Hurricane Rina reminder that late-season hurricanes happen

Posted on October 27, 2011 by lynnem

The spooky thing about the end of October is that Halloween does NOT signal the end of hurricane season. Hurricane Rina is reminding us that there is (at least) more than one month left – and that maybe around Thanksgiving Floridians can exhale as the season officially ends. Maybe.

As I write this, Hurricane Rina is heading to Cancun, and there is a good chance she may be downgraded to a tropical storm before landfall. Earlier in the week, the storm forecast for Florida contained wording that declared a direct impact was “highly uncertain or unlikely.” Those terms don’t seem congruent: Highly uncertain means a storm may hit, while highly unlikely tells me to relax. Early weather warnings also said that hurricane models were “in disagreement” over where the storm may go with half of the models taking Rina westward and other models predicting she’d move more north. Computer software disagreements aside, it is a reminder that hurricanes do offer an opportunity for advance warning, yet Mother Nature maintains the upper hand over technology.

Late season hurricanes are not as rare as we’d like to think. Remember that Hurricane Wilma hit Florida on October 24, 2005.  Storm summaries published in NOAA’s Monthly Weather Review show that over the past 70 years, there were 10 deadly hurricanes that caused loss of life in the November-December timeframe. Yes, a hurricane can occur in December. Hurricane Alice formed December 30, 1954, so it was the first hurricane of the 1955 season and carries the distinction of being the only Atlantic hurricane to span two years since it dissipated seven days later. Imagine celebrating the New Year with a hurricane on the way. That’s guaranteed to put a damper on the party.

Of those 10 late season hurricanes, seven occurred in the past 20 years, according to information in the Weather Underground. Off-season hurricanes are most likely to occur in the central to western Atlantic Ocean, and most do not make landfall. Whew! Of the storms that do make it to land, the area most vulnerable are the islands of Hispaniola and Cuba.  The strongest recorded hurricane that occurred outside of the hurricane season occurred early. Hurricane Able formed May 15, 1951 and did minimal damage. So, it ain’t over.

Posted in General, Hurricanes | Leave a comment

How an annual insurance review can save you money

Posted on October 20, 2011 by lynnem

People want to know how they can save money on home insurance. We at the Insurance Information Institute often provide tips, and just as often we take our own advice – which is what I did this week. My homeowners insurance policy is coming up for renewal. And, like most Floridians, the insured value for my home makes me long for the “good old days.” You know, like way back in 2006 when home prices peaked. Today, given the housing market realities, people see the amount their home is appraised for and the amount it is insured for and then they do at least one of two things. They get upset or they get busy. I chose the latter and called my insurer. They did a “real time review” which cut the insured value by $30,000, and that cut my premium down by nearly $300.

Now, for the rest of the story. With property insurance, coverage is all about rebuilding cost, and those costs may fluctuate. The insured value of a home is about making sure you have what it would cost to rebuild. Most people know that, although recently I read a letter to the editor in a South Florida newspaper where a homeowner suggested matching insurance to the tax-appraised value. Really bad advice – and most insurers won’t let you do that because it is something that will leave you seriously underinsured.

Maybe some people are confused by all the numbers they see tied to the home. There is the property appraisal for tax purposes and certain Florida exemptions cause thousands of dollars to be subtracted, distorting the picture when it comes to insurance. Then, there is the real estate value of a home calculated according to individual characteristics, but primarily by recent sales. We all know how that has been playing out, unfortunately. The insurance value is about replacement cost – getting the home back to rights if it is destroyed by a covered loss, such as fire, tornado or hurricane.

My property is appraised for tax purposes at less than half what the insured value is. There is no way this home that I have lived in for 21 years can be rebuilt to Florida building code for the amount shown on my property tax bill. Neither can yours. Call your insurer and have a chat at least once a year. I asked about the rebuilding cost, and it was adjusted downward. I also asked about building ordinance and law coverage (BOL), which will give us the extra money needed to reconstruct my 1984-built home to current, stronger standards. I have BOL coverage at 50 percent of Coverage A, which is the amount of coverage on the home itself. This 50 percent more will account for the increased costs required to rebuild, repair or demolish home-sweet-home if it becomes less sweet due to disaster. I was thinking of dropping BOL to the 25 percent level, found it would save me about $150 – and decided to leave it as is. My premium isn’t going to drop by the full $300 because sinkhole coverage spiked a bit because (lucky me) I live on the outskirts of Sinkhole Alley.

