Don Brown

The Miami Herald
by Manley Fuller
August 21, 2011

We watched, we waited, and once again we were spared, this time.

Earlier this month, Tropical Storm Emily fortunately weakened while in the Caribbean, leaving our homes, businesses and wallets intact. As most South Floridians kept an eye on the “cone of uncertainty” wondering if and when the hurricane shutters would need to go up and last minute errands would need to be made to the grocery store, gas station and bank, I wondered how many residents were concerned that this may be the storm to leave Florida in a financial crisis?

With four months left this hurricane season, which is predicted to be an active one, it would behoove all Floridians to take advantage of this second chance and look into mitigating their homes against future storm damage. With citizens throughout the state in an uproar about rising property insurance rates, we should all realize that for every $1 spent on mitigation, $4 is saved, and that over time this will help reduce insurance premiums statewide. Mitigation provides this added benefit, because by strengthening our homes we can protect against the devastating effects of hurricanes, reduce the number of hurricane-related insurance claims that are filed, and lessen the state’s exposure to catastrophic damage.

This week, on the 19th anniversary of Hurricane Andrew, the wake-up call from Emily also serves as a reminder that we desperately need to reform Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund to better protect all Floridians. The state-run insurer, which now is the largest carrier in Florida, has lost sight of its intended goal and today writes policies for more than just the small number of homes unable to acquire coverage through the private market. Today, multimillion dollar beach homes are included among the 1.3 million policies, and the risks are high for all Floridians.

Needed reforms to Citizens and the Cat Fund will end the requirement that all Floridians subsidize reckless coastal development in the most hazardous areas of the state. By removing Citizens coverage on structures in flood and storm-prone areas seaward of Florida’s coastal construction control line and within units of the Coastal Barrier System, we will reduce the risk of the public having to pay the claims of beachfront property owners.

From the beautiful homes along Golden Beach to the palatial mansions on Fisher and Star Islands, who knows how many of those residential properties are insured through Citizens? What we do know is that residents who can well afford their own private insurance are being insured by Citizens, and when a storm does make landfall on Florida’s coast, it will be all Floridians from Miami to Pensacola who will be required to pay the claims from storm damage.

Florida homeowners, renters, business owners, churches and even charities, such as Florida Wildlife Federation, will be on the hook for a decision our elected officials have yet to take full control of.

Recently, NOAA issued its updated 2011 Atlantic hurricane season outlook and raised the number of expected named storms from its May pre-season prediction. There is no time like the present to take the necessary steps to protect our homes, businesses, and beaches from whatever the future may hold.

There’s no time like the present for the Florida Legislature to reform Citizens Insurance and the Hurricane Catastrophe Fund.

Manley Fuller is president of the Florida Wildlife Federation.

http://www.miamiherald.com/2011/08/21/2366976/reform-mitigation-would-help-fix.html

The Gainesville Sun
by Don Brown
August 18, 2011

While next month is considered the most active time of year with regard to hurricane season, it’s the month of August that produced two of the most devastating storms our state has ever been exposed to; hurricanes Andrew and Charley. Although it’s been 19 years since Andrew made landfall in South Florida and seven since Charley pummeled the west coast, we can only wait and see if the next named storm will be another one for the history books.

Regardless of how we recovered from the storms of the past, today Florida is in a rather precarious position. Despite the fact the largest insurer in the state is financially unsound, most Floridians believe we will be able to repair the damage from the next storm and rebuild our communities the same way we have done in the past. Unfortunately, that is not the case, and instead what Floridians will be forced to deal with following another Andrew or Charley is a financial burden beyond imagination.

According to estimates, Citizens Property Insurance Corp. will have a $5.7 billion surplus by the end of 2011, with the potential to recover $6.591 billion in Florida Hurricane Catastrophe Fund reimbursements and $0.575B in private reinsurance to pay claims after a storm. However, with a total exposure of about $465 billion and the 100 year probable maximum loss estimated at $22 billion, it will be all Floridians, whether they are Citizens policyholders or not, who will repay the loans for the amounts needed in excess of what Citizens has available to pay consumer claims. The cost of this debt will be paid for in the form of hurricane taxes tacked on to all insurance policies including those of working families, business owners, churches, charities and renters.

