- 03
- January
2012
Reported today in the Tampa Bay Times (formerly St. Pete Times), authors Susan Taylor Martin and Dan Dewitt reported on the most recent issues associated with sinkholes in Florida and sinkhole insurance claims. I applaud their attention to detail and am hopeful the next two editions are as thorough. When I spoke with them a few weeks ago, we discussed many of the coverage issues as well as the recent changes in the law, which triggered the quote she attributed to me (yes, I talked about sinkholes and included the term "mashed potato" in reference to the new law).
As I have been dealing with sinkhole and other insurance claims for more than a decade, it is always good to see educated outsiders examine this topic and see what the identified as priorities. In this article, the authors identify the primary "concern" being raised by the State of Florida, versus those of our Florida policyholders. Taking the policyholders first, the policyholders want affordable property insurance. That one's easy. But, as the authors note, the primary concern appears to be "pay offs," as well as homes left unrepaired after insureds learn of their confirmed losses. The policyholders get paid, and the home doesn't get repaired, which hurts other, future owners.
My own criticism of the article is that it allows the reader to be distracted from a fundamental issue regarding policyholders and insurance companies. While unintentional, the article describes sinkhole insurance in a way to suggest it is some kind of bloated social program, another "austerity" measure for undeserving people. I think the context must include reference to the reality that these disputes are arising from two people who entered into a contract for price to provide a service. Remember, these people who are apparently gaming the system, as it is being described, paid for their lottery ticket. The explanation would likely be that the article focuses on Citizens Property Insurance Corporation, which is a product of State law (sidenote: it is misleading to say that the State of Florida "backs" Citizens. See me later on that).
As I am reading this, I am struck by how off the State of Florida is on this issue. Why? I own my home. I pay for insurance for it. Later, when I learn the cost of repairs is more than the value of my home, I am not going to repair it. To do so, even under the most aggressive of repair protocols is likely a fool's errand. In the end, it's between my insurance company, my family, and me as to what we are going to do. I did not consider at the time of buying my insurance how my life choices might impact those who will come after me in my home. I don't put up a light fixture and think, "yes, but, what will the Jones think when they move in here?" I was not aware that my premium payment to the insurance company might be adjusted based upon whether I have properly considered the future inhabitants of our State. For a state with no state income tax, I find it odd this obsession the Insurance Regulators have about whether others will be left to clean up my home. As to whether the legislature cares about this contingency, I say doubtful, because they didn't care enough on the front end to require that most homes be required to provide foundation systems necessary to sustain the kinds of environment in which most Florida homes exist. If they had, you wouldn't probably be reading this blog post because this would be on the radar.
To the continuing analogy regarding sinkholes being a homeowner's lottery, I say this. Ask the people in this state who have confirmed sinkholes, facing the potential loss of their home whether they feel like they are winning. Sure, there are people out there who are gaming the system, but I don't represent those people. Instead, I represent people who are tired of being treated like criminals because they filed an insurance claim. You file an insurance claim, later to find out you are going to spend 8 hours in an examination under oath with the insurance company's lawyers and tell me how you feel about it. The comparison to a lottery makes no sense, when the guy who sold you the lottery ticket decides later that you may not be deserving of the money.
The answer to my question should be obvious. For most of the smaller, take out companies, the concern is and will always be about profit. If a homeowner wants to pay a premium and pocket the result, I do not see how this triggers a statewide concern. For a state where a considerable portion of our insurance goes to wind-based losses, and we have not had a storm touch this state in more than a half of a decade, it seem shallow for insurance companies to talk about their profitability right now. Most of these companies are continuing to pay enormous, bloated profits it their owners disguised as management fees under their Mages. They take enormous percentages of the premiums paid annually. The primary reason there are not more insurance companies in this state has no relationship with the ability to write it for profit. Instead, it is because the initial capital outlay is about $15mm (which is almost always returned within the first 2 years), and most major lending institutions are not lending any money to anyone right now.
Again, I ask, if you lose so much money while you are insuring us, why are you still here? Yeah, that's what I thought.
Great read. Here's the link:
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