Friday, January 10, 2014

Citizen's Clearing house causes confusion for Florida Homeowner Insurance Consumers.

Florida's volatile property and Casualty market continues to cause confusion for Florida Homeowner Consumers.

The introduction of Citizen's "clearinghouse" program is a case in point.  Citizen's claims that the new program will benefit policyholders.  in the following ways:  Increase coverage by removing restrictions, increase coverage options for consumers, reduce exposure in the event of catastrophes, create expanded access to the private market for all policyholders, and create a benefit to all Floridians who do not purchase their insurance through Citizens by decreasing Citizen's overall exposure thereby limiting  thereby reducing assessment exposure.

Sound confusing?  It is.  First assessment exposure is generally not understood by Insurance consumers.  Briefly, Citizens is unlike regular companies.  If they incur losses, they can and will access (surcharge)  all policyholders in Florida for their losses.  Reducing Citizen's total number of policyholders will indeed reduce this risk to Florida's homeowner Insurance consumer.

Secondly, Citizens has the ability to further surcharge their own policyholders for additional amounts over what they are permitted to surcharge the consumer who purchases his or her insurance through the private marketplace.  Another plus.

So what are the negatives?   In my opinion there are two very big negatives:  Pricing and stability of the insurers in the clearinghouse program.

First the premium.   Florida's homeowner premiums have skyrocketed in recent years, for good reason. I won't go into those reasons right now, but briefly hurricane exposure, sinkhole exposure, cost of construction goods, and cost of reinsurance are the main reasons for the big increases.  So when someone is not able to purchase coverage through  Citizens, they save money, right?  Not so fast.  Many of the companies writing policies voluntarily in Florida have rates that are higher.  So people who are offered coverage outside of Citizens often pay more for the same coverage, or reduce their coverage options to save money.  Better coverage?  Only if you can afford it.  With many policies costing thousands of dollars these days, many consumers opt for less coverage, not more.

Second is the Elephant in the room. Who are the these companies offering takeout coverage and why haven't I heard of them before?.  You may ask yourself why isn't Allstate, State Farm, Geico, Hartford, Progressive, Aetna, and the other big name companies participating in the clearinghouse and/or the takeout programs?  Because they have decided the exposure isn't worth it?

So by and large the companies writing policies in Florida now are small, new, Florida based carriers without AM best ratings. Instead they carry a "Demotech" rating of A which is controversial. For more on this see this link,, and then this article about a Demotech  A rated Florida Based Homeowner  Insurer who went bankrupt,, and finally this article about Florida Homeowner Insurance Companies and Demotech ratings,

With the new clearinghouse program, Insurance consumers will be steered towards these companies aggressively.  How they service their policyholders long term and whether or not they maintain themselves financially after a major hurricane or storm is unproven and an unknown.  If we judge their future performance by the past, it won't be all roses.  Time will tell. The following link is Citizen's clearinghouse "faq" for your consideration.

Wednesday, November 16, 2011

Citizens Insurance proposes sweeping changes

A recent article does a pretty good job of proposing Citizen's proposed changes.  Citizens plays a special role on the west coast of Florida since virtually no major Insuror will write new policies.  This leaves the majority of insurance consumers no choice but to purchase their homeowners coverage through Citizens.  

Friday, April 1, 2011

Fraud and your Auto Insurance premium, Part 2

Recently the National Insurance Crime Bureau did a study on Florida questionable claims and came up with the following findings:

1) 22,679 questionable claims were referred to the bureau for further examination in 2010

2)  This represented a 34% increase from 2009

3) 84% of these claims were auto insurance related

4) Miami was the worst city in the state for fraud, followed by Tampa and Orlando respectively.

The reader may find this interesting but question what it has to do with him, an honest insurance consumer.  The answer is it has everything to do with your Auto Insurance premium. First we need to understand what Insruance is, and why it is important and effective.

Insurance as a concept spreads the financial risk of an accident among many that the individual could not bear.  As an example, there are many drivers but relatively few serious accidents.  One person bearing the costs of a serious accident could bankrupt this individual or cause serious financial harm.  If this risk of this relatively small amount of accidents was absorbed by a large group of drivers, each person could afford to pay a much smaller amount, decreasing the risk of financial ruin to the group.

Enter auto  Insurance.  Insurance companies access the risk, set the premium, collect the premium and administrative costs.  It is normal for an insurance company to divert 30% or so of the premium to adminstrative costs and pay out roughtly 70% in claims. Often the entire profit of an auto insurance carrier will be the amount they are able to make while they hold your money, called investment income, but this is a subject for another day.

Some companies model the risk better, are more restrictive, or target certain groups, hence the variance in costs  and why your neighbor may get a quote from your company and say it is more than he pays, but if you call his company, it may be more than you pay.  Confusing, yes.

The company's administrative costs are fixed, or relatively fixed.  when there is an increase in fraud, or frequency of claims, the company will increase the premiums to THE ENTIRE GROUP it insures.  Insurance companies break the risk down in macro and micro territories.  So if Florida as a group loses money, the entire state will see rate increases.  If certain areas are problem areas, they will see even larger increases.

This brings us back to the current state of affairs.  Unfortunately auto Insurance Premiums in Florida are rising, and companies are 'underwriting' for multiple claims that fit certain patterns. In insurance lingo, this is called a hard market, and we are in one now.  I hope this helps the reader understand why their premium has risen lately, regardless of what company you purchase your insurance with. 

Friday, February 25, 2011

Auto Insurance fraud, staged accidents, Florida, and your insurance premium.

We hear about it all the time.  Insurance Fraud costs us money.  The cheats pass on their illicit gains to those of us who are honest and only put in legitimate claims. Florida leads the nation in staged auto accidents, often performed by gangs of organized criminals.  But how serious is the problem really?

A letter recently sent to all Infinity Auto Insruance policyholders in Florida may shed some light on the scope of the problem. Below is this letter re-printed in its entirety;

Did you know that you are paying approximately $400 more for auto insurance because of fraud? Auto insurance fraud is driving up insurance costs and threatening your safety.

During each of the last three years, Florida has had the highest number of questionable auto claims resulting from staged accidents in the nation.  With  1,446 in 2009, Florida's questional auto claims represent 30.1 percent of the national total; its number far exceeds that of 2nd place New York which was 765.  These numbers, of course, only include proven instances of fraud.  We believe much more fraud exists, and is the source of rising costs for everyone.

Insurance fraud is a particularly serious issue in the Tampa, Miami, Orlando, and Hialeah areas.  These four cities rank in the top 10 worst citieis in America in rates of questionable auto claims.

Reforms to limit auto insurance fraud should be a priority for the Florida State Legislature.  Auto insurance fraud is putting the safety of Florida drivers at risk and significantly increasing costs for Florida drivers.  Based on the latest data available, Florida motorists as a group pay the 2nd highest auto liablilty insurance premium in the nation.  The 2007 average annual liability premium is $719, which is 51 percent higher than the national mean of $475.00.

Today, the reality is that fraudulent claims and staged accidents are the most significant drivers of auto insurance premium increases in the state.  We must eliminate the funding source for these criminal operations, and put procedures in place that protect both the safety and the wallets of Florida drivers.

We know that Floridians are struggling in today's economy, and we want to do our part to keep auto insurance costs from escalating due to fraud.  You can help. Please visit and take action-write your local legislators and urge them to take action on this important issue.
It is time for lawmakes in Tallahassee to put consumers first and take action to stop auto insurance fraud once and for all.  Let them know just how serious we are.

This letter was signed by vice president of Infinity,Mr.  William Dibble. 

So what is going on?  In short, people fill up a car with co-conspirators, stage an accident  and all of them seek medical attention at often dubious facilities that may or may not be in on the operation. You and I pay for this.  Insurance companies set their rates on known risk factors, and out of control fraud will and has caused major carriers to leave certain marketplaces, like Tampa, Miami and Orlando.

Let's hope the problem is addressed soon

Wednesday, February 16, 2011



Yesterday State Farm Florida Announced they have requested from The Florida Insurance Department that they Grant State Farm a 28% rate increase.  Florida State Farm Policyholders have endured many rate increases and have also endured  State Farm threatening to cancel all of their homeowner policies and leave the state , so it will be interesting to see if 1) they get the rate increase they are asking for and 2) whether or not it will be well tolerated by weary State Farm Policyholders.  Many State Farm customers have already left for smaller Florida Based startup insurers to save money, or in areas that State Farm isn't actively writing new policies (like Hernando and Pasco counties), many have left and placed their policies with Citizens Insurance Company.  A battle with State Regulators is sure to come, so stay tuned to this blog for updates.

Friday, November 12, 2010

Citizens Announces Rate Increase

On November 10, 2011 Citizens received approval to amend rates for new and renewal home insurance policies.

We do not know how much the premium will be adjusted yet because the rate filling has not been revealed, but we do fortunately know that it will not go up more than 10% .  This is also good news for a few policyholders who will see up to a 5% reduction.

Policies will also see a slight increase in the emergency assessment by order of the Florida office of Insurance regulation. This is to help diminish the deficiencies that exist in the catastrophic hurricane fund. For a copy of this order, look here...

So  once again the policyholders of Citizens are playing rate roulette.   How this will affect home insurance policyholders in Pasco, Hernando, and Citrus counties is yet to be determined. But again we do know that the assessment will be mild and that the rate increase is limited to 10%, so this will not come as a huge shock to the policyholders of Florida.

