FL Insurance Companies Advocating Against Rate Increases

I stopped by a friend’s house this week to visit and was disturbed to learn she retained a Public Adjuster to process a leaky pipe claim. I asked why she did not put in a  claim with her carrier first.  She is insured with USAA which has the one of the best reputations in the business.  Another friend had recommended the Public Adjuster and she fell for ‘the insurance company adjuster works for the insurance company and we work for the policyholder” pitch.  When I pointed out to her that the service of adjusting her claim was already included in the premium, she realized she had been intentionally steered away from contacting her carrier first with a promise of a higher payout.

Insurance companies  want to pay claims because it makes good business sense.  It’s a Tom Peters – Marketing 101 : take-care-of-your-customers-and-your-business-will-thrive’ Basic Principle.

Florida is a particularly difficult property insurance market, in part due to the hurricanes and also the political interference in the vertical itself.  The proof is that no new admitted commercial residential property insurance companies have entered the market since 2006.  Florida has two problems when it comes to Master Association Property Insurance:  The under-pricing of Citizens and the overexposure of the CAT Fund.

The last administration seriously damaged this market by taking a government-controlled entity – Citizens – and lowering its prices from the most expensive to least expensive.  Would you open a business and compete with the government who is providing the same product at half of your breakeven pricing?  Obviously not! Citizens will not regain its place of insurer-of-last-resort until they are the most expensive policy out there as was the case before.  The problem is when they try to do this, there is an orchestrated public outcry.

When it comes to FL Property Insurance, there is a battle of perception in the public discourse.  On one side are the Forces of Change which are attempting to fix the problem and, on the other, are the Forces of the Status Quo who view the insurance industry and its customers as a cash cow to be continuously milked.

The Forces of Change are comprised of insurance industry professionals and vendors in the vertical who know the business and understand how to bring about positive change for the customer.  Any attempt at explaining the dynamics of the industry by these Forces is ridiculed by their opponents as ‘anti-consumer propaganda’ – the classic blame-the-messenger technique.

The Forces of the Status Quo are comprised of those fighting for a business-model based on business disparagement and defamation because it maximizes their profits.  Rather than tout their customer service skills, they falsely advertise insurance companies ‘don’t want to pay claims’ or paint them as scams.  The insurance industry is trying to minimize premium increases for its customers by engaging the Legislature about reducing the exposure of risk the State Catastrophic Fund is taking on (aka ‘the CAT Fund’).  If it is reduced this year, all carriers will be forced to purchase more expensive private reinsurance and pass on the increase to their customers which is us!

Against the advice of the insurance professionals, it seems our politicians are opting to go for the path of least resistance as the public does not understand the nebulous world of reinsurance and it is harder to whip up a mob into a frenzy over the CAT Fund.

Sean Virtue is Regional Vice President of Mack, Mack and Waltz Insurance Group and also writes the Blog on condominium association Florida and insurance agency in Florida. In the last 15 years, Sean has assisted in the launch and growth of several Florida personal and commercial insurance carriers. Sean currently specializes in Condominium Association Master Policies, Commercial Residential.