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Monday, October 25 2021

Fourteen alleged insurance fraudsters are awaiting court action after they were arrested last week in southwest Florida.

In Manatee County, south of Tampa, 13 men were caught in a sting operation and charged with contracting without a license and failing to have workers’ compensation insurance on their workers, the Manatee County Sheriff’s Office said in a news release.

The sheriff’s office did not say how the sting went down. But in similar operations in recent years, authorities advertised for bids on a local residential construction project. When the contractors arrived to look at the property, authorities checked state databases and found the men to be operating outside state law and regulations. The operation was conducted in conjunction with investigators from the Florida Department of Financial Services, the National Insurance Crime Bureau.

“The purpose of the operation was to address unlicensed contractors who are working without the required contractor license and engaging in construction-class work without the required workers’ compensation insurance exemptions,” the sheriff’s office said.

Those arrested were:

Jake Gratkowski, Oved Otachy, Robert Pinas, Carlos Pena, Harold Leventry, Loren Leonard, Robert Edwards, John Small, Jonathan Pipes, Andrei Razmeritsa, Earl Brown, David Lamothe and Junio Goncalves-Fonseca.

In Naples, Florida, a former insurance agent, jailed a decade ago for pocketing premiums, was arrested last week on charges of leaving the scene of an accident.

Kenneth Elliott won local fame in 2011, when he was convicted of defrauding at least 20 policyholders. He was sent to prison and ordered to pay more than $68,800 in restitution, including $742 to his own mother, according to a report in the Naples Daily News.

Elliott was released from prison in 2018. In March of this year, he was charged with leaving the scene of an automobile accident, but he failed to appear in court and remained at large until last week.

The man has been ordered held without bond. He has applied for indigent status, claiming to have no income or assets. Court records show he has paid only about $11,000 of the restitution he was ordered to pay in 2011.

Monday, October 25 2021

It’s not just a few Florida property insurance companies that are running into financial trouble. Almost every carrier is losing money in 2021 and the future does not look any better, the CEO of Citizens Property Insurance Co. told lawmakers Tuesday.

“It is an absolute sea of red ink across the industry,” Barry Gilway said at a Florida Senate Banking and Insurance Committee meeting. He showed sobering net income data for carriers, and few bright spots could be found.

“This is not one or two companies that are having problems in the marketplace,” he said. “This is virtually every single company experiencing negative net income – and a direct hit to surplus.”

Gilway said that 52 Florida-domiciled companies write about 79% of the market. They write $13.8 billion in premium but are backed by only $4 billion in surplus. With Florida’s market now on “life support,” and red ink rising, many insurance companies are now finding it almost impossible to obtain new capital.

That forces carriers to go out of business or drop policies and raise premiums, a growing trend that has prompted thousands of homeowners to move to Citizens in the last two years. Citizens’ policies, expected to top 1 million by the end of next year, are reaching unsustainable levels, officials have said.

Tuesday’s committee hearing was held to explore some solutions to the Florida insurance conundrum. Gilway echoed the sentiments of insurance agents, lawmakers and others who have spoken about the problem in recent months. Citizens, he said, was set up to be an insurer of last resort, yet it is limited by law and by regulators on rate increases that now set most Citizen premiums at about half of what private market insurers charge.

“We are in an insane position,” he said. “Here we are, supposed to be the insurer of last resort, but we’re not supposed to be there at 50 cents on the dollar of what private carriers charge.”

More than 90% of Citizen’s single-family homeowner policies are offered at less than what private market insurers charge. In answer to a question from Sen. Doug Broxson, R-Pensacola, Gilway said he is aware of no other state’s residual insurer that has rates so low and competes with the private market.

Sen. Jeff Brandes, R-Bradenton, pointed out the absurdity of Florida’s market. A billionaire from out of state can buy a second home in Florida, with a lower-priced policy from Citizens that is subsidized by taxpayers.

“You’re right on,” Gilway said. “Yes. The system is subsidizing those individuals.”

Sen. Darryl Rouson, D-St. Petersburg, asked if Citizens had a way of tracking insurers who appear to be losing money and have complained about litigation.