One other thing that happened on my policy review was that I learned my insurer had us down for having one custom bathroom and when we reviewed everything, I got that corrected. Only standard-issue stuff exists in our abode. Anyhow, that fix didn’t make a dent in the price, yet was a reminder to play closer attention to the details in the insurance policy.

Posted in Homeowners+Renters, Property insurance, Saving money on home insurance | 1 Comment

How a scratched fender is payday for fraudsters

Posted on October 13, 2011 by lynnem

There was an Auto Insurance Fraud Summit in Miami this week at which a woman told her story of a minor parking lot accident, a scratched fender and a resulting lawsuit. Her voice was shaky as she recalled the first accident she ever had after priding herself on decades of safe, accident-free driving. She was just as nervous telling the tale as when it all occurred. Her story: Before backing out of the shopping center parking space, she checked and double-checked for oncoming traffic. Slowly, slowly she edged out. And then, ding! She tapped a car with four young women in it. She said no one appeared injured at the time, and the damage to her car was so minor she was able to buff most of it away. Yet, her insurance company tells her the other driver has a lawyer and is suing for injuries – over a nearly imperceptible scratch.

The senior citizen in this particular car-crash tale thinks it was a setup. She is equally distressed over the higher insurance rates she will now be paying, and she is not alone. There is so much fraud and abuse in the state’s no-fault auto insurance system that all drivers are paying higher insurance rates. Hearing her story got me thinking about what the dialogue might be between perpetrators if this was indeed a setup. Below is fiction, but it is not farfetched.

Phonia: Once again, I find myself with too much month left at the end of my money. Sure wish I had an easy way to get some extra cash.
Scamalady:  I’ve heard there’s money to be made from getting in a car crash on purpose.
Phonia: Sounds dangerous, plus I happen to be anti-pain.
Scamalady: Funny you should say that because I got the idea from one of those radio commercials that advertise lawyer and doctor referrals for pain. They say if you get in a car crash you are entitled to up to $10,000 in medical benefits and lost wages.
Phonia: $10,000? Entitled? Man, I sure want something I’m entitled to – and if it’s on the radio, it must be true.
Scamalady: I’m not sure you could get the entire amount. But this friend of mine got a dent in his bumper and wound up making an easy thousand bucks. And, he got a couple of massages, too. He wasn’t hurt at all. He just went to this clinic, they did a couple of x-rays, gave him some aspirin, and a check. Easy money.
Phonia: There must be a downside. Like what if I bang up my ride and can’t drive it?
Scamalady: That won’t happen if we plan a car accident at low speed with a slow driver. You know, like a parking lot accident with a little old lady. With four of us shopping together today, we could each make some extra cash by getting in a crash and making an insurance claim on your policy.
Phonia: What! That doesn’t make sense. How do you make money off my insurance?
Scamalady: Geez, girl. Get real! Don’t you know that your personal injury protection insurance covers your passengers, too? It’s called PIP, and it’s also called no-fault insurance. Doesn’t matter who is at fault because your insurance company pays. Hey, lucky us! There’s a little old lady going to her car right now……

More than 200 people showed up at the auto fraud summit in Miami, and they heard several stories of auto insurance fraud. Most of those attending were insurance agents who are just as disturbed by rising auto insurance rates as their policyholders. They know companies have been paying insurance claims for suspected staged accidents because the law requires claims to be paid within 30 days. They also know that it is unscrupulous medical clinics and attorneys making money off the “$10,000 entitlement” – not necessarily the perpetrators of the fake crashes. Frivolous lawsuits also drive up claims payouts and, ultimately, the price we all pay for insurance. There were three fraud summits held around the state in recent months to discuss ways to close fraud loopholes that enable people to turn minor car crashes into major paydays. Expect change.

