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Eight Months After Ian, Struggles Continue for Swamped Florida Residents
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Eight months ago, chef Michael Cellura had a restaurant job and had just moved into a fancy new camper home on Fort Myers Beach. Now, after Hurricane Ian swept all that away, he lives in his older Infiniti sedan with a 15-year-old long-haired chihuahua named Ginger.
Like hundreds of others, Cellura was left homeless after the Category 5 hurricane blasted the barrier island last September with ferocious winds and storm surge as high as 15 feet (4 meters). Like many, he’s struggled to navigate insurance payouts, understand federal and state assistance bureaucracy and simply find a place to shower.
“There’s a lot of us like me that are displaced. Nowhere to go,” Cellura, 58, said during a recent interview next to his car, sitting in a commercial parking lot along with other storm survivors housed in recreational vehicles, a converted school bus, even a shipping container. “There’s a lot of homeless out here, a lot of people living in tents, a lot of people struggling.”
Recovery is far from complete in hard-hit Fort Myers Beach, Sanibel and Pine Island, with this year’s Atlantic hurricane season officially beginning June 1. The National Oceanic and Atmospheric Administration is forecasting a roughly average tropical storm season forecast of 12 to 17 named storms, five to nine becoming hurricanes and one to four powering into major hurricanes with winds greater than 110 mph (177 kph).
Another weather pattern that can suppress Atlantic storms is the El Nino warming expected this year in the Pacific Ocean, experts say. Yet the increasingly warmer water in the Atlantic basin fueled by climate change could offset the El Nino effect, scientists say.
In southwest Florida, piles of debris are everywhere. Demolition and construction work is ongoing across the region. Trucks filled with sand rumble to renourish the eroded beaches. Blank concrete slabs reveal where buildings, many of them once charming, decades-old structures that gave the towns their relaxed beach vibe, were washed away or torn down.
Some people, like Fort Myers Beach resident Jacquelyn Velazquez, are living in campers or tents on their property while they await sluggish insurance checks or building permits to restore their lives.
“It’s, you know, it’s in the snap of the finger. Your life is never going to be the same,” she said next to her camper, provided under a state program. “It’s not the things that you lose. It’s just trying to get back to some normalcy.”
Ian claimed more than 156 lives in the U.S., the vast majority in Florida, according to a comprehensive NOAA report on the hurricane. In hard-hit Lee County – location of Fort Myers Beach and the other seaside towns – 36 people died from drowning in storm surge and more than 52,000 structures suffered damage, including more than 19,000 destroyed or severely damaged, a NOAA report found.
Even with state and federal help, the scale of the disaster has overwhelmed these small towns that were not prepared to deal with so many problems at once, said Chris Holley, former interim Fort Myers Beach town manager.
“Probably the biggest challenge is the craziness of the debris removal process. We’ll be at it for another six months,” Holley said. “Permitting is a huge, huge problem for a small town. The staff just couldn’t handle it.”
Then there’s battles with insurance companies and navigating how to obtain state and federal aid, which is running into the billions of dollars. Robert Burton and his partner Cindy Lewis, both 71 and from Ohio, whose mobile home was totaled by storm surge, spent months living with friends and family until finally a small apartment was provided through the Federal Emergency Management Agency. They can stay there until March 2024 while they look for a new home.
Their mobile home park next to the causeway to Sanibel is a ghost town, filled with flooded-out homes soon to be demolished, many of them with ruined furniture inside, clothes still in closets, art still on the walls. Most homes had at least three feet of water inside.
“No one has a home. That park will not be reopened as a residential community,” Lewis said. “So everybody lost.”
The state Office of Insurance Regulation estimated the total insured loss from Ian in Florida was almost $14 billion, with more than 143,000 claims still open without payment or claims paid but not fully settled as of March 9.
With so many people in limbo, places like the heavily damaged Beach Baptist Church in Fort Myers Beach provide a lifeline, with a food pantry, a hot lunch stand, showers and even laundry facilities for anyone to use. Pastor Shawn Critser said about 1,200 families per month are being served at the church through donated goods.
“We’re not emergency feeding now. We’re in disaster recovery mode,” Critser said. “We want to see this continue. We want to have a constant presence.”
