Move My Realty - Real Estate News

Where did savings go? Insurance executives will have to tell under oath

January 15th, 2008 9:23 AM by Ron Mastrodonato

Where did savings go? Insurance executives will have to tell under oath

TALLAHASSEE, Fla. – Jan. 11, 2008 – Property insurance executives will have to raise their right hands and swear to tell the truth to explain why most homeowner premiums in Florida remain high despite the Legislature’s vow to rein in rates.

State Senate leaders, including President-designate Jeff Atwater, have been appointed to a special committee that will hold two days of hearings on property insurance beginning Feb. 4.

Executives from companies that insure homes in Florida will be called to testify under oath about their pricing practices and profits. Senators warned Thursday that not telling the truth could lead to perjury charges and potential jail terms.

“We’re going to get to the bottom of it,” said Atwater, R-North Palm Beach. “It is in law that the savings we offered would be passed through directly to the customer ... so it is now time for the insurance executives who did not comply to tell us why they aren’t doing it.”

Consumer advocates said they were pleased that legislators plan to follow up on their promises to investigate why the average 28 percent drop in homeowner rates predicted by politicians of both parties last year hasn’t been seen. Robert Hunter, director of insurance for the Consumer Federation of America, said the new committee’s subpoena power will be a key tool in investigating possible collusion and other illegal practices.

It has not yet been determined which insurance executives will be asked to appear before the Select Committee on Property Insurance Accountability, but any who ignore the invitation to testify voluntarily will likely face subpoenas. Ignoring them could result in jail time.

“We’re going to be looking for CEOs to testify,” said Senate Democratic leader Steve Geller, D-Cooper City, the new panel’s co-chairman. “From GEICO, we’re going to want the gecko himself.”
Last January, the Legislature approved an insurance overhaul to stem soaring rates prompted in part by devastating back-to-back hurricane seasons and the resulting high cost of reinsurance that companies purchase to help pay claims after catastrophes.

Gov. Charlie Crist and legislative leaders predicted premiums, some of which had ballooned 300 percent or more in 2006, would drop 25 to 40 percent.

Most of the savings were expected to come from expanding the state’s Hurricane Catastrophe Fund from $16 billion to $28 billion to allow companies to buy lower-cost reinsurance.

Yet in the intervening months, many homeowners received even bigger insurance bills. Thousands of others were dropped by their insurers. At the same time, insurers made a record $3.4 billion profit off the Florida market.

William Stander, assistant vice president of the Property Casualty Insurers Association of America, said insurers are “looking forward to telling our side of the story” to the Senate panel.

“Florida lawmakers’ continued search for someone to blame for the state’s property insurance woes ignores the real problem: the huge and growing financial risk that we all face from the next storm,” he said.

In parallel with the planned Senate hearings, the governor and state insurance commissioner have issued subpoenas to some insurers to turn over internal documents to determine whether there has been a conspiracy to keep rates high.

In addition, officials from Allstate and Allstate Floridian Insurance Co., the state’s fourth largest insurer, are scheduled to testify next week at public hearings before state insurance regulators. The hearing was set by the Office of Insurance Regulation after Allstate Floridian proposed a double-digit increase in homeowners’ rates.

“We’re eager to be part of the dialogue to come up with lasting solutions,” said Allstate Floridian spokesman Adam Shores.

In early October, State Farm, the largest property insurer in the state, bowed to official pressure by reducing its rates an extra 2 percent – for a total of 9 percent – and agreeing not to drop a homeowner policy just because the customer did not buy auto or life insurance as well. However, State Farm still must turn over its books and records for the investigation into possible collusion.

“We’re willing to comply,” said Justin Glover, a State Farm spokesman. “We have nothing to hide.”

Crist, who thinks many Florida homeowners are due refunds, has asked three trial attorneys to explore whether the state can file a class-action lawsuit against property insurers.

“The law says the savings enjoyed by the insurance companies must be passed on to the consumers. Well, they’re not all doing it,” Crist said in December.

Copyright © 2008, South Florida Sun-Sentinel, Linda Kleindienst, Julie Patel. Distributed by McClatchy-Tribune Information Services.
Posted in:General
Posted by Ron Mastrodonato on January 15th, 2008 9:23 AM


Sites That Link to This Blog:

English French German Portuguese Spanish