While no one relishes paying more for insurance, fairness requires that those who generate risk should pay their full share of it. By choosing to live in the Sunshine State, a year-round vacation spot for many with perfect temperatures and beaches for miles, we must also take responsibility for the cost of this American paradise. For those fortunate enough to own multimillion dollar beach front property as a first home, or even vacation home, it is unreasonable that they receive subsidized insurance via Citizens at the expense of so many hardworking Floridians who can’t afford to own property on the beach.

As we maneuver through this time when lawmakers are working to put our state on a path to financial stability, we need those fortunate individuals, who made the choice to live on Florida’s coast, to take responsibility for their actions. By reforming the two state-run entities and encouraging the return of the private market, we can work to alleviate both the financial pressures Citizens policyholders are being faced with today and the potential financial calamity the entire state will face in the wake of the next major storm.

Don Brown is a senior fellow with The Heartland Institute, a former member of the Florida Legislature and chairman of the House Insurance Committee

http://www.gainesville.com/article/20110818/NEWS/110819438/-1/news300?p=1&tc=pg

The Daytona Beach News Journal
by Steve Hall
August 17, 2011

The recently passed property insurance reform law (Senate Bill 408) promises to lower homeowner insurance rates.

Eventually.

That’s not exactly true either. It really doesn’t promise to lower rates. Only politicians can do that. As an insurance agent and risk manager, I don’t get to set the homeowners insurance rates our companies charge. I just get to explain them — not an easy thing to do these days.

SB 408 is a good first step in fixing some things that were causing companies to raise rates or restrict writing new policies. Those fixes include no longer forcing companies to pay for repairs to homes when no repairs were made, and changes to the sinkhole part of your policy.

Prior to 2005, when you had damage to your home, the company paid you 80 percent of your damages, so you could get started on repairs or rebuilding. You then got the other 20 percent (called the holdback) when the repair was completed. The Legislature decided in 2005 that your company should pay all of the money up front. As often happens when laws are passed, unintended consequences show up. Since 2005, company losses increased 80 percent, due primarily to this change.

The other major change delivered by SB 408 is on sinkholes. Who thought we would be talking about sinkholes instead of hurricanes? The cost of sinkholes from 2006 through 2010 was $2 billion! Fifty percent of Florida insurance companies lost money in 2010. Fifty percent with no hurricanes. Sinkholes are the culprit. When did sinkholes become so prevalent?

Public adjusters began marketing to homeowners that they may be entitled to money for sinkhole damages. Florida law was not well-written regarding what a sinkhole was. I always thought it was when your house was in a hole, but apparently public adjusters believe a crack in your driveway, or a hairline crack in your wall, qualifies. Claims started coming out of the woodwork. The new law defines “sinkhole.”

The changes regarding sinkholes require claims to be paid for repairs actually made, instead of when a sinkhole claim is proven. If the company deems that there is not a sinkhole loss, the homeowner will also have to share half the cost of additional sinkhole testing, up to $2,500. Both requirements should reduce frivolous claims.

What about the thing that didn’t get fixed — and still poses a huge danger for you? It’s called Citizens.

Citizens is the largest property insurer in Florida with over 1.4 million policies. Why should you care? Because Citizens has $443 billion in exposure, with $6 billion in surplus. If Citizens were a real insurance company, it would be deemed unsound and closed by the regulators.

So what happens if Citizens has claims and not enough money to pay them? Well, just look at your auto insurance bill (yes, I said auto). Down toward the bottom of the premium, you will see one or more entries with charges to you. Some are assessments by Citizens to you — on your auto insurance — because Citizens did not have the money to pay the claims from past hurricanes. These charges are on almost every policy you have, including your business policy if you own a business. So Citizens can tax almost every policyholder when it needs extra money.

Why would Citizens need extra money? Because its rates are not financially sound. Remember the politicians? They can just make this stuff up as they go along. So even though Citizens’ own math guys warned that Citizens’ rates are 40 percent to 50 percent below where they should be, the politicians said, “Let’s allow the rates to rise, but only after freezing them for three years and then allow them to rise 10 percent each year.”