In nearby Sanibel, the lingering damage is not quite as widespread although many businesses remain shuttered as they are repaired and storm debris is everywhere. Seven local retail stores have moved into a shopping center in mainland Fort Myers, hoping to continue to operate while awaiting insurance payouts, construction permits, or both before returning to the island.
They call themselves the “Sanibel Seven,” said Rebecca Binkowski, owner of MacIntosh Books and Paper that has been a Sanibel fixture since 1960. She said her store had no flood insurance and lost about $100,000 worth of books and furnishings in the storm.
“The fact of the matter is, we can get our businesses back up and running but without hotels to put people in, without our community moving back, it’s going to be hard to do business,” she said. “You hope this is still a strong community. ”
Yet, the sense among many survivors is one of hope for the future, even if it looks very different.
Cellura, the chef living in his car, has a new job at another location of the Nauti Parrot restaurant on the mainland. Insurance only paid off the outstanding loan amount on his destroyed camper and he didn’t qualify for FEMA aid, leaving him with virtually nothing to start over and apartment rents rising fast.
But, after 22 years on the island, he’s not giving up.
“I believe that things will work out. I’m strong. I’m a survivor,” he said. ”Every day I wake up, it’s another day to just continue on and try to make things better.”
Photo: Velazquez at her Fort Myers Beach home, where storm surge reached almost to the ceiling. (AP Photo/Rebecca Blackwell)
Copyright 2023 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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SFR Services, a Florida restoration firm made famous by its volume of claims litigation and its charges that United Property & Casualty Insurance Co. had instructed desk adjusters to alter their estimates, now finds itself in some legal trouble of its own.
A circuit judge in Lee County recently found that SFR had intentionally concealed and misrepresented material facts during the appraisal process in a Fort Myers-area condominium claim dispute with Tower Hill Prime Insurance Co. after Hurricane Irma in 2017. The firm stuck with an estimate of $233,000 and failed to disclose a contract with a roofing company, which charged less than half of that for the actual work, Judge Michael McHugh wrote in his May 9 order.
“SFR Services was aware that the cost of the scope of roof work was $99,000, at least as of March 20, 2020,” the judge noted. “Despite knowing this information, SFR Services continued to present an estimate generated by Elite Claims and continued to represent that the value of the roof replacements for the clubhouse and both gatehouses was more than $230,000, while simultaneously indicating that its overhead and profit fell in line with the industry standard of 20%.”
Members of an appraisal panel, assigned to resolve differences between two other estimates, said they were unaware of the lower price from Castillo Roofing when they awarded the higher amount on the claim. The judge found that SFR, as an assignee of the condominium association, had violated the concealment and misrepresentation provision of the insurance policy and was “tainted by fraud.”
McHugh ruled in favor of Tower Hill and vacated the higher appraisal award, voided part of the coverage and agreed to Tower Hill’s request for a new umpire on the appraisal.
SFR, based in Stuart, Florida, has already asked Florida’s 6th District Court of Appeals to review the decision.
“Unfortunately we are appealing this egregious ruling,” SFR’s principal, Ricky McGraw, said in an email to Insurance Journal. “We have moved to disqualify the judge presiding over the case. Florida has made it hard for contractors that help their clients.”
SFR’s attorney, Melissa Giasi, asked the judge to disqualify himself, arguing that he was prejudiced by his concerns about McGraw’s allegedly fraudulent activity; the judge did not hold a jury trial; and he adopted a final order drafted by Tower Hill that contained numerous errors. When that motion failed, Giasi asked the appeals court to step in and prohibit McHugh’s order. The appeals judges declined.
In its answer to Tower Hill’s 2020 motion in Lee County, which asked the court to vacate the high-end appraisal award, the SFR attorney also argued that Tower Hill had “unclean hands,” had acted in bad faith and had improperly adjusted the claim amount.
Judge McHugh did not see it that way. He also pointed out that the insured, Rookery Pointe Homeowners Association, did not participate in the alleged fraud.
“In fact, the condo association, through its former president, Debbie Kiel, testified they were so concerned with the estimate provided by SFR Services, they got their own estimates which were in line with Castillo Roofing’s estimate,” the judge wrote.
McGraw and SFR Services for years have been thorns in the sides of several insurance carriers in Florida. Court records show that the firm has filed hundreds of lawsuits against insurers over AOB claims in recent years. Most famously, in early 2022 SFR charged