Sinkholes and No-Fault Insurance Hot Topics at Florida Chamber Meeting

Sinkholes and insurance solvency were the key issues discussed at the Florida Chamber of Commerce’s 4th Annual Insurance Summit in Orlando. Legislators, insurance regulators and members of the insurance industry met to discuss the important issues effecting the Florida insurance market and possible trends that will emerge in 2011.

Among the speakers at the Chamber event was Florida Insurance Commissioner Kevin McCarty. McCarty’s comments warned about the already dire effects of rising sinkhole claims, claiming that several private insurers are already teetering towards insolvency. A press release on the event covered McCarty’s concerns.

“Even if state legislators enact major reforms this spring to address an explosion of questionable sinkhole claims, two or three private insurers will likely go insolvent from the crush of claims they have already received, Florida Insurance Commissioner Kevin McCarty told a gathering of insurance industry officials and public policymakers today.”

The role of Citizens, Florida’s state run windstorm insurer, was also a hot topic. Florida Chief Financial Officer Jeff Atwater argued that making Citizens competitive with private insurers and bringing more competition into the market is sorely needed.

“With Governor Rick Scott and the Legislature focused on sparking Florida’s economy and creating jobs, Atwater told the crowd that “this is an excellent moment” to enact substantive public policy changes that stimulate market competition yet safeguard consumers.

“I want an environment where companies want to compete – as many companies as possible – and that’s the kind of thinking our regulatory environment should embody,” Florida Chief Financial Officer Jeff Atwater said. “I believe there is monumental opportunity for the Legislature and the Governor to enact the right policies.”

Steve Pociask, President of the American Consumer Institute Center for Citizen Research, agreed with Atwater, arguing that opening up the market would lead to lower prices and more options for consumers.

The third main issue discussed was the issue of fraud related to Florida’s no fault laws. A recent report submitted to the Florida House Insurance Committee found that the no fault laws were adding to the cost of insurance for Florida drivers.

“On Wednesday, the Florida House insurance committee heard testimony from anti-fraud officials that rampant fraud in Florida’s No-Fault/PIP auto insurance system is adding about $100 annually to the cost of auto insurance for the average Florida family with two cars.”

The press release from the Florida Chamber of Commerce is reprinted below.

CONCERNS OVER SINKHOLES, FRAUD AND OVER-REGULATION ADDRESSED AT FLORIDA CHAMBER’S INSURANCE SUMMIT

ORLANDO, FL (January 27, 2011) – Even if state legislators enact major reforms this spring to address an explosion of questionable sinkhole claims, two or three private insurers will likely go insolvent from the crush of claims they have already received, Florida Insurance Commissioner Kevin McCarty told a gathering of insurance industry officials and public policymakers today.

McCarty made his comments at the Florida Chamber of Commerce’s 4th Annual Insurance Summit, taking place today and Friday at the Disney Contemporary Resort. More than 250 people are gathered at the two-day event to discuss steps needed to restore competition and choice for consumers in the homeowners’ insurance market in Florida, concerns over the solvency of private insurers, and ways to reduce taxpayer exposure in state-run Citizens Property Insurance Corporation and the Florida Hurricane Catastrophe Fund.

State lawmakers are currently considering legislation to address an explosion of sinkhole claims made in the absence of any hurricanes striking Florida. Between 2006 and 2009, the number of sinkhole claims filed statewide skyrocketed from 2,360 to 7,245, while sinkhole losses jumped from $209 million to $406 million. A Senate staff analysis found that there is no geological explanation for this surge. Rather, the analysis found that claims after often filed over minor cracking in walls and foundations, that unscrupulous public adjusters are fueling claims activity through misleading advertising, and that in many instances, homeowners are using claims settlements for such things as paying off their mortgages or cars – instead of fixing their homes.

Insolvencies and the overall financial health of Florida’s property insurers was another major area of discussion at the summit.

During 2009, eight of the 18 insurer “impairments” in the United States occurred in Florida, said Lynn McChristian, Florida representative for the Insurance Information Institute. Forty percent were due to insurers having inadequate reserves, or the fact that they were unable to charge adequate rates. Meanwhile, Phil Bowie, an Executive Vice President and Managing Director of WillisRe, noted that Florida had witnessed nine private insurer insolvencies since 2004, impacting more than 600,000 policyholders.

With Governor Rick Scott and the Legislature focused on sparking Florida’s economy and creating jobs, Atwater told the crowd that “this is an excellent moment” to enact substantive public policy changes that stimulate market competition yet safeguard consumers.

“I want an environment where companies want to compete – as many companies as possible – and that’s the kind of thinking our regulatory environment should embody,” Florida Chief Financial Officer Jeff Atwater said. “I believe there is monumental opportunity for the Legislature and the Governor to enact the right policies.”

Steve Pociask, President of the American Consumer Institute Center for Citizen Research, echoed Atwater’s remarks, noting that while markets can fail, so too can government policies – and in Florida, they have.

He encouraged state policymakers to enable greater free market competition in homeowners’ insurance that ultimately will lead to lower insurance prices and more choice for consumers.

In other areas of discussion, McCarty said that changes must be made in the way that state-run Citizens currently competes directly with private property insurers – often by offering lower prices and more generous coverage. In the area of auto insurance, McCarty said state regulators are seeing disturbing loss trends that are no longer limited to South Florida, but have expanded statewide. On Wednesday, the Florida House insurance committee heard testimony from anti-fraud officials that rampant fraud in Florida’s No-Fault/PIP auto insurance system is adding about $100 annually to the cost of auto insurance for the average Florida family with two cars.

The Florida Chamber’s insurance summit continues Friday with presentations on Florida’s Bad Faith laws, the state’s growing sinkhole epidemic, and a policy discussion with state lawmakers.

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Established in 1916 as Florida’s first statewide business advocacy organization, the Florida Chamber of Commerce is the state’s largest federation of employers, chambers of commerce and associations, representing more than 139,000 employers. The Chamber works within all branches of government to affect those changes set forth in the annual Florida Business Agenda, and which are seen as critical to the continued improvement of Florida’s business environment. Visit www.FloridaChamber.com   for more information.

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