This week on the McDaniel Insurance Solutions podcast we dive into the FIGA Emergency 1% Assessment, Carrier Insolvency, and Reinsurance. For more information about McDaniel Insurance Solutions visit us online at here.
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Today is Friday, April 30 2023. And we're going to be talking about a lot of changes that are happening in the insurance industry in Florida. Specifically, we saw this week, the Florida insurance guarantee Association issued an emergency 1% assessment, we'll dig into what that means for you. We're going to talk about insolvency liquidation, what you can do to make sure that you're working with a solid stable carrier. And then lastly, what we can expect in June when reinsurance rates come out for insurance carriers, so we're going to talk about what reinsurance is, how it impacts your premiums and how it's really important in the state of Florida. On April 10 2023, the Florida insurance guarantee Association levied a 1% emergency assessment on all covered lines of business except for auto. So that's pursuant to Florida State statutes member ensures so your insurance company will collect and remit those assessments to the Florida insurance guarantee Association on a quarterly basis. And the 1% Emergency assessment could be covered by the insurance company, or they are allowed to recoup that emergency assessment from policyholders starting October 1 2023, until September 30 2024. So the reason that this has happened is we've seen a large number of insolvencies in Florida. So we've had almost 10 carriers go insolvent in the last two years in Florida. So what happens if something happens like hurricane in and you have a claim, but your carrier has gone insolvent, they no longer exist, those claims have to be covered by the receiver, which a lot of times is the state of Florida. And so there may not be any money leftover whatsoever. And so for them to be able to raise funds to cover claims for carrier insolvency, you'll see the Florida insurance guarantee Association step up and issue something like this an emergency assessment that's designed to help cover the cost of ongoing claims from carrier insolvency. So there's a couple of different schools of thought to this as a consumer, it can be frustrating, you feel like you've done everything you can to make sure that your worth is stable company, you've done your homework. And now you feel like you know, maybe you're paying a little bit towards people that didn't care as much as you about insurance. It's a really tough situation for everybody to be put in. At the end of the day. It is 1%. I know that that's not nothing. But if you have a$4,000 homeowner's policy, you're looking at about a $40 increase, so it's not super detrimental. But what does that mean for the future of Florida and for the future of policyholders as this can happen again, it's in the Florida State statutes, they are allowed to do this. And until we solve the issue of carrier insolvency, we're going to continue to see this as storms and weather events happen and people have claims with carriers that have gone insolvent. More Information and Press releases about the 1% Emergency assessment can be found online. It's the figure facts.com So FYI, GA as in Florida insurance guarantee Association facts fac ts.com You can actually find information about assessments on there you can find information about insolvencies reports. It's a fairly useful website that really helps explore why this is happening. And what has caused this to happen. As I mentioned previously, we've seen about 10 carriers go insolvent in the last two years here in Florida. The list of carriers are going to be American capital assurance Corporation, Avatar, property and casualty insurance Corporation fed net or federated National Insurance Company, Florida specialty insurance company, Gulf Stream property and casualty insurance company, Southern fidelity insurance company, St. John's United property and casualty, Weston, and Windhaven. There's a few others and there's some that are specialty, like physicians United plan that have gone insolvent. But that's affected a lot of Floridians. And so, when you're looking at your insurance and your plan your strategy for the year, and we always talk about, you know, in our agency, does it meet your short term and your long term goals, you need to do a little bit of homework, you want to make sure that the carrier you're working with is one not only priced competitively and fairly, but also they're going to be around and when you have a claim they're not going to leave you high and dry. They're not going to close the doors. So there's a few different resources for that. And Florida, there are rating companies that issue financial ratings for carriers. So traditionally, the most respected is going to be a nm best and you can actually navigate to their website, it's a m best.com. You can actually put in the company's name there and you can actually pull All their financial stability rating from am best. So typically, in our office when you look at a carrier, as far as longevity sustainability, being stable as a carrier, we always look at and best ratings to see. Okay, does this make sense for the client? Is this going to meet both their short term and their long term goals. And one of the carriers that we have a lot of success with on that that is an AM BEST A rated carrier is AAA, we're able to bundle home and auto, you know, we're fortunate enough that we're one of the few independent agents that has access to that product in Florida. So that's where I usually start is a&m best. Is this a carrier that's am best rated? Have they had any downgrades have they had any turbulence, and I'm going to do my homework on that as an agent. As a consumer, you can also double check this information, make sure that your agents telling you proper information. The other more popular rating agency that you'll find in Florida, often you won't find them in other states, but is demotech. And so you can navigate to their website demo tech.com. That's DEMOTECH.com. And you can actually search for all carriers licensed in Florida, you can search for specific carriers, and you can find out what their financial stability rating is. They issue basically an unsurpassed, so they do an A prime, double A prime, and then an A, they do also offer ratings like s for sustainable. They do a non rated, they do an ineligible, so they do have a variety of financial ratings available for carriers. And you can usually see year after year, their change in premiums written their change in surplus assets admitted. So that's usually a pretty good indicator. If you look at a carrier. For example, there's a really popular online carrier that actually had a negative $4 million in net premiums written in 2022. So usually you can look at that and see okay, this company is not performing as well as I'm sure they want to is that something that's going to affect policyholders potentially the other last resource out there is the Kroll bond rating agency that's a newer financial rating company to the insurance world. They've rated carriers like frontline