Oh, I forgot to tell you. If you are a Citizens policyholder, you have an assessable policy. That means that if Citizens needs money, you will also be assessed up to 45 percent of your premium to help Citizens pay the shortage.

Citizens is supposed to be the company of last resort. Too often, it is the market of choice because of its price advantage. Yet every policy is an added burden to you and me, because we take on more risk when the wind blows. And it inevitably will.

I wish I could tell you that homeowners insurance prices will stabilize. For the next three to four years, I expect they will rise. If you look at the commercial insurance market for direction, you can see companies will aggressively compete for business where they believe they have a reasonable chance of profit. Give homeowners insurance companies a level playing field, and they will come back. Remember when the national companies used to write homeowner policies in Florida?

The legislature and governor should be commended for taking an important first step in stabilizing our homeowners insurance market. To make it truly healthy, they must make Citizens the market of last resort.

http://www.news-journalonline.com/opinion/editorials/guest-columns/2011/08/17/property-insurance-bill-only-a-start-on-needed-reform.html

InsuranceNewsNet.com
by Jeff Jeffrey
August 15, 2011

The Florida Hurricane Catastrophe Fund may be unable to cover all of its losses in the event of a major catastrophe — unless significant changes are made to the cat fund — according to fund Chief Operating Officer Jack Nicholson. That’s why Nicholson has begun circulating draft legislation, which he said would help put the fund on more solid financial footing.

Among the changes included in the draft legislation are reducing the size of the government-run reinsurer’s “mandatory” layer, requiring insurers participating in the fund to pay more, decreasing special taxes the fund might impose on Floridians, and ending the fund’s never-funded temporary increase in coverage or TICL layer.

The cat fund is a tax-exempt state trust fund, which provides reinsurance protection to insurance companies that suffer losses as a result of a severe hurricane.

The fund has a mandatory coverage layer of $17 billion, which Nicholson’s proposal would reduce to $12 billion by the 2015 contract year. The draft legislation includes provisions that would allow for increases after the fund demonstrates it can fully fund its single-season capacity and its second-season capacity.

Nicholson said his proposal would also seek to have the private market “put more skin in the game” by increasing co-pays from the current level of 10% over the next three years. For the 2013 contract year, the maximum available coverage percentage would be 85%; for the 2014 contract year, the maximum available percentage would go to 80%; and for the 2015 and subsequent contract years, maximum available percentage would go down to 75%.

“We would like to be able to say to the legislature that we can pay 100% of our losses, regardless of what happens. Right now, we can’t honestly say that we can,” Nicholson said. “These changes would move us much closer to that goal.”

Nicholson said it is essential for more private market reinsurers to help bear some of the cat fund’s load because the fund is being asked to do things for which it was never designed.

Nicholson said during the economic boom of 2007, lawmakers expanded the role played by the fund to help lower rates. That became a major problem when the mortgage crisis hit, because it caused the fund’s debt burden to explode, he said.

“The two markets each have their own role to play. The private sector should play a completing role in terms of capacity that the fund can’t support. And our role is to provide stability to the market,” Nicholson said. “When those roles began to overlap, there were serious problems.”

The fund and its largest client, Citizens Property Insurance Corp., which is the state’s insurer of last resort, have garnered headlines recently as more and more industry watchers warn of the potential risks associated with the two taxpayer-backed entities, which have the potential to severely hurt the state economy in the event of a severe hurricane.

In June, A.M. Best analysts released a statement that it “continues to be concerned” about the fund’s ability to pay all of its obligations in the event of a severe hurricane.

“[B]ased on the revised estimated claims-paying capacity recently released by the FHCF, the post-event maximum estimated borrowing capacity estimates have been reduced, as compared with the bonding estimates provided in May 2010. As a result of these factors, as well as A.M. Best’s analytical judgment, coverage provided by the FHCF’s mandatory layer will continue to be reduced by 5% in A.M. Best’s assessment of risk-adjusted capitalization. Given the lack of funding regarding the Temporary Increase in Coverage Limits, no credit (100% reduction) will be provided for this layer, as was the case previously. A.M. Best believes that reducing the amount of coverage provided via the FHCF and relating it to the projected borrowing capacity represents a more accurate view of overall risk-adjusted capitalization,” the release said (Best’s News Service, June 1, 2011).

