hemisphere spring.

The Climate Prediction Center (CPC), an agency of the National Weather Service, in a monthly forecast said that neutral conditions have returned and are favored to continue through at least the Northern Hemisphere spring.

La Niña emerged last year for the first time since 2012. The phenomenon, characterized by unusually cold ocean temperatures in the equatorial Pacific Ocean, are linked with floods and droughts.

Even though neutral conditions are most likely, there is a chance of the appearance of El Niño as early as March to May 2017, the forecaster warned. That would be less than a year after the last El Niño faded, having brought serious crop damage, forest fires and flash floods.

Recent Florida Supreme Court decisions and ongoing abuse in Florida’s insurance market have led a ratings company to change the criteria it uses when rating insurers in the state. The announcement comes as insurers get ready to announce their 2016 annual reports that could indicate unfavorable results for many.

Ohio-based Demotech — which rates 397 companies nationwide, 57 of which are in Florida —said Monday that it has suspended ratings guidelines it uses in Florida due to what it is calling an uncertain operating environment in the state.

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The ratings firm says no Florida insurers it rates are in danger of failing but there are about 10 to 15 that could see downgrades in March.

Demotech said it will eventually revise its general guidance but, in the meantime, it is advising carriers individually to ensure they are adequately capitalized to handle the now uncertain operating environment.

“Pricing insurance policies is a prospective process. Carriers and their actuaries price tomorrow’s policies based upon the claims and experience from yesterday and today,” the ratings agency said in a statement. “When changes occur in claims procedures, practices, and protocols, the utility of historical experience is diminished. Similarly, with insurance policies issued for 12-month periods, court decisions that markedly change claims procedures, practices, and protocols mid-term are problematic to carriers, insurer rating agencies, and actuaries.”

The uncertain operating climate that concerns Demotech refers to Florida’s escalating assignment of benefits crisis that has caused the number of litigated water loss claims to skyrocket over the past few years, particularly for the state-run insurer Citizens. The problem has begun affecting Florida’s private market insurers as well, with many pulling out of areas of the state where the abuse is the most rampant and filing for rate increases.

In addition, two court cases decided at the end of 2016 that Demotech said reversed “industry claims procedures that remain intact in other operating environments” will create unanticipated challenges for insurers that Demotech said it now needs to take into consideration to properly rate companies operating in Florida.

“Claims procedures, processes, and protocols utilized in the past must be replicable in the future if loss experience is to be predictable and claims handling scalable,” Demotech said in a statement. “The [AOB) situation in Florida is unlike any other in the United States and two recent court decisions, Johnson (September 2016) and Sebo (December 2016), have also revised claims procedures, practices, and protocols from the industry standards that previously existed to a ‘Florida only’ standard.”

The state high court’s ruling in December in the case of American Home Assurance Co. v. Sebo overturned a lower court’s decision that sided with the insurer. The case stemmed from a 2007 concurrent loss claim, where the Florida Supreme Court instead ruled for the homeowner in the case (Sebo). Lawyers specializing in insurance law said at the time that the case could lead to the reopening of past claims where coverage was denied.

In the other case, Johnson v. Omega Insurance Co., the Florida Supreme Court disagreed with a lower court’s ruling that Omega wasn’t responsible for paying the insured’s attorney’s fees because it didn’t act in bad faith when it wrongfully denied benefits for the insured and later paid the claim. The Supreme Court said that though the insurer righted the situation, it was at fault for initially denying the claim and therefore should be responsible for the insured’s attorney’s fees.

Demotech said “no carrier can be prepared for the impact of the Johnson and Sebo cases, which were less than 100 days apart, being superimposed on the challenges associated with an AOB protocol unlike that of any other jurisdiction.”

Demotech said it must now “undertake a review of its protocols to respond to the implicit albeit yet unquantified changes in the operating environment.”

Joseph Petrelli, president and CEO of Demotech, said the company has not yet determined what the new ratings guidelines will be, but it will be watching the Florida Legislature when it resumes in March and would certainly take any legislation that addresses these issues into account when establishing them.

“The operating environment in Florida is not the same as it was and is not the same as other jurisdictions so we need to respond,” Petrelli said. “We are not 100 percent certain what the evolution will be – it is a fluid situation. However, we know the situation is not better today than it was several months ago, and we need to have a suspension of guidance while these situations play out.”

Petrelli emphasized, however, that the changes do not mean the ratings company will no longer rate Florida insurers; rather it is looking at each company individually and providing guidance on how each insurer can prepare financially for the impact that increased claims could have on its surplus.

“We are still rating companies and doing everything that we currently do,” he said. “But [Florida insurers] now operate in a jurisdiction where the situation has changed. We don’t want to operate with one hand behind our back and too many things have changed for us to use the same ratings guidance.”

He said the companies Demotech rates currently have adequate reserves to handle losses from the catastrophe events of 2016, including Hurricanes Hermine and Matthew. However, those storms coupled with the changing market will have an impact on company balance sheets for 2016.

“[2016 catastrophes] eroded their surplus and after that had been eroded there was the Johnson and Sebo cases,” he said. “No one is in danger of going under, but that being said we have standards that are higher than just not going under.”

Demotech is encouraging the insurers it rates that experienced significant losses from 2016 storms and any other unaccounted for losses to take advantage of the Statutory Statement of Accounting Principles Number 72 (SSAP 72), which provides insurers with the opportunity to address financial matters before Feb. 28. Insurers can use the SSAP to infuse capital into their surplus to improve their year-end results.

Petrelli said there are about 10 to 15 Florida companies that could see downgrades in March, but the company will not issue any downgrades before then.