Posted in Auto, Auto Insurance Fraud, General, Insuring Florida | Leave a comment

Tale of 2 town hall meetings: Home vs. Auto Insurance

Posted on October 3, 2011 by lynnem

Within two weeks’ time, two town hall meetings were held in Tampa related to insurance. One got a lot of attention from the media and the public, while the other not so much. In mid-September, at least 250 people came to voice concern over proposed sinkhole rate increases for Citizens Property Insurance. Last week, a town hall meeting was held to hear the public voice on rising auto insurance rates, and about 75 people showed up. Considering that both sinkhole AND auto insurance rates are rising by nearly the same amounts in parts of Florida, this difference in attendance is curious.

Of course, attendance at the sinkhole hearing was fueled by Citizens’ rate indications that showed a statewide increase of more than 2,000 percent for Tampa. That, obviously, got attention and fueled panic. Now that regulators have weighed in, the sinkhole rate increase for Hillsborough County will be around $100 annually, and three to four times more than that for Hernando and Pasco. Auto insurance rates are rising within those same parameters, so I wonder why there seems to be less concern – given the lower turnout at the Auto Insurance Fraud Summit in Tampa last Wednesday.

Most of the attendees at the auto insurance summit were small-business owners of independent insurance agencies, not the general public. So, it was primarily a “preaching to the choir” event. Insurance agency owners know painfully well that rampant fraud is impacting the no-fault auto insurance system. Fewer companies want to sell auto insurance in areas where they are paying out more in claims than they are collecting in premium. (This should sound familiar, since that’s what has happened with property insurance.) For the employees and owners of small insurance agencies, companies leaving the market mean fewer options for customers and, ultimately, fewer customers. Chris Foley is an owner of an insurance agency considering closing up shop in Hillsborough County. He spoke at the summit, expressing concern that rising auto insurance costs may cause more people to go without coverage altogether. Foley is a member of the Fraud Alert Team, which was instrumental in helping to get a Hillsborough County ordinance passed to combat fraudulent insurance claims. The ordinance may be a model for other municipalities combating a rise in unlicensed medical facilities that portend to treat accident victims, but are merely a mechanism to bill insurers for suspect or inflated services.

Foley’s belief that rising auto rates will make people simply stop paying for coverage is scary. It’s against the law to drive without insurance, and Florida already has high numbers of uninsured motorists. This problem is getting attention to determine what is driving up auto insurance costs and to drive them down. The state’s Division of Insurance Fraud (DIF) blames criminal activity with organized fraud rings participating in staged accidents. Then, the crooks send people with alleged injuries to phony clinics for phony treatment. DIF’s annual report shows nearly half of all the referrals it receives for investigation are related to auto insurance fraud. Another research bulletin says costs are higher because medical procedures in Florida cost more than other states. Florida’s Office of the Insurance Consumer Advocate is looking into all this. There is a PIP Working Group comprised of nearly two dozen people looking to reverse the trend of rising auto rates. I’m a member of the group and invite you to look at the website for all the meeting materials and presentations.

There is another Auto Insurance Fraud Summit in Miami on Oct. 11 from 6:30 to 8:30 p.m. at the University of Miami Fieldhouse. It’s in the Multipurpose Room.

Posted in Auto, Citizens Property Insurance, Homeowners+Renters, Sinkholes | Leave a comment

Sanity for sinkhole rates, but sinkhole claims still insane

Posted on September 21, 2011 by lynnem

Come on. Did you really think Citizens Property Insurance would get approval to raise statewide sinkhole rates an average of 447 percent? I’ll bet they didn’t think so either. So why would our state-run insurance company ask for such an increase, you may ask. Because that is what their data showed. Insurance rates = insurance costs. Citizens’ documents from its rate hearing show it paid nearly eight times more in claims than it collected in premium. It also showed that sinkhole claims this year are twice what they were last year. How are they (we) going to pay those rising costs? A little bit at a time is the answer in the hope that it will all go away.

