Sunday, December 12, 2004

Insurance Storm and Web Gremlins

"I don't think you found it all."
-- Pete Dunbar, Florida Department of Financial Services

"Days" 3 and 4 of the Gannett Company series 'Insurance Storm' have now been published on the web.

Insurance Storm Continues

Day 3, Follow the Money, details how the insurance industry buys access to -- and the votes of -- of state legislators and elected officials. Here's a snippet of the lead article by Paige St. John:
Insurers invested $18.7 million in Florida's state campaigns during the 2002 and 2004 election cycles. They helped seat many of the top officials and lawmakers now deciding on rate increases or future limits on relief.

The biggest recipients are state Chief Financial Officer Tom Gallagher, followed by Gov. Jeb Bush and the lawmakers who sit on insurance regulation committees. The top 10 list is all Republican, simply reflecting the current balance of power in Florida.

Pete Dunbar, Gallagher's top adviser, blinked at the amount of combined contributions.

"I don't think you found it all," he said.

There is more -- money spent on drinks, dinners and trips; checks directed to favorite charities; and the salaries for a slew of high-priced lobbyists. Most of that is not disclosed.

Insurers paid more than $739,000 to entertain and feed lawmakers debating legislation meant to help the industry in 2003. They are not required to say whom they spent it on.

They donated millions more to the pet causes of those with whom they want to curry favor, gifts that usually go unreported.

Insurance money is such a factor in state politics, Ben Wilcox often uses it as an example when the Common Cause director gives talks on influence and power in Florida.

"That's where your premium is going," Wilcox said. "A lot of times what they're buying is inaction, keeping rates high."
Day 4, which the Pensacola News Journal won't publish until Monday, is titled Frustrated Floridians Want Insurance Overhaul. It concentrates on results of a November poll Gannett did of Florida insurance consumers:
Starting Monday, four months after Hurricane Charley made landfall, the Florida Legislature will decide how to offer help to consumers and insurers alike.

From the people's perspective, their government's agenda should be clear:

# Floridians want the state to enforce deadlines and standards for insurers.

# They want reasonable deductibles.

# They are willing to help insurers pay claims by easing access to public catastrophe funds.

* * *
In interviews, dozens of frustrated policyholders said they wanted faster action and rules to enforce it. Their complaints no doubt stem from the sheer magnitude of the catastrophe: about 1.5 million claims throughout the state -- an enormous logistical challenge for insurers.

"There are three groups of people," said Debbie Berger, from a neighborhood a half-mile from the Santa Rosa Sound. "Those who don't know what they're entitled to, those who do know but just can't afford to hang on long enough to fight their insurance companies, and those who have the money to wait and get what they deserve."

Among those who filed claims, 81 percent said they feared their insurers would drop their policies, the FLORIDA TODAY/Gannett Co. poll found. And among those who didn't file a claim, 13 percent said it was because they didn't want to lose their insurance or suffer a rate increase.

But poll numbers don't tell the whole story. In weeks of interviews across Florida, residents pointed to other hurricane-related problems -- some with insurance, some not -- that could be addressed by the state.

For example, they want more fairness and transparency in the way adjusters knock down the value of their losses, an issue not on this week's agenda.

"A perfect example is my kitchen cabinets," said Steve Mazer, whose Melbourne home was soaked throughout after the ceilings caved in. His insurance company offered $3,000 for cabinets that Mazer must pay contractors $15,000 to tear out and replace, he said.

"Now that's $12,000 I have to fight for," Mazer said. "It's not like I'm taking out particleboard cabinets and replacing them with some kind of mac-daddy fixtures."

Other Floridians said they didn't receive enough disclosure of their hurricane deductibles on their insurance policies. State regulators plan to address that issue.
Web Gremlins

Perhaps the most pointed thing so far to come out of the entire series is in Sunday's Pensacola News Journal. There, if you have a hard copy of the newspaper, you'll find a feature editorial admonishing the state legislature to "focus on the plight of their real constituents -- the people of Florida -- not the well-heeled industry that supports so many of their campaigns."

Unfortunately, some web gremlin has mis-coded the on-line version of Legislature Should Focus on Real Insurance Problems and an older editorial having nothing to do with insurance appears (as of midday Sunday) under the title. You'll either have to buy the newspaper or keep trying the link provided in the preceding sentence while hoping it gets fixed.

The central point of the editorial is sound:
At the moment, Gov. Jeb Bush and legislators appear all puffed up about dealing with multiple-deductibles -- homeowners having to pay insurance deductibles for damage from each storm if hit by more than one hurricane.

... [W]e can't say that this year's four-storm assault on Florida won't happen again. But out of some two million claims filed so far, only about 29,000 policyholders report facing multiple deductibles... .

That is, no doubt, of serious concern to those who got hit twice. But it hardly looks like a major statewide problem.

* * *
Of far more concern statewide is the state's definition of hurricane coverage insurers must meet. Why state statutes would include snow and sleet, but not storm surge, is anybody's guess. (Although no one could be blamed for connecting it to the bounteous contributions insurance companies make to politicians' campaigns.)

Legislators might also want to do something to see that insurance companies and agents can't call a policy a "hurricane" policy if it doesn't cover all damage done by the storms, which must include storm surge and other flooding.

If a policy only covers wind damage, you shouldn't be able to sell it as a "hurricane" policy.

* * *
The state is in the business of regulating insurance companies not to keep them from making a profit, but to ensure that in making that profit they don't do it by taking advantage of the people of Florida."
Overall, I have to say that Gannett's Insurance Storm series strikes me as more of a tropical storm than a raging hurricane. The series gives readers a taste of what's going on -- huge profits for Florida property insurers even in the midst of one of the worst seasons on record; insurance company incompetence (or worse) in fairly and quickly settling customer claims; gargantuan campaign contributions flowing from insurance companies into the coffers of the state politicians who are supposed to be regulating them; and widespread public dissatisfaction with the way property insurance companies treat their customers.

Somehow, though, the series seems to lack the punch it promised. The "eye" of the storm, if you will, is missing. Just who bears ultimate responsibility is not made clear. Who should Floridaians -- and particularly Florida voters -- ultimately hold accountable for the insurance mess afflicting the Northwest Panhandle and other areas of the state? The state legislature? Chief Financial Officer Tom Gallagher? Governor Jeb Bush? All of the above?

A real hurricane is an act of nature which can't be avoided. The "insurance storm" is an act of man. It's time we figure out who is causing this storm -- and how to stop them.

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