“We will be doing downgrades and upgrades in March in response to year end results – we have taken that position now. Even though we have a pretty good idea what those results will be, [insurers] have the ability to change those based on SSAP – so we are waiting for that to come out,” he said.

In addition, Demotech will be evaluating and implementing revised reinsurance evaluation procedures for all catastrophe exposed property insurance carriers countrywide prior to the start of the 2017 storm season. The company said the revised reinsurance evaluation procedures will be more stringent than the procedures in the suspended guidance. Accordingly, they may be phased in over time.

Demotech will continue to provide all carriers in catastrophe prone jurisdictions with “objective catastrophe reinsurance evaluation criteria and our initial thoughts on the review and analysis process of vertical and horizontal catastrophe reinsurance programs for the 2017 storm season in all jurisdictions.,” the company’s statement said.

A U.S. flood insurance program that is drowning in billions of dollars in debt can be modernized to bolster its finances while curbing the public’s exposure to flood risks, a national coalition said in a reform proposal unveiled on Wednesday.

The plan by Washington-based SmarterSafer.org calls for the National Flood Insurance Program (NFIP), to use cutting-edge technology that would more precisely determine flood-prone areas, and to price flood insurance premiums in accordance with those specific risks.

Other measures would include greater involvement by private insurers in the flood insurance market and offering incentives for communities to enhance and restore natural buffers against floods, such as wetlands and forests.

The proposal is among the first in a year that could usher in sweeping changes to the flood insurance program, whose authorization is set to expire in September. The program, operated by the Federal Emergency Management Agency (FEMA), is $24.6 billion in debt to the U.S. Treasury Department, a FEMA spokeswoman said. Most of the debt covered claims from Hurricane Katrina in 2005 and Superstorm Sandy in 2012.

It is unclear which lawmakers may take up the issue as Washington adjusts to a new presidential administration, or how much of the SmarterSafer.org plan would be adopted. However, there is bipartisan support to modernize the insurance program and U.S. Senate and House lawmakers held several hearings last year about possible ways to do it.

The flood insurance program has been a political football in Washington for years, mainly because of the debt, which the government has said is impossible for the program to repay.

The program was temporarily extended 17 times between 2008 and 2012 and lapsed four times during the same period, a pattern that can create uncertainty in real estate markets, some U.S. lawmakers have said.

Federal law requires that homes in flood-risk areas have flood insurance before a mortgage can be completed. The federal program remains the only flood insurance available to the vast majority of Americans, although a small market for private flood insurance is now sprouting in some flood-prone states, such as Florida.

A 2012 law ultimately extended the program to September.

Another law in 2014 allowed FEMA to buy private reinsurance to cover the program if claims surge, among other measures. Last September, FEMA obtained more than $1 billion in reinsurance for 2017 from 25 reinsurers.

The push to further modernize the program has rallied support from diverse groups. SmarterSafer.org, for example, is composed of more than 30 organizations ranging from insurers to environmental groups. Members include units of insurers Chubb Ltd. and Swiss Re AG, Reinsurance Association of America, National Taxpayers Union, Union of Concerned Scientists and National Wildlife Federation.

Car makers and tech firms are convinced that driverless cars are the future, but they appear to be ahead of consumers in that thinking.

Only 23 percent of Americans say they are willing to ride in an autonomous car, while 28 percent say they are unwilling, according to a new survey.

The poll from media firm Morning Consult found that Americans have safety concerns about self-driving cars: 41 percent of American adults think autonomous cars are less safe than a vehicle driven by humans, while 33 percent said they are more safe. Seven percent said they are equally safe.

Age is a big factor: 41 percent of 18-29 year-olds believe autonomous cars are safer than vehicles driven by humans, while only 22 percent of those 65+ believe they are safer (49 percent of 65+ say they are less safe).

However that could change. The same poll, conducted January 12-13, 2017 among 2,200 American adults, also found some optimism about the future of autonomous vehicles. A plurality of respondents, 42 percent, said they may be willing to ride in one in the future.

Boston Consulting Group says the autonomous car vehicle business will increase to $42 billion by 2025 and account for a quarter of global sales by 2035. At the recent Consumer Electronics Show in Las Vegas, Tesla Motors Inc., BMW, Ford, Volvo and Google showed off their models and shared their visions of an autonomous future; overall there were some 138 auto-tech exhibitors seeking deals in the self-driving economy.

For the first time, The Hartford has ranked #1 in Auto claim customer satisfaction in the J.D. Power 2016 U.S. Auto Claims Satisfaction Study.
 
In addition to receiving the highest overall satisfaction score among 27 insurance providers, customers also ranked us as the #1 carrier for first notice of loss. 

Commercial truck drivers with three or more medical conditions double to quadruple their chance for being in a crash than healthier drivers, reports a study led by investigators at the University of Utah School of Medicine.

The findings suggest that a trucker’s poor health could be a detriment not only to himself but also to others around him. “What these data are telling us is that with decreasing health comes increased crash risk, including crashes that truck drivers could prevent,” says the study’s lead author Matthew Thiese.

Thiese notes that keeping healthy can be tough for truck drivers, who typically sit for long hours behind the wheel, deal with poor sleeping conditions, and have a hard time finding nutritious meals on the road. The rate of crashes resulting in injury among all truck drivers was 29 per 100 million miles traveled. For drivers with three or more ailments, the frequency increased to 93 per 100 million miles traveled, according to Thiese. 

Considering that occupants of the other vehicle get hurt in three-quarters of injury crashes involving trucks, it’s in the public interest to continue investigating the issue, says the study’s senior author Kurt Hegmann, M.D., M.P.H., director of RMCOEH. “If we can better understand the interplay between driver health and crash risk, then we can better address safety concerns,” he says.