“Do you have any data on the performance of insurance companies on denying and delaying claims payments and how that has had an impact on litigation,” Rouson asked.

Gilway said Citizens does not have that data, but that the Florida Office of Insurance Regulation may collect that information.

Monday, October 11 2021

The federal government Friday rolled out a flood-insurance program revamped to reflect worsening climate change, a program that will raise rates for millions of homeowners in wealthy coastal areas and humble inland communities alike.

The Federal Emergency Management Agency in April announced the first significant update to the beleaguered National Flood Insurance Program, which covers about 5 million properties. Premiums have risen steadily, but the program is more than $20 billion in debt, thanks in part to rising seas and stronger storms. Now, a quarter of the participants will see lower costs, while the remainder will see premiums rise in increments as high as 18% annually. The maximum total increase will be $12,000, a level that will affect only the most expensive real estate.

“Climate change is going to make housing more expensive than it already is,” said Daryl Fairweather, chief economist at Redfin Corp. “This is just a first step.”

FEMA is facing an urgent but unpopular task. The program was created in 1968, when there were fewer major storms and fewer people living by the sea. But the U.S. coastal population grew by over 15.3 percent between 2000 and 2017, to over 94 million. Moreover, many inland places that have seen huge surges in flooding lack accurate maps. A 2017 report from the Department of Homeland Security inspector general found that 58% of FEMA flood maps were wrong or outdated.

The insurance program was originally meant as a backstop for homes that private insurers found too risky. Now, however, it covers 95 percent of residential flood policies. In all, the program sweeps in about 5 million properties, including primary and vacation homes and businesses. Deeply subsidized premiums, averaging under $800 annually, mean that the agency routinely pays out nearly four times what it takes in.

David Maurstad, the program’s senior executive and architect of the overhaul, said that nearly 90% of members would see premiums fall or rise only slightly, rather than the blanket increases of past years.

“The new rating methodology is correcting longstanding inequities,” he said Thursday. “We can no longer continue to ignore the fact that some of our policyholders had been unjustly subsidizing other policyholders. They should no longer bear the cost for the policyholders with higher-value homes, who’ve been paying less than they should.”

Until now, FEMA used a fairly simple methodology developed in the 1970s that based risk ratings on two factors: whether homes were inside a severe flood zone and their elevation within those zones. FEMA says its new model, known as Risk Rating 2.0, is based on huge advances in technology. The leaps include sophisticated catastrophe models that are standard for the private insurance industry, which will allow officials to evaluate individual properties and assess risk fairly.

Hiking premiums may encourage homeowners to think more deeply about the wisdom of living in endangered areas.

“People need to have very difficult conversations about adaptation, about relocating, ” said Laura Lightbody, project director of the Flood-Prepared Communities initiative of the Pew Charitable Trusts. “Price is one of the most clear ways to communicate risks.”

But even large premium increases may not nudge people away from the water. Residents of wealthy vacation spots like Miami Beach, Florida, and New York’s Hamptons can afford them. Kevin McAllister, founder of Defend H20, a Hamptons nonprofit, said that $12,000 is “the cost of a Belgian block driveway or less for these homes.”

Gene Stilwell, executive sales manager at Town & Country Real Estate in East Hampton, said many residents will take the revamped program in stride.

“It’s worth it,” he said. “If something happens, they have the means to reconstruct and rebuild and fix whatever flood damage has occurred.”

Meanwhile, many other places with scant resources will be feeling painful increases for the first time. An $800 policy that increases 18 percent over 10 years would be $4,188, a significant increase for someone on a budget.

Last week, senators including Democrats Chuck Schumer of New York and Robert Menendez of New Jersey, and Republican Marco Rubio of Florida wrote FEMA to ask that the roll-out be delayed, arguing that too many people would see increases too abruptly. “This is a sharp departure,” they wrote.

Maurstad replied that the plan had been delayed once, and that the increases would proceed Friday.

On Monday, Menendez will introduce legislation that could cut maximum annual increases to 9%, institute means-testing and add vouchers for those who cannot afford the increases.

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