All Catastrophe Insurance Premiums such as for Homeowners Insurance and all kinds of Property Insurance, are based on a solid, fact-based Computer Model. For example, Florida is the first State -- and as of now, perhaps the only State -- to develop its own CatClaims Computer Model which is used to assess Rate Hike requests. The history of Hurricane damage, for example, is input into that Computer Model to reflect the reality on the ground since statistics about Hurricane damages began.
This year Florida spent $2,700,000 to obtain a "computer catastrophe model" of CatClaims. Florida officials are also continuing to use Property Insurers' computer models, which were the only source of claims predictions data available to Florida and other States until Florida developed its own CatClaims Model this year. See my November 6, 2006 post.
Recently, some corporate headquarters in other States have quietly submitted Premium Increase Requests in Florida using opinion-based 'models' instead. One such 'model' originates in California and is based on the input opinions of several paid anonymous persons, for example. See my December 3, 2006 post here, and see Peter G. Gosselin, "Insurers Learn to Pinpoint Risks -- and Avoid Them" (Los Angeles Times, Tuesday, November 28, 2006, page A1, col. 2)(Note: Registration for this newspaper article may be required, but is stated on their Web Site to be FREE).
However, the Florida Office of Insurance Regulation, it seems, is not accepting Premium Increase submissions based on anything but the facts. One recent example is given by the submissions of USAA, one of many examples and not unique to USAA, a good and exemplary Company in many ways.
USAA at first requested an increase in premiums for homes and condominiums for a statewide average of 40% in Florida. USAA's first request was made as of August 11, 2006.
Within a month and a half, a Hearing was held by the Florida O.I.R. on September 26, 2006. The evidence for the Rate Hikes requested was examined and of particular interest here, the regulators questioned the model that was used as a basis for the requests.
On November 2, 2006 the O.I.R. rejected the 40% rate hike request. The reasons of especial interest here include that (1) "[t]he company failed to provide sufficient supporting data for the catastrophe model used" in the submission, i.e., there were not enough facts presented that would allow people to review the facts used to support the requested increase, and (2) the 'model' used in the submission "is not currently accepted ...." November 2, 2006 Notice of Intent to Disapprove, from the Florida Office of Insurance Regulation (Mr. Ken Ritzehthaler, Actuary) to U.S.A.A. (Ms. Janet Ogle, Compliance Analyst).
USAA then "amended its filing and lowered the overall rate requests to 16.3 percent." USAA's Rate Increase Request of 16.3 percent was approved by the Florida Office of Insurance Regulation on Thursday, December 21, 2006. It will take effect for Florida Homeowners and Condominium Owners insured by USAA as of February 8, 2007. See December 21, 2006 Press Release, Florida Office of Insurance Regulation.
Reporting on these complex issues is done by very few, and very few people report on these issues better than Ms. Kathy Bushouse, for example, and one way to read current and past reporting on these complicated issues is to link to this article: Kathy Bushouse, "USAA Rates on Home Insurance to Rise by 16.3% Across State" (South Florida Sun-Sentinel, Friday, December 22, 2006).
More information needs to be made public about shifts away from reality that are requested anonymously by some people, and to a 'model' that benefits their employers. Facts are abundant such as in Florida to justify good arguments for many kinds of CatClaim Coverage Premiums. Let any and all Premium Hikes be submitted in the open -- and if they are not, let them continue to be amended until they are submitted based on publicly available facts.
Until that day, Happy Holidays to All!
REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.
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