in the past that lost their frontline last year and best rating and their demotech rating. And the Kroll bond rating agency picked them up and released a report on them. So that's always something that you can check. As a consumer, you have free access to it, you can look and see, hey, what's going on with this. The other thing, if you really want to get granular with the Office of insurance regulation, you can look and see who has filed rate increases. So you can look at pending rate increases, you can look at rate increases that have been approved, just because it's pending, and it's in there doesn't mean it's going to happen. So we'll give you that one warning on that. But it's a really good resource. You know, we look at that when we look at planning, when somebody's with a carrier, you know, and maybe we're $50 more for the year or something like that, hey, your renewals coming up in 30 days, did you know that they got approved for a 15% rate increase. And so you can look at that sometimes to guess and take a guesstimate I guess where you're going to end up and how stable that situation is for you. Lastly, let's dig into reinsurance what it is how it works, and how it can affect us as consumers. And so insurance companies across the United States have what's called reinsurance. And so to keep it simple, it's insurance for the insurance company. So let's say something like Hurricane Ian happens. And their losses are high, right? They have a deductible that kicks in. And the reinsurance is going to help cover the cost of those claims. So reinsurance is really, really important. And it makes sure that we're covered for our claims, the insurance company is covered. When something happens and you turn in a claim, they have the ability to pay out that claim amount. And so reinsurance rates are reaffirmed every year in January and June in Florida currently. So January, we saw an average increase of around 50% For reinsurance costs. That's what's led to rates to be increased for consumers. And in June, we can anticipate kind of the same thing to happen, we're going to see an increase on reinsurance rates, which means if your policy renews after June, likely, you'll see an increase in your premiums as well. You know, and there's always a lot of frustration towards the insurance companies and when rates get increased, it's not always their fault. And so, the data shows that, you know, only about eight and a half percent of all claims for homeowners in the United States were opened in Florida, right so this goes back to like 2019 data but of the At eight and a half percent, over 76% of property claim lawsuits in the United States were from Florida. And so, you know, we hear this statistic sometimes that in the US and the other 49 states, there's about two lawsuits today filed against a homeowner's insurance company in Florida, there's over 200 A day filed against homeowners insurance company. So state legislature has passed some bills to help reduce that number and to give better resolution for clients. And really stop kind of the bad actors or third parties filing false or inflated insurance claims. Because when that happens, and we see bad actors or third parties filing inflated insurance claims, or maybe you have a neighbor that you're like, Man, I know they just got a new roof and nothing was wrong with it. And you know, they got approved, could have been because they were through a long tedious lawsuit that cost the insurance company a lot of money. And unfortunately, that's passed around to all of us as consumers. And I always, you know, I'm quick to point out to people that as an insurance agent, I still also have to have insurance, right, and usually a little bit more than the average person just because of what I do. And so I get a feel that cost effect to doesn't mean that there's not things that you can do to prevent that. There's still a lot of great discounts out there. You know, I mentioned earlier in this podcast, we're able to bundle home and auto typically, so that a lot of times will will lead into some savings on its own. The other things that you can do our like water control devices, that's a new growing popular thing, you have a water control device that shuts off the water, if you have a water leak, that can give you a great discount, being in a gated community can give you a great discount, having an alarm system being retired, there's a lot of discounts that are still out there. So it's important to have that annual review with your agent, make sure that you're taking advantage of all the discounts that are out there. And thinking you know, when you come time to renovate, you know, have a conversation with your insurance agent, see if there's anything that you can do, that would help reduce the cost of your insurance. So while we have seen in the first quarter of 2023, and increase across the board average increase of about 25%. On homeowners, I'm happy to say that in our agency, we saw an average increase of about 6%. So we've really taken that short term, that long term thinking and applied it to our book of business and treated clients like we would want to be treated and make sure that they have something that's going to be a stable option. That's not going to price gouge them. Lastly, the one thing to keep in mind too is inflation obviously is taken a lot of people by storm, inflation in March was down to 5%. So in February is up 6%. But while we saw average 25% increase on homeowners, you know, things like eggs this year saw 36% increase margarine, 33.4%, frozen vegetables, 20%, airfare 17.7%, motor vehicle repair 17.4%. So all of these things factor into it, obviously, we know the cost of labor, and the cost of materials in the construction industry has gone up, which leads to an increase costs and claims. So at the end of the day, in June and June, when reinsurance rates get reaffirmed, we can expect an increase, more than likely we are going to see an increase, which means as consumers, we're going to get a little bit of an increase passed down to us. So what you can do right now is a perfect time to shop have a good conversation with your insurance agent. Whether it's us or it's somebody else, look for somebody who's not trying to just sell you a policy look for someone that wants to educate you on the process. They want to explain coverages to you and be available to answer questions that you may have. So, you know, right now, people are really putting a magnifying glass on their insurance and maybe learning more about it than they have in the past. And they're really digging into it and trying to understand it. I love it. I absolutely love it. I know there's some agents that are like, oh, man, everybody asked me so many questions now. I love it. That's why I got into insurance. We would love to help educate you on your policy, find something that's a better fit for you, or maybe even at the end of the day tell you, Hey, you have a really good plan. You know, here's something that you could do maybe to optimize it or fit something else into that plan for the long term. Anyway, stay tuned and we'll bring more content to you here in the next couple of weeks.