To summarize the deep sinkhole problems of Citizens:

  • Citizens paid out $250 million in sinkhole claims in 2010 and collected just $32 million in sinkhole premiums to pay those claims.
  • Sinkhole claims are coming in this year at double the rate of last year, primarily because the door is closing on filing frivolous sinkhole claims for cosmetic damage so some feel inclined to get a foot in the door.
  • Citizens’ board knew that a massive sinkhole increase had no way of getting approval, and they settled on phasing rates in at 50 percent of the current rate for next year, and then re-crunching the numbers to see if the sinkhole claims volume goes down with the law changes taking effect.
  • Commissioner McCarty said the 50 percent cap should be 32.8 percent.

    Here’s the disconnect I see: We have solid data proving how much sinkhole claims cost insurers. There is no corollary scientific study showing more actual sinkholes are occurring. All we have are more sinkhole CLAIMS – and no one wants to pay for them. We have become accustomed to government paying for all sorts of things without having the money on hand, and it continues to hold true for the government-run insurance company. Dubious sinkhole claims are those in which policyholders took claims money and did not make repairs. The majority of claimants have done that, according to county property appraisers. That is one loophole in the old sinkhole law closing with the legislative changes.

    Alas, in Florida, setting insurance rates is not about math; it is about politics, as the editorial in the St. Petersburg Times noted. The editorial board declares that sinkhole rates are “settling at a sane level.” Okay, rates are sane, but sinkhole claims are insane.

    Posted in Citizens Property Insurance, General, Property insurance, Sinkholes | 1 Comment

    Citizens rate hearing shows facts no match for fury

    Posted on September 14, 2011 by lynnem

    I attended the Citizens Property Insurance rate hearing in Tampa on Tuesday. At the Convention Center, I parked next to a gaudy car wrapped in advertising for a “sinkhole specialist.” At a break in the four-hour meeting, another so-called sinkhole specialist handed me an advertising flier, touting “a one-stop shop for all your above and underground repairs.” The rate hearing was, therefore, a marketing opportunity and a reminder of the cash cow sinkholes have been. Obviously, the people who have Citizens insurance are not the only ones worried about changes in sinkhole rates and laws.

    Insurance rates are based on facts. And, the facts were laid out by Citizens staffers and independent experts to verify that sinkhole claims are breaking the bank of the state-run insurer. This is the government-run insurance company, mind you, that all of us pay into whether or not we actually get coverage from it. Citizens revealed the truth about sinkhole claims – and people have decided they don’t like that truth one little bit.

    More than 200 people showed up, many by bus. They got free t-shirts and ball caps from a policyholder organization that happens to be associated with trial lawyers. An actuary, economist and Citizens’ executives laid out the data, and it did not appear to faze the crowd. The bottom line is….the bottom line. All anyone wants to know is how much is this going to cost me. Here’s the thing going unsaid (until now): If the people in counties with the most sinkhole claims don’t pay the right insurance rate to pay these claims, then who should pay? That’s a rhetorical question since we’ll all pay and keep right on doing so.

    Insurance rates are determined by costs, and rates should be “actuarially sound,” meaning rates reflect exposure to loss. Total premiums collected must be adequate to cover claims paid out. This is the way it works for private insurers, but not for the government-run company. Documents prepared for the rate hearing show that in 2010 Citizens paid out $250 million in claims for sinkholes and collected $32 million in sinkhole premiums. In the first six months of 2011, Citizens had 1,400 new sinkhole claims. That’s double the number from the first half of 2010. Facts be damned was the overall message from politicians and policyholders.

    I talked to a few homeowners at the rate hearing (aka pep rally for politicians). One couple said their neighbors on both sides of their home had filed claims for sinkhole damage. I asked if the damage had been repaired with the claims money. They said no. My next question to them: If someone had actual structural sinkhole damage to their home, wouldn’t you think they’d repair it? The point is that people filed claims for cosmetic damage and decided they would rather use the claims money for another purpose and can live with a crack in the wall or floor. SB 408 now requires that the claims money fixes damage, rather than leaving it for the next homeowner.

    Another woman told me her neighbor “cashed in on a sinkhole claim” (her words) and urged her to do the same. She said that sounded too much like fraud to her, and she declined, yet came to the rate hearing to voice concerns over such behavior. Most of the attendees, of course, wanted to voice dismay and concern over rising costs.

    Citizens’ board has agreed to cap sinkhole rates at 50 percent of what people are paying now for comprehensive sinkhole coverage. If you are paying $900 now annually for coverage, the rate could go up to $1,400 by January 1, if it is approved by regulators. The Florida Office of Insurance Regulation has documents you can request to get more information on proposed rates. Keep in mind that coverage for catastrophic ground cover collapse is still provided in all property insurance policies. Comprehensive coverage is optional and covers the cosmetic damage. Also keep in mind that if SB 408 works as it is designed to do, then sinkhole rates are expected to drop — because rates reflect costs.

    Posted in General | 1 Comment

    Longevity, love and life insurance

    Posted on September 8, 2011 by lynnem

    “I hope the Lord gives us longevity,” said my father as we talked about family, his aches and aging. Dad was already in his early 80s at the time, so that comment struck me in a very profound way. I had two thoughts: First, my dad does not think he is old yet, and that no matter how much time we have on earth, it may not be enough. Thankfully, longevity is a gift to me from both dad and mom, who are in their late 80s now. I am grateful for that plus other revelations, not the least of which is to know that to enjoy this day includes planning for tomorrow. Pops delivered that lesson to me as a teenager. He made me buy a life insurance policy.

    Now, as you can imagine, finding out that he had already arranged a life insurance policy for me – that I got to pay for – did not make me happy. Not one bit. “Wait a minute,” I recall whining. “I get to pay for a life insurance policy, and if I die, you get the money? This is good for me how?” Well, he explained it was good for me since it was a permanent policy with a savings feature. Dad had to tap into the savings portion of his universal life insurance policy a number of times in the course of raising us six kids, so he was setting me up with a cash value account as a kind of safety net.

    There are many reasons to buy life insurance, and getting a teenager into a saving habit may be one of them. A more important reason is to replace income for your dependents if you are no longer around. This is not something only for parents of young children to consider. It is also for couples in which the death of a partner would leave the survivor in financial difficulties. Most people choose term insurance policies these days. A “level term policy” pays the same benefit amount if death occurs at any point during the term, which can be renewable from five to as many as 30 years. How to choose the type of policy depends on your needs and financial goals.

    September is Life Insurance Month, and at www.LifeHappens.org you can learn more about protecting the people you love. In this economy, it is more challenging to do – and all the more important. An industry research study found that 41 percent of U.S. households have no life insurance protection at all, an all-time high for the level of uninsured. The study showed most adults rely on employer-sponsored group life insurance, which provides the lowest average amount of coverage. We’ve got some tips on saving money on life insurance. You want to be sure you read through them because paying a low premium for the wrong type of benefit is a waste of your money, so do your homework first.

    Longevity is indeed a gift, and life insurance is a backup plan.

    Posted in General, Life Insurance | Leave a comment

    Flooding got your attention? Don’t watch, take action with flood insurance

    Posted on August 31, 2011 by lynnem

    Remember when your mother forced you to take a spoonful of medicine because it was good for you? Flood insurance is good for you, and Mother Nature (and her daughter Hurricane Irene) just spooned out a dose that should motivate some people to take the medicine and protect their property by purchasing this important coverage. Most standard homeowners and business insurance policies do not cover flood damage.

    Images of flooded homes in the Northeast are all the motivation some people need to consider buying a flood insurance policy. But too few people do. A 2011 poll by the Insurance Information Institute showed that only 14 percent of homeowners in the U.S. had flood policies. Floridians have more flood policies than any other state, but we don’t hang onto them for very long. Why? Two reasons come to mind: First, no one forces you to buy flood coverage, other than your mortgage company if you live in a high-risk flood zone. And, some people buy a flood policy and after a couple of years when “the creek don’t rise”, they think they wasted money and decide not to renew it.

    A study on how long homeowners keep flood insurance coverage showed the average length of time was 2 to 4 years nationally, and less than that in Florida. Halfway through this year, as of June 30, the federal government declared 28 major flood disasters, compared to 50 federally-declared major flood disasters in all of 2010. Add Hurricane Irene flooding, and three more months of rainy season, and that number is growing.

    People underestimate the risk of flooding, and they also underestimate its destructive power. A few inches of water can cause thousands of dollars in damage. Check out the interactive tool on the cost of flooding. There is a lot of information available at www.FloodSmart.gov, including a resource to give you an idea on the price of a flood policy.

    A New York Times article about the July floods in South Dakota had a headline that seems to point out the unfortunate disconnect between risk and our perception of it — “In a Flood Zone, but Astonished by High Water”. Umm. You’re in a flood, and you’re surprised. Think about how surprised you’ll be if a flood happens in a low-risk zone, which is where 20 percent of flood claims payments go

    Posted in Flood, General, Homeowners+Renters, Property insurance | 1 Comment

    Earthquakes are one natural disaster Floridians don’t worry about

    Posted on August 24, 2011 by lynnem

    Southern California has about 10,000 earthquakes each year, most of them so small that no one notices. In Florida, hurricanes may leave us quaking, but there is little risk for earthquakes. There was a tremor in September of 2006 in the Gulf of Mexico centered about 330 miles southeast of New Orleans. It was felt in parts of Florida, Georgia, Alabama, Louisiana and Mississippi. For most people, it may not have mentally registered since it is such an unfamiliar event, even though it registered at 6.0 magnitude at the center.

    Powerful earthquakes are rare in the southeast. Prior to 2006, the last known seismic activity in Florida was in 1952 when a tremor was felt around Quincy. A policeman noted the exact time it occurred on the back of the parking ticket he was in the process of issuing.

    Earthquakes are not covered under standard homeowners or business insurance policies. Coverage is usually available for earthquake damage through a supplemental policy. Cars and other vehicles are covered for earthquake damage by comprehensive insurance, which is optional and also provides protection against flood and hurricane damage, as well as theft.

    The U.S. Geological Survey has information on Florida’s earthquake history and the Insurance Information Institute has facts and statistics on earthquakes.

    Posted in General | Leave a comment

    Subrogation: A tool to manage insurance costs

    Posted on August 18, 2011 by lynnem

    Ever had a car crash that wasn’t your fault? You can file a claim with your own insurance company, rather than have the at-fault driver’s insurer handle it.  Some people hesitate to do this because they have to first pay the deductible amount. But subrogation gets your deductible back because your insurer will subrogate the claim, meaning the person who caused the accident is held accountable to pay to repair your car plus pay your deductible.

    Subrogation is ancient. It is a concept traced to common law established in the 13th century in the Magna Carta. It simply means standing in the shoes of the insured by exercising the right to recover payment from the party responsible for the loss. In other words, it is based on the principle of making someone responsible for their own actions. It is a cost control tool that insurance companies use to manage costs for all their policyholders by paying claims they owe, but not the other guy’s (or gal’s).

    With subrogation rights, insurers are able to investigate accidents and recover the losses they paid out. You benefit from this since every dollar recovered erases a dollar paid out. Because insurance rates are a reflection of historical loss costs, getting reimbursed is important for reducing premiums as a whole and is increasing in importance. Subrogation used to be a time-consuming, manual process. Now it is streamlined and more available.

    A web-based paperless system, called E-Subro Hub, is an efficient way for insurance companies to interact with one another. Tampa-based Arbitration Forums, Inc. (AF) developed the system, which is on track this year to handle more than 500,000 claims valued in the billions of dollars now that it is available in all 50 states and the District of Columbia. AF is a non-profit organization founded by the insurance industry in 1943 and is the nation’s largest arbitration and subrogation services provider. With the system operating nationally, insurers can electronically manage subrogation claims and file intercompany arbitration.

    Being able to conduct subrogation activities online has proven to be a money saver, and those savings help contain insurance costs.  

    Posted in Auto, Insuring Florida | Leave a comment