And in May, American Strategic Insurance President and Chief Executive Officer John Auer said both the cat fund and Citizens need some major changes to avoid significantly hurting the state’s economy.

“As we sit currently, far too much risk is being borne by the taxpayers of Florida, through a combination of both Citizens and the Florida Hurricane Catastrophe Fund,” Auer said. “For years Florida has been only one major hurricane away from fiscal crisis. The current system requires all Floridians to pay hurricane taxes to subsidize million-dollar beach homes on Florida’s coast.”

Auer wants Citizens, which has ballooned to become the state’s largest insurer by market share, returned to its original mandate of insurer of last resort (Best’s News Service, May 31, 2011).

Also in May, Florida Gov. Rick Scott signed into law major property insurance legislation that puts additional limits on how claims against Citizens may be filed. The new law raises the minimum surplus requirements for residential property insurers; shortens the time frame for filing windstorm and hurricane claims to three years and sinkhole loss claims to two years; provides a more precise definition of a sinkhole; places limits on public adjuster compensation; and restores the replacement-cost holdback provision for dwelling coverage, among other reforms (BestWeek, May 18, 2011).

But if Nicholson’s proposal is adopted by lawmakers and musters the support of Scott, it would go a long way toward setting the cat fund on more solid financial ground, said Eli Lehrer, a vice president of the Heartland Institute.

Lehrer said while he would have liked to see Nicholson’s proposal set a higher level of retention for the fund, ensuring fewer storms would rise to the level of needing its backing, he believes the draft legislation includes a number of positive suggestions. Lehrer said he thinks ending the TICL layer of coverage would go a long way in improving the fund.

“The instability of the catastrophe fund is one of the single biggest problems facing the Florida property market and it’s the one receiving the least amount of attention. While Florida Citizens has its own problems, it isn’t likely to bankrupt the state,” Lehrer said. “The catastrophe fund could.”

http://insurancenewsnet.com/article.aspx?id=273058&type=propertycasualty

The Heartland Institute
Editorial
August 12, 2011

TALLAHASSEE — Heartland Institute staffers today praised proposals from Florida Hurricane Catastrophe Fund Chief Operating Officer Dr. Jack Nicholson that would put the giant taxpayer-backed reinsurer on sounder financial footing.

Nicholson’s proposals, put forward in public speeches and widely circulated draft legislation, the full text of which is available at www.outofthestormnews.com, includes provisions that would reduce the size of the government-run reinsurer’s “mandatory” layer, requires insurers participating in the fund to pay more, reduces special taxes the fund might impose on Floridians, and ends the fund’s never-funded TICL (temporary increase in coverage) layer.

Many of the proposals echo those made in a James Madison Institute report, written by Eli Lehrer, vice president of Washington, DC operations for Heartland, titled “Solutions to Restore Florida’s Property Insurance Marketplace to Protect Taxpayers and the Insured.” Although several Cat Fund reform proposals were floated during the previous legislative session, none received a floor vote.

Don Brown, a Heartland Institute senior fellow and former Florida legislator, says Nicholson’s proposal is necessary for Florida’s future. “For some time we have known that the Florida Hurricane Catastrophe Fund might not be able to borrow enough money to fully fund its mandatory coverage limit after a major storm. The uncertainty is now greater than ever given the status of the world financial markets.

“The proposal recently advanced to restructure the Catastrophe Fund to more accurately reflect its ability to fund post-loss obligations is not only timely but, in my opinion, not optional,” Brown continued. “We must thank Dr. Nicholson for his leadership and adopt his proposal as soon as possible.”

Heartland’s Florida director, Christian Cámara, agreed. “As currently structured, the Cat Fund poses an enormous risk to Florida taxpayers and the state’s economic future. This plan would be a major step in the right direction that would not only help insulate taxpayers from years of devastating post-hurricane taxes, but also promote the transfer of billions of dollars’ worth of hurricane risk outside our borders.

“The less hurricane risk taxpayers bear, the less likely it is that taxpayers will have to bail out the state after a storm,” Cámara said.

