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January 2011
| Vol 2, Issue 1 |
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 | | Donald D. Brown |
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Don Brown Newsletter
Florida's Property Insurance Market at a Crossroads |
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| Greetings! |
Since the holiday break, there has been greater media interest in covering Florida's property insurance crisis. However, a positive trend is emerging. Instead of echoing the tired and harmful rhetoric of "profits", "price-gouging" and "rate increases", a growing number of reporters/editors/columnists are recognizing that Florida consumers are threatened by an over-regulated, politicized insurance system.
The most glaring examples or by-products of this threat is Citizens Property Insurance Corp., which has become the insurer of first resort, threatening every Floridian with unacceptable hurricane taxes, which they are already paying. The media and decision makers have not only recognized the glaring shortcomings of Citizens, but also the rising threat of statewide sinkhole claims and how suppressed rates expose homeowners to unpaid claims or limited choices in the marketplace.
I've dedicated this edition of my newsletter to showcase a few media news clips. We can only solve a problem by recognizing we have a problem. Gov. Scott and the Florida Legislature have demonstrated courage by rejecting the political temptations to demonize the insurance industry for political gain.
The Florida Legislature, during their committee hearings in January, will review SB 408, which is a comprehensive and responsive proposal to the threat facing every Floridian.
I'm very encouraged that we will begin the process of fixing our failed insurance system. By lifting restrictive regulations and allowing a free market to compete, we begin the journey of establishing longer-term market stability.
Thank you for checking out my newsletter. To learn more about my services and professional background, visit my website www.DonBrownFlorida.com. Sincerely,Donald D. Brown
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Media Catching Up to Citizens' Concerns
| Finally, the media is catching up to what a growing majority of Florida homeowners have come to understand - insurance companies need to collect adequate premiums to pay claims vs. keeping rates suppressed. In 2010, the Florida Chamber of Commerce did a survey where they found 63% of Floridians polled said the most important priority is making sure their insurance company can pay their claim. Less than a third polled indicated keeping insurance rates low was a priority.
Robert Trigaux, the St. Pete Times business columnist, wrote a recent column titled, Time bomb of rising bills awaits Floridians that I thought was representative of the change we are seeing in media coverage. In his column, Trigaux acknowledges that Citizens Property Insurance rates must go up 55% percent to cover claims from a major hurricane. What Mr. Trigaux did not acknowledge is that the "real" time bomb is not Citizens rates but the hurricane taxes that will hit Floridians when a storm hits Florida.
The consequences of keeping Citizens' rates under-priced is every Floridian with an insurance policy pays "hidden hurricane taxes." For example, Hurricane Wilma struck in 2005, but last year, Citizens had to borrow $700 million to pay for recent filed Wilma claims, which you and I are paying back with these hurricane taxes. Just check your car, home, business insurance policies to see how much you're paying.
Right now, the only option for Florida homeowners are Citizens and smaller, untested, undercapitalized start-up companies. We need more national brands to provide the peace of mind that we once had in a state still prone to the big storm. See my Sarasota Herald Tribune "letter to the editor" toward the end of this newsletter.
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Senate Banking & Insurance Committee Learns
Sinkhole Alley Spreading Across State | Sen. Mike Fasano, R-New Port Richey, said it best in the St. Pete Times article, Flimsy Sinkhole Insurance Claims Targeted by Legislature, "Because we haven't had a hurricane in several years, they've [trial lawyers & public adjusters] decided to find another niche." Sen. Fasano's comments came shortly after receiving a staff report on Florida's sinkhole epidemic. According to the Office of Insurance Regulation, over the period of 2006 to 2009, sinkhole claims more than tripled with totaled losses amounting to $1.4 billion.
The staff report, presented to the Senate Banking and Insurance Committee earlier this month, painted a greedy picture of this cottage sinkhole industry, where a growing number of claims are originating from parts of Florida not known to have sinkholes. The rise of this industry is threatening the stability of the insurance market. Florida consumers will continue to be on the hook unless the Governor and Legislature take decisive action.
As a member of Gov. Scott's transition team on regulation and insurance, our team made several recommendations. Many elements in SB 408 will make it harder for public adjusters and trial lawyers to exploit consumer fears. Proposals to take sinkhole coverage out of Citizens and let the free market offer solutions are also under consideration.
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Letter to the Editor
Submitted to Sarasota Herald Tribune & Still Pending
| Eric Ernst, a Herald Tribune columnist, wrote a piece titled, Dig Deeper to Pay Property Insurance, that was published on January 5, 2011. The column was filled with opinions that I believe were inaccurate and inflammatory. This kind of coverage is nothing new, but in his column, Mr. Ernst used a quote from me reported in another news story to complement his column's attack on insurance carriers.
I submitted my letter to the editor on January 10, 2011, which was two weeks ago. To date, my letter has not been published. I hope the paper will publish my counter piece to Mr. Ernst's opinion.
Here is my letter to the editor dated, January 10, 2011:
Dear Editor: Mr. Ernst's recent column about Floridians digging deeper to pay for property insurance is filled with misconceptions, populist rhetoric and simply poor insight. I do agree with Mr. Ernst that property insurance rates in Florida will continue to go up, but why? Florida hasn't seen a hurricane in five years, but over that time we've seen insurance companies filing bankruptcy, going insolvent, and leaving the state. The property insurance market has gotten so bad due to choking state regulation and suppressed rates that if a storm or fire destroys your home there's a risk your claim won't be paid. Last year, Herald-Tribune reporter Paige St. John reported on how the state promoted untested and undercapitalized carriers who they knew didn't have enough reserves to pay for a house fire claim. Yes, it's politically sexy to attack insurance carriers and accusing them of "price gouging" in a poor economy - that would get a politician elected. However, the simple fact is insurance companies doing business in Florida are not collecting enough premiums to cover their storm-related claims, which exposes Floridians to financial devastation. Citizens Property Insurance, the state's insurance company of last resort, has become the largest carrier in Florida. Last year, Citizens received over $700 million in claims stemming from Hurricane Wilma. Wilma struck Florida over five years ago! Citizens didn't have the money to cover those claims due to artificially suppressed rates, so they borrowed the money. Every Floridian who has a car, home, and business will pick up the check to pay for Wilma's claims in the form of hurricane taxes, which is a consumer subsidy for failed state policies. Government has politicized insurance for too long and it's time to attract more capital and encourage more national carriers back to the Florida market. Yes, rates will go up and they need to in some cases, but we'll see market stability over the long term, which ensures consumers have more choices on how they protect their families in this hurricane prone state.
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In the Loop
Select Media Coverage on Property Insurance
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Since the holiday break, there have been steady stream of media coverage on Florida's property insurance crisis. Here a few examples of articles that I've posted on my website www.DonBrownFlorida.com. Be sure to visit my website regularly to keep in the loop:
Time Bomb of Rising Bills Awaits Floridians, St. Pete Times, Robert Trigaux, Jan. 21, 2011
The Insurer of First Resort, Gulf Coast Business Review, Jan. 20, 2011
Florida Charities, Biz Call End to Hurricane Premium Taxes, Insurance Journal, Jan. 20, 2011
Insurance Bill Would Target Sinkholes to Limiting Claims Florida Tribune, Jan. 19, 2011
Citizens Insurance Officials, Legislators Start Talking About Changes, PolitiFact, Jan. 18, 2011
Flimsy Sinkhole Insurance Claims Targeted by Legislature, St. Pete Times, Jan. 12, 2011
Insurance Rates Top Gov. Scott's List, Likely to Rise , Vero News, Jan. 8, 2011
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| Don Brown Speaking Engagements |
 January 26th: Don will be the featured speaker addressing the Orlando chapter of the Professional Insurance Association of Florida. January 27th: Don will be the moderator at the Florida Chamber's Insurance Summit at Disney's Contemporary Resort in Orlando.
The panelist discussion is titled, Assessments: Pay Now, or Pay Later.
Panelists will include:
Sandy Robinson, Florida Insurance Guaranty Association
Sharon Binnum, Citizens Property Insurance Corporation
Jack Nicholson, Florida Hurricane Catastrophe Fund February 7th: Jacksonville Kiwanis Club February 17th: Ft. Lauderdale Kiwanis Club March 4th: Jackson County Chamber of Commerce March 10th: North Ft. Lauderdale Rotary Club Meeting March 24th: Coral Gables Rotary Club April 14th: Tampa Chapter of NAIFA Regional Meeting If you are interested in having Don present, Florida Insurance Market at a Crossroads, before your civic or business group, you can email Don at don@donbrownflorida.com. |
| Join Don Brown on Twitter for Real-Time Commentary | |
Property insurance in Florida is a hot topic that interests every Floridian. Every day there are articles, reports, statements, and data pertaining to the insurance market. Follow me on Twitter to learn the latest news, developments, controversies, and my opinions.
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One Man's Laugh Brings Down the House |
A few members of the audience are brought up on stage by a comedian to be part of his act. Watch the audience member in the middle in the yellow shirt - his laugh brings down the house and you cannot help but to laugh yourself. This clip has over 21 million views. Treat yourself: Man's Laugh Brings Down the House. |
My New Year's Resolution for 2011
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My 2011 New Year's resolution began early last year. I committed to offer my insurance knowledge and experience for public consumption. Regardless of whether or not you agree with me, I hope that I can enrich the debate and help decision makers in the Capitol, press rooms and community intersections get past the rhetoric and base decisions on facts.
The fact is government regulation and political football have put Floridians at risk. Government solutions is a contradiction in terms. The free market gives us the best chance to overcome our problems. In 2011, let's acknowledge the problem and debate the solutions, rather than succumb to populist rhetoric that only serves to distract us from fixing the insurance market. Here's to a great year ahead,
Don Brown www.DonBrownFlorida.com |
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