Florida policies cost most in US: Should insurers keep tax savings?

Jan. 26--What can homeowners do? Take action. Shop around. Review multiple financial safety grades and complaint data on more than 100 Florida insurers in The Palm Beach Post's property insurance guide. The exclusive online guide has been updated and is available today free to subscribers at www.myPalmBeachPost.com/insuranceexplorer.

For consumers who care about issues affecting rates, now is a good time to let legislators and regulators know.

Insurance companies in Florida and other states stand to reap a windfall from federal tax cuts but will overcharge customers by an estimated 5 percent or $25 billion unless regulators take action, the Consumer Federation of America said.

California's insurance commissioner ordered a review Monday. Florida's Office of Insurance Regulation has not laid out a specific plan of action but will "carefully consider" the issue, a spokeswoman told the Post.

An insurance industry group blasted CFA's calculations as "not actuarily sound" and "simplistic," with effects of tax cuts varying widely at different companies.

"Premium reductions could be one of the many options," said Logan McFaddin, the Florida-based regional manager of state government relations for the Property Casualty Insurers Association of America. "Companies may choose to innovate, expand operations and create new jobs, or provide more employee benefits and incentives."

In Florida, McFaddin said, "companies' immediate concern moving into 2018 continues to be helping families, businesses, and communities rebuild after last year's record-setting hurricane season. Once again, the CFA has taken a short-sighted view of an issue and how it could impact consumers."

Insurers in Florida have tried to direct more attention to changes they want state legislators to make by March. These include rewriting laws that they say provide too many incentives for contractors to get consumers to sign over control of insurance benefits on, say, a water-leak claim and then hire lawyers to take cases to court. Some allies have dubbed it "looting by lawsuit."

Firing back, lawyers, contractors, public adjusters and others say insurers want to pad their profits and restrict consumer options. After half a dozen years of stalemate, big differences remain between a bill that passed the House and legislation in the Senate.

Insurers support the House bill, HB 7015 by Rep. Jay Trumbull, R-Panama City.

"It provides meaningful reforms to address the issues of skyrocketing litigation and assignment of benefit abuse that raise rates for our customers," said Christine Ashburn, chief of communications, legislative and external affairs for state-run Citizens Property Insurance Corp.

It's just one of several controversies roiling the waters in a market where many national insurers have pulled back and smaller, Florida-based companies have stepped in.

It has been less than a year since ratings firm Demotech said its guidance on 57 Florida-based property insurers was under review in the wake of the 2016 storms and trends with "assignment of benefit" claims. A wave of mergers and capital infusions followed, and more than $350 million was quickly added in loss reserves and capital contributions, but not all companies survived.

In May, Mount Beacon Insurance Co. went out of business and about 22,000 of its policies were transferred to Florida Specialty Insurance Co.

In August, Sawgrass Mutual Insurance Co. of Sunrise said it was going out of business and more than 20,000 customers would be transferred to another company.

Then came Hurricane Irma. It has produced more than $7.2 billion in claims. Almost five months after the storm hit, barely half of more than 877,000 claims have been closed with payment, or just under 450,000, according to state data.

More than 282,000 claims have been closed without payment. Among the reasons: Insurers said consumers did not meet hurricane deductibles or claimed damage was not caused by the storm or was payable only under a separate flood policy. More than 145,000 claims remained open as of Jan. 5.

Amid all of it, Florida remains the only state with average premiums above $2,000 ($2,011) across all lines of residential insurance, leading Louisiana at $1,895 and Texas at $1,721, according to numbers the National Association of Insurance Commissioners released early this year. The data analyzed was 2015 results.

And that's a statewide average: $2,000 would feel like a refreshing bargain for many near the coast in South Florida.

That's why folks can get a little touchy on something like tax cuts. Consumer advocates are making it clear they do not want regulators to let insurers sweep savings under the rug.

"When their corporate taxes go down, insurance companies need less premium, so their rates must come down," said J. Robert Hunter, the Consumer Federation of America's director of insurance, a former Texas insurance commissioner and past adviser to Florida regulators. "But unless commissioners ensure that companies lower their rates, drivers, homeowners, and businesses will be stuck overpaying for coverage."

Birny Birnbaum, executive director of the Texas-based Center for Economic Justice, said insurance companies are "big winners" from recent changes in both the tax law and industry accounting rules.

"In order to protect American consumers from excessive rates, insurance commissioners need to take action to fix the imbalance that is already costing policyholders about $70 million a day," Birnbaum said.

The advocates sent letters to insurance commissioners in every state including Florida's David Altmaier.

"The Office has reviewed the letter from the Consumer Federation of America and the Center for Economic Justice and appreciates their comments," a statement from Florida's Office of Insurance Regulation said. "As with any development that potentially affects rates, the Office will carefully consider the impact of all of the provisions of the Tax Cuts and Jobs Act of 2017 on insurance rates for Florida consumers."

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