Basic Auto Insurance Terms

Bauknight Insurance of Hernando www.bauknightinsurance.com, operates independent agencies in both Pasco and Hernando county.  They can be reached at 352-686-0612 or 727-863.5641. Bauknight Insurance is a multi-line full service insurance agency offering many companies and all types of property and Casualty coverage.


BASIC AUTO INSURANCE TERMINOLOGY

Bodily Injury Liability
Bodily injury liability covers you in the event that you cause an accident in which another person (or people) is injured.

Property Damage Liability
Coverage in case your car damages someone else's property - usually this means someone else's car, but it could be a fence, light post or other piece of property.

Medical Payments
Medical Payments covers certain medical expenses if any vehicle occupants are injured in an accident.

Collision Coverage
Collision coverage is an optional coverage that covers damage to your car caused by impact with another car or object.

Comprehensive Coverage
Comprehensive car insurance coverage is also an optional coverage that covers damages to your car caused by something other than a collision - like theft, fire, etc.

Other coverage can be added to your policy, depending on the company offering the policy. many companys offer towing and labor and/or rental reimbursement.  Other companys offer things like guaranteed replacement cost of the car, gap coverage and more.

An independent agent is better suited to advise you what coverage are available for your situation and to provide you the rates of many companies at once.

How bad is the Sinkhole problem in Central Florida?

Sinkholes have become the de facto "problem child" for insurance companies in this area resulting in tens of millions of dollars in losses.  this news is not new.  I have blogged about this issue before, but just how serious is the problem?

Actual sinkholes occur due to the topography of our area.  Hernando and Pasco counties are full of springs that are fed directly from the Florida aquifer.  the Florida aquifer is characterized by porous limestone where water flows through, most often with various layers above it, including clay and sand.  This system is normally under  pressure as the water pressure is greater than its ability to escape, and when it finally does escape it does so in a dramatic fashion, bublling up to the surface in various springs in the region.

Two major issues have contributed significantly to the problem.  the first is continued construction and overpopulation over the aquifer.  the local community then uses water for watering, washing, drinking and other uses. which reduces the  available water. the second issue is overpumping and sending the water to other areas.  Wells are strategically placed over the aquifer, millions of gallons are removed and shipped to Pinellas County.  For more on this see This link.

When the inevitable drought comes, the water level drops in the aquifer and no longer supports the limestone and failures occur.  Sometimes the failure causes something termed "downward dipping" and damage is caused to the structure when no sinkhole opens.  Other times dramatic sinkholes open up and swallow all or a portion of the home.

The problem has broached crises levels over the years.  On May 7, 2013 Hernando county felt the urgency to appeal to FEMA for relief due to the fact that as of  6106 sinkholes had been reported since 2000.  Of those only 2726 had been repaired.  this negatively affected the tax base which has caused loss of revenue to not only the County tax collector, but has affected real estate sales, house prices, Insurance availabilty, and even has had an affect on property pride of ownership.

About the author.

Greg Bauknight is the president of Bauknight Insurance of Hernando www.bauknightinsurance.com which has had offices in both Pasco and Hernando Counties for over 30 years.  they know first hand the problems associated with the sinkhole epidemic and can help those affected obtain coverage through multiple channels.  They can be reached at 352-686-0612 or 727-863-5641.

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, http://www3.ambest.com/consumers/content.asp?refnum=116156, and then this article about a Demotech  A rated Florida Based Homeowner  Insurer who went bankrupt, http://articles.sun-sentinel.com/2013-06-12/business/fl-heritage-insurance-rating-review-20130612_1_heritage-property-business-model-rating-review, and finally this article about Florida Homeowner Insurance Companies and Demotech ratings, http://grok.typepad.com/life/2010/03/beware-of-florida-homeowners-insurance-companies.html.

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.


https://www.citizensfla.com/utilitybar/policyholderfaqs.cfm?show=pdf&link=/shared/faqs/FAQ_General_Final.pdf

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.  

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. 

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 http://www.insurancefraudUncovered.com 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

STATE FARM FILES FOR 28% RATE INCREASE FOR FLORIDA HOMEOWNERS

  STATE FARM FILES FOR 28% RATE INCREASE FOR FLORIDA HOMEOWNERS



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.