Friday, December 10, 2004

The Insurance Storm

Today Gannett media properties across Florida, including the Pensacola News Journal, begin tackling the post-hurricane insurance company crisis... no... disaster... no... flim-flam in a special section.

The entire series, titled The Insurance Storm, will run from December 10-13. Although presented in a somewhat hokey manner, like a 4-day hurricane, the series is a must-read for anyone with property insurance -- or an interest in how Florida is governed.

The coordinated series is being published and broadcast as legislators are gathering in Tallahassee to consider hurricane relief measures. From the looks of things, insurance industry lobbyists will be there in legion strength, trying to pick the pockets of lawmakers.

The first two installments are published in today's Pensacola News Journal and Ft. Myers News-Press. One lead article today is by Matt Reed, identified as capital bureau chief for the News Journal. He reports the insurance 'climate' on Day 1.

Among the findings:

Big profits. Florida property insurers collected $13.4 billion more than they paid out in claims between 1992 and 2004. "Meanwhile, the same companies made hundreds of millions of dollars by investing your premiums in bonds."

Hurricanes haven't hurt profits. "Of the dozen insurers consistently ranked among the biggest in Florida, all seven publicly traded companies reported profits in the third quarter [of 2004], records show. Those earnings reflect all of their estimated catastrophe losses, including those to be paid in the fourth quarter.

Accounting gimmicks. Like Russian nesting dolls, insurance companies are organized into a series of smaller subsidiaries. Through "shrewd accounting" the Florida subsidiaries can be loaded down with claims losses while the parent corporation keeps the profits. The picture is manipulated to look "bleak," the News Journal observes, until you realize that the parent companies "have collected hundreds of millions of dollars in dividends and other payments from Florida for years."

Policy holders ignored. Reed reports, "More than one-third of all Floridians suffered hurricane damage to homes and businesses this year, a statewide poll for the News Journal/Gannett News Service found. ... More than half haven’t received settlement checks, the poll found."

Double talk. Far from being "strapped" as many might assume, Gannett's reporters found that Florida insurers have been engaging in double-talk. In one example, Allstate Insurance Co. "told the news media that the hurricanes had wiped out a decade of profits in Florida," even as it was telling Wall Street "We're generating good amounts of free cash flow... .” enough, in fact, to continue buying up its own stock, thus magnifying profits even more.

Day 2 in the series focusses on Citizens Property Insurance, a sore subject with many locals along the Blue Roof Coast. According to Steve McQuilkin of the Ft. Myers News-Press --
Today, with about 900,000 shunned policyholders swelling its client rolls, Citizens is facing two big problems. Correcting them likely will cost every insurance customer in Florida.

  • The company's customer service since the storm has been so roundly criticized that the state formed a task force earlier this month. It will examine why Citizens is having trouble paying claims and responding to customers. Policyholders say the company has been dragging out claims, low-balling damage and delaying payments.

  • The company expects that the claims from this summer's storms will wipe out its reserve fund. Hurricane policyholders across the state -- not just those with Citizens -- likely will be hit with a one-time assessment to start rebuilding that fund. Early estimates put it at $52 for each of the state's 5.9 million customers.

  • Also, Citizens almost certainly will raise rates for its own customers.

    According to McQuilkin, "By the beginning of December, 4,119 formal consumer complaints had been filed against Citizens with the Department of Insurance since Hurricane Charley hit Aug. 13, far more than any private insurer." Judging from what we see and hear around the panhandle, that number is wildly off the mark -- or soon will be.

    In addition to these lead articles, the series is accompanied by a number of other features covering such subjects as "Why your rates will go up," "Key players in the insurance debate," "Who really insures your home?", and "Understanding your policy."

    Days 3 & 4 of the "Insurance Storm" will be published over the coming few days.

    No comments: