by Michael Peltier
The News Service of Florida
Leery of the claims and about limited state oversight, Gov. Charlie Crist and the two other trustees of the State Board of Administration recently postponed the sale of $710 million in bonds to reimburse insurers for claims still being made from the 2005 hurricane season.
Citing a litany of issues including the poor economy, lenient consumer protection statutes and the use of public adjusters whose pay is based on the percentage of a claim, the panel said it wants more information before signing off on a bond issue that would raise most policyholders’ rates by $18 a year.
None of the three trustees — Chief Financial Officer Alex Sink and Attorney General Bill McCollum in addition to Crist — likely wants to take an action that would raise assessments in an election year. Sink, a Democrat, and McCollum, a Republican, are both running for governor while Crist is seeking the GOP nomination for the U.S. Senate.
The trustees in 2008 approved more than $650 million to pay claims from the 2002-05 hurricane seasons, but a deluge of reopened claims largely attributable to 2005’s Hurricane Wilma have flooded into the Hurricane Catastrophe Fund as the deadline nears for cases to be filed.
Crist said he was worried that some of those claims may be being reopened fraudulently.
“We don’t want good citizens to pay for bad behavior,” Crist said.
State officials say a combination of factors have resulted in millions of dollars in additional claims being filed for 2004 and 2005, in addition to the 2.8 million initial claims that were filed.
Bond officials told the trustees that a combination of factors has coalesced to drive up claims.
One reason is likely the economy — some policyholders may be using the pretense of hurricane damage to raise cash.
Consumer protection laws also may be at work. Angered by a slow industry response following the heavy 2004 and 2005 hurricane seasons, lawmakers passed a handful of measures to make it easier for policyholders to get paid. State Board of Administration Executive Director Ash Williams suggested that lawmakers may have gone too far.
But some of the blame also fell Wednesday on public adjusters, who have become more prevalent in recent years. Unlike insurance company adjusters, public adjusters are often paid on commission. While limited in the amount they can charge on new claims, reopened claims have no such limit.
Florida’s CAT fund was set up to reimburse insurers for excessive hurricane losses. Policyholders now pay a 1 percent assessment — about $60 a year on average — to pay off fund’s debt. The assessment is scheduled to end in 2014. Officials have proposed an additional 0.3 percent assessment until 2016 to take care of the additional $710 million debt that would pile for the additional claims.
Ben Watkins, head of the Division of Bond Finance, said Wednesday the delay would not affect the state’s ability to pay existing claims and would not affect Florida’s bond rating.
“If anything, (the caution) makes the state look more fiscally responsible,” Watkins told the News Service following the meeting.
Two bills dealing with public adjusters, SB 2264 by Sen. Mike Bennett (R-Bradenton) and HB 1181, sponsored by Rep. Janet Long (D-St. Petersburg) were introduced Tuesday. Both measures would prohibit public adjusters from directly soliciting business, regulate their advertising and limit their compensation. Both measures also reduce from five years to three years the window during which claims can be reopened.
Florida insurance industry representatives applauded the decision to delay the bond sale, but reminded the trustees that the state must ultimately honor its commitment to property insurers and the policyholders they cover.
“Citizens Property Insurance Corporation and private insurers have paid these claims, while identifying and referring to the state Division of Insurance Fraud cases where there is clear evidence of fraud,” said Guy Marvin, president of the Florida Insurance Council, an industry group. “ In many, many cases, it is alleged the damage occurred from Hurricane Wilma almost five years ago and Citizens or a private insurer cannot disprove that.”
Public adjusters have a different take. Had insurance companies treated clients fairly following the history-making hurricane seasons, the number of unsatisfied customers would be much lower.
“My feeling is that if the insurance companies paid what they owed, you’d have no need for public adjusters,” said Ken Plante, a Tallahassee lobbyist who represents public adjusters.