Brown can be reached at (850) 865-9280 or dbrown@heartland.org. Cámara can be reached at (305) 608-4300 or ccamara@heartland.org. Lehrer can be reached at (202) 615-0586 or elehrer@heartland.org

——————————————————————————–

The Heartland Institute is a 27-year-old national nonprofit organization with offices in Chicago, Illinois; Washington, DC; Austin, Texas; Tallahassee, Florida; and Columbus, Ohio. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.

http://heartland.org/press-releases/2011/08/12/heartland-praises-nicholson-cat-fund-reform-proposals

Bradenton,com
by Jeanette Scutti
August 11, 2011

Sinkholes have become a major issue for both Florida property owners and insurance companies. While sinkhole related losses are a statewide issue, claims data shows they are more prevalent in Hillsborough, Pasco and Hernando counties.

Highlighting the financial problem, sinkhole losses for Citizens Property Insurance Corp., our state-run insurer, were $245 million in 2010, yet Citizens collected only $32 million in premiums for the coverage. These losses illustrate the magnitude of the problem and yet do not include our private insurance company losses. Consequently, in order to stem the losses and ensure the sustainability of insurance companies to pay future claims, the premiums for sinkhole loss coverage are rising rapidly and it is important to understand the coverage options available to property owners.

Let’s distinguish the difference in coverage for what we commonly refer to as sinkhole damage but can be categorized differently in the insurance policy. First, the standard Florida homeowner’s policy automatically includes coverage for “catastrophic ground collapse,” which means geological activity that results in abrupt collapse of ground cover, depression in the ground clearly visible by the naked eye, structural damage to the building including the foundation and condemned with order to vacate by a governmental agency authorized to issue such and order. Structural damage consisting of merely settling or cracking of the foundation or building does not constitute a loss by catastrophic ground collapse nor will this coverage pay to repair the depression, the hole or to stabilize the land on the insured premises.

If a hole was to open up and swallow all or a portion of your home and it is deemed unlivable, this would be considered catastrophic ground collapse.

Property owners can choose an endorsement for “sinkhole loss.” Sinkhole Loss is actual physical damage caused by “sinkhole activity,” which means settling or systematic weakening of the property which results from movement raveling of the soils, sediments or rock material into the subterranean void created by the effect of water on limestone or similar rock formations. Mere cracks in walls and/or foundations caused by sinkhole activity and verified by a professional engineer selected or approved by your insurance provider may be covered under the sinkhole loss coverage provision.

Sinkhole loss coverage relates more for cosmetic damage including coverage to stabilize the land. This coverage endorsement is where the hefty premium increases are going to come and where property owners are going to have to decide whether to buy this optional endorsement and, in some cases, may be compelled to purchase this coverage by their lender.

The question now is how will national mortgage lenders view these coverages when applying for a loan? Because this is a Florida issue, do the lenders understand that basic coverage is provided for catastrophic ground collapse? Will they require the sinkhole loss endorsement to be added to your homeowner’s policy?

Federally backed lenders Freddie Mac and Fannie Mae will most likely drive the market response and set the requirements as most lending institutions tend to follow one of these agencies and some lenders adopt their own guidelines from both. Currently, Fannie Mae does not require sinkhole coverage but Freddie Mac does require it. Educating lenders on the differences between catastrophic ground collapse and sinkhole loss coverage should assist them in making a determination on their requirements and we suspect this will be an evolving issue for the marketplace.

The proposed rate increases for Citizens Property Insurance Corp. for the sinkhole loss endorsement coverage option have not yet been submitted to the Office of Insurance Regulation for approval; however the OIR will have 45 days to approve these once a formal request has been received. If approved, these changes will not take effect until January or February of 2012. We are not sure if they will approve a “one shot” rate increase or if they will phase in the rate increases? Some private insurance companies have filed for a rate revision as well.

It is important to know the insurance coverage included in your policy along with the optional coverage endorsement available. Florida property owners will have to decide whether or not to purchase the optional sinkhole loss endorsement and that option will undoubtedly be influenced by their lender.

Jeanette Scutti, a family risk manager at BB&T Insurance Services, can be reached at (941) 748-1431.

http://www.bradenton.com/2011/08/11/3412985/sinkhole-changes-impact-owners.html

Johnson Strategies
by Scott Johnson
August 8, 2011

Staggering, unconscionable, devastating, incomprehensible…such is the hyperbole misshaping both the intent and impact of Citizens sinkhole rate increase–unanimously recommended by its board week before last. Leading the army of distortionists is Senator Mike Fasano (R-New Port Richey) and Florida’s former Insurance Consumer Advocate, now a staunch advocate for public adjusters, Sean Shaw.

With legions of misinformed activists and some media outlets behind them, the two are calling for statewide hearings and urging Sinkhole Alley residents to join them August 16 for a flag waving protest to which they’ve invited Gov. Rick Scott and CFO Jeff Awater. Governor Scott, CFO Atwater and Insurance Commissioner Kevin McCarty have each been asked to oppose the hike. CFO Atwater is urging that it be implemented “gradually”.

What’s troubling is whether the Senator and Mr. Shaw know how many followers they are hurting in order to unjustly enrich a small minority. I’m compelled to assume they don’t know since the alternative, they don’t care, is too painful to contemplate and significantly out of character for both of them.

Here are the facts.

Citizens sinkhole premium deficit is around $245 million and growing. Those receiving the benefit of a premium that is about 450% too low make up only about 20% of Sinkhole Alley’s 250,000 Citizens policyholders; about 50,000 people, total of 90,000 statewide. Eighty percent in Sinkhole Alley do not buy the coverage, even at today’s bargain basement price; far fewer buy it in the remaining counties.

Also, the coverage is elective and is not required by mortgage lenders, else how would so many be able to go without it? Fannie Mae doesn’t require it and no lenders require similar coverage in “any” other state including earthquakes in California or mine-subsidence coverage in West Virginia–in stark contrast to what Senator Fasano has been saying. And, the payout for this coverage in Florida isn’t for anything nearly as catastrophic; it’s for settlement cracks in driveways and sidewalks and, according to numerous state studies, it’s spent on vacations and mortgage pay-offs, not repairing damage if, indeed, there was any.

Citizens premium deficits, like those of any carrier, reduce surplus. Unlike private carriers, however, Citizens assesses its own policyholders up to 15% for such deficiencies. Those assessments are paid by “all” Citizens policyholders after a storm. If it’s not enough, private market policyholders must also chip in.

This means that; approximately 50,000 people from just a few counties, “choosing” to purchase a coverage no one else wants, even at today’s discounted price, are being unjustly enriched via backdoor fees charged to everybody else; including some who don’t even own property. This has prompted some to ask, “if they don’t like the price, why can’t they do what everybody else has already done and not buy it?”

It also prompts some to ask who the winners are here? Well, a handful of Public Adjusters and attorneys who want their share of the claim payout that flows to those 50,000 people, would be one answer!

Keep in mind this solution (removing sinkholes from Citizens 10% premium cap) was first brought to light by the consumer advocates office, the one Sean Shaw used to head up. Florida lawmakers only implemented the consumer advocates recommendation delivered during the Citizens rate hearing in December of last year. While Sean Shaw had already left to join the Merlin Law Group, where he often defends public adjusters, the motivations of his former office was…consumer protection.

Everyone has coverage against sinkhole damage. The question here is, how much are you willing to pay so a substantial minority can buy a different coverage, (sinkhole “activity” coverage), which pays for settlement cracks?

No doubt next week’s demonstration will attract a lot of people. My bet is the majority will be among the 50,000 plus who want the rest of us to keep on paying their bills.

Either way, it’s not going to be a pretty sight!

##end##

End Note: There is both logic and irony in the suggestion that the reforms of SB-408 might reduce the future payout for sinkhole losses and thus the need for such a large rate increase. The irony is that, since those reforms include requiring claim dollars to be spent on repairs, those who bought it, the 50,000, are likely to drop the coverage, even if the indicated rate need was a reduction.

http://johnsonstrategiesllc.com/citizens-sinkholes-not-a-pretty-sight

The St. Petersburg Times
by Greg Armstrong
August 7, 2011

Sinkholes reveal insurance woes

In Florida we have a provision in all regular homeowner policies that covers catastrophic ground collapse — when a house falls in a hole and is condemned by building officials. Coverage has been there in the past and it is still in all Floridian’s property insurance policies. It is not truthful for anyone to debate sinkhole coverage by stating “any home that falls into the ground is not covered unless they paid for sinkhole coverage” just because extremely large rate increases have been recently proposed by Citizens Property Insurance Corp. It is also not honest to let anyone believe that these huge rate increases are for anything other than for sinkhole coverage.