Stay tuned to this blog for updates.

Wednesday, November 10, 2010

11/9/2010 Tampa Bay On line Sinkhole Article

Yesterday Keith Morelli of Tampa Bay on-line published this article...

In the article Mr. Morelli cites the Florida office of Insurance Regulation's report released today. The report quotes many disturbing facts about sinkhole claims in the region.

Some of the information in the report includes

1)  In 2006 There were 2360 sinkhole claims in Florida

2)  In 2009 there were 7244 sinkhole claims.

3) In 2010, up to 10,000 sinkhole claims are projected to be filed.

4) In the past four years, 1.4 Billion has been paid in sinkhole claims.

5) 72% of all claims filed have been in Pasco, Hernando, Hillsborough, and Pinellas Counties.

In other words, the amount of sinkhole claims have almost quadrupled  in just the last 4 years  and the claims are not going away.

What is going on?  Are Spring Hill and Hudson or for that matter, all of Pasco and Hernando Counties falling into the earth?

The short answer is  no. In my opinion the sinkhole craze has been fueled in a large part  by Public adjusters, Attorney's, and people trying to pay off their mortgages and/or profit off of their policies. Oftentimes people see cracked concrete as a financial opportunity where in the past cracking concrete was a fact of life in Florida.

THIS DOES NOT MEAN there are not legitimate sinkholes and that there is not an actual problem  going on that is unique to this area.

So what is the Problem?  This article can give you some insight if you are into technical reading.

  This area of Florida sits on a unique geological system known as "Karst".  As a former Cave diver I have been inside of this system down to several hundred feet deep and back inside of these underground limestone caverns back hundred's of feet from the cave entrances.  The Karst system of West Central Florida includes many features such as numerous Springs, Underwater Caves, and Porous limestone that extends through Hernando  down through Pasco County.  This system is under tremendous stress from Local water Pumping and from Regional water Pumping.   Much of the drinking water in Pinellas County is extracted from Wells in Pasco Country and Piped South.  As the population has exploded over the Karst, People have sunk wells for drinking and watered their grass. Compounding this is the fact that   whenever you turn on your tap water for any reason in Hernando or Pasco Counties the public water systems of the region are supplied by direct wells into the aquifer.  Agricultural pumping also plays a roll.  All of these things combined have stress the karst system in the area exponentially over the last 20 years.

Before the regions population explosion the aquifer was  full of pressurized water which held the fragile limestone formations together,except in drought conditions. Now with the stress on the aquifer the water level has dropped  and often the limestone is  not supported by water and subjected to compromise.  Sometimes this causes a downward dip of soil under your house and can cause cracking and other problems. In a worse case scenario and much more rarely , the limestone collapses into the void underneath it and a sinkhole forms on your property.

When the cracking is caused by an actual sinkhole or sinkhole related activity and you have sinkhole coverage, the insurance company has to respond.  If you have cracking and report it to your Insurance Company, they are required by law to eliminate the cause of loss by sinkhole and it costs them $5000 or more to send an engineer. Literally thousands of these claims pour in each year.  If the engineering company finds suspected Sinkhole activity, the Insurance Company pays for not only for fixing the damage but for "fixing" the sinkhole. These costs can and do  run into hundreds of thousands of dollars.

This environment has led to a flood of companies leaving the area and others to stop writing and cancel  their policyholders off the books, canceling entire agents' entire client lists. Some agents have been forced out of business and others have had to spend most of their time rewriting their clients and answering to angry policyholders. The remaining policyholders see huge rate increases or are forced to buy Insurance from Citizens Property and Casualty Company which has become the largest home Insurance Company in Florida.   No agent wants this to happen. No consumer wants this to happen, and Insurance Companies want to sell insurance, make a profit, and have happy customers.  It seems these days none of us are getting our way.

It indeed  is a volatile situation for all of us.  Unfortunately as long as we continue to over pump water, Attorneys see an opening for new clients, Public adjusters canvas areas for cracking concrete and encourage claims, and concrete continues to crack,  the Insurance Market will be poor in this region. The result is  we will pay more, and fewer and fewer private companies will keep their policyholders.  The next time your dishonest neighbor brags about his big check and the fact that he still has his house and nothing is really wrong with it, remind him that you and people with legitimate claims are paying his way.

Bauknight Insurance can help.  We have experts on staff who can replace your coverage when canceled, provide you with new policies when you buy a new home or refinance, provide you with sinkhole coverage or advise you of the savings and consequences of going with just "catastrophic sinkhole only" type coverage.  You can reach us at or call us at 352-686-0612 in Hernando, or 727-863-5641 in Pasco.