We have a broken system. People are taking advantage of it each year in an attempt to profit, get out of debt or catch up on neglected repairs. This broken system perpetuates an oddity where expensive testing is rarely conclusive and subject to the interpretation about alleged sinkhole activity.

We have only had “sinkhole coverage” beyond “catastrophic ground collapse” for a little more than two decades. Before then, we all got along just fine without separate coverage in this state. But today people are rushing to cash in on alleged sinkhole claims.

As a direct result of the legislation passed in Tallahassee this spring, these dubious techniques will no longer be allowed for use by sinkhole repair companies, unscrupulous public adjusters or attorneys.

The cost of this dubious activity in the past four to five years is equal to that of a major hurricane. All of Florida suffers because of payouts approaching $1.5 billion and the cost of this “sinkhole activity coverage” should be paid by those who want this extra coverage.

Part of the insurance bill was to strengthen Citizens, which was designed to be the insurer of last resort. The financial status of Citizens is extremely critical to its policyholders and all taxpayers in Florida. The Legislature also listened to private insurers who either aren’t in Florida, have pulled back or have left the state. Private insurers articulated the many changes necessary to improve our market and for private capital to return.

The Florida insurance system needs to get its financial house in order. Stopping the practice of a small number of homeowners, attorneys, adjusters and repair companies cashing in at the expense of all Floridians is a good start. These rate hikes seem painful but may finally bring an end to a broken system.

http://www.tampabay.com/opinion/letters/sinkhole-issue-spotlights-states-broken-insurance-system/1184633

The Tampa Tribune
by Will Weatherford
August 5, 2011

Property insurance. When these two words are spoken, what tends to follow is a wave of frustration and anger for many homeowners and policymakers in Florida. This is because there exist two powerful opposing forces that must be weighed and reconciled in order to strike a balance that is in the best interest of consumers.

Consumers, rightly so, want to get the best value at the lowest cost. Yet, consumers also need the assurance that when they do make a claim, their insurance company has the ability to pay quickly and in full. While the explanation of the problem is simple, achieving a solution is not.

Added to the debate is the fact that a public entity has become the single largest property insurance company in Florida. Citizens Property Insurance Corp. was created in 2002 to serve a small number of high-risk homes that could not obtain coverage through the private insurance market. The intent of the program was to ask all policyholders in Florida to shoulder a fraction of the risk for a few of their neighbors who were in desperate need.

Today, that small risk has ballooned into a mountain of liability that is a serious threat to the economic stability of our entire state. Here’s why: Citizens’ rates do not cover all of its liabilities. If we have a catastrophic event of the magnitude of another Hurricane Andrew, every person who has a home, auto or business liability insurance policy will be responsible for a share of billions of dollars in claims.

It is with this background that the Legislature asked Citizens to examine its current assets and potential liabilities and work toward closing the gap. We directed Citizens to press toward a goal of becoming more actuarially sound. We understood that this path would likely result in incremental rate increases. We also knew that it is far better to make small payments now in order to prevent massive assessments that could bankrupt our state and devastate our economy. Kicking the can down the road is simply the wrong course of action.

On the road toward an actuarial sound rate, the Legislature put in safeguards to cap increases so consumers wouldn’t be hit with massive bills in a single year. However, during the 2011 session, we gave Citizens increased flexibility and discretion in the area of comprehensive sinkhole coverage, an added benefit that is optional for the majority of homeowners. Due to increases in abuse and fraud, sinkhole claims paid by Citizens far exceed premiums collected, and the company drastically needed new tools to address these inappropriate claims.

However, as a legislator who voted in favor of giving them flexibility, I am deeply disappointed in recent actions taken by Citizens. Instead of striking a balance, they stuck Floridians with dramatic rate increases, in some cases as high as $4,000 per year.

There is no doubt that Citizens faces an imperfect environment. It was designed to be the insurer of last resort, not a company holding the largest share of the market in the state. However, in recommending these exorbitant rates, Citizens apparently focused on historical data and did not adequately consider key components of the new law that should stabilize costs. For instance, the new law incorporates key provisions of the Florida Building Code, which will help separate legitimate claims from questionable ones.

I believe a more prudent course of action for Citizens would be to reconsider its rate request in light of all the changes in the law and work with the Florida Office of Insurance Regulation (which has to approve any rate request) to ensure that any rate increase is not excessive.

It is in the best interests of all Floridians to have a vibrant, competitive private market where companies vigorously compete. We will continue to act to unwind the tangled mess that has been in the making for over two decades, and we will do so incrementally in order to ensure that Floridians will be able to make it through the transition.

State Rep. Will Weatherford, R-Wesley Chapel, represents District 61 and has been designated to become House speaker in November 2012.

http://www2.tbo.com/news/opinion/2011/aug/05/meopino1-untangling-a-two-decade-old-mess-ar-248421/

Tallahassee Democrat
by Will Weatherford
August 3, 2011

Property insurance. When these two words are spoken, what tends to follow is a wave of frustration and anger for many homeowners and policymakers in Florida. This is because there are two powerful opposing forces that must be weighed and reconciled in order to strike a balance in the best interest of consumers.

Consumers, rightly so, want to get the best value at the lowest cost. Yet consumers also need the assurance that when they do make a claim, their insurance company has the ability to pay quickly and in full. While the explanation of the problem is simple, achieving a solution is not.

Added to the debate is the fact that a public entity is the single largest property insurance company in Florida. Citizens Property Insurance Corp. was created in 2002 to serve a small number of high-risk homes that could not obtain coverage through the private insurance market.

The intent of the program was to ask all policyholders in Florida to shoulder a fraction of the risk for a few of their neighbors who were in desperate need.

Today, that small risk has ballooned into a mountain of liability that is a serious threat to the economic stability of our entire state.

Here’s why: Citizens’ rates do not cover all of its liabilities. If we have a catastrophic event of the magnitude of another Hurricane Andrew, every person who has a home, auto or business liability insurance policy will be partly responsible for billions of dollars in claims.

It is with this background that the Florida Legislature asked Citizens to examine its assets and potential liabilities and to work toward closing the gap. We directed Citizens to press toward a goal of becoming more actuarially sound. We understood that this path would likely result in incremental rate increases. We also knew that it is far better to make small payments now in order to prevent massive assessments that could bankrupt our state and devastate our economy. Kicking the can down the road is simply the wrong course of action.

On the road toward an actuarially sound rate, the Florida Legislature put in safeguards to cap increases so that consumers wouldn’t be hit with massive bills in a single year. However, during the 2011 session, we gave Citizens increased flexibility and discretion in the area of comprehensive sinkhole coverage, an added benefit that is optional for the majority of homeowners.

Due to increases in abuse and fraud, sinkhole claims paid by Citizens far exceed premiums collected, and the company needed new tools to address these inappropriate claims.

However, as a legislator who voted in favor of giving Citizens flexibility, I am deeply disappointed in recent actions it has taken. Instead of striking a balance, it stuck Floridians with dramatic rate increases, in some cases as high as $4,000 per year.

There is no doubt that Citizens faces an imperfect environment. It was designed to be the insurer of last resort, not a company holding the largest share of the market in the state. However, in recommending these exorbitant rates, Citizens apparently focused on historical data and did not adequately consider key components of the new law that should stabilize costs.

For instance, the new law incorporates key provisions of the Florida building code, which will help separate legitimate claims from questionable ones.

I believe a more prudent course of action for Citizens would be to reconsider its rate request in light of all the new changes in the law and work with the Florida Office of Insurance Regulation (which has to approve any rate request) to ensure that any rate increase is not excessive.

It is in the best interests of all Floridians to have a vibrant, competitive private market where companies vigorously compete. We will continue to act to unwind the tangled mess that has been in the making for over two decades, and we will do so incrementally in order to ensure that Floridians will be able to sustain the transition.

http://rattlernews.tallahassee.com/article/20110804/OPINION05/108040303/Will-Weatherford-Citizens-needs-scale-back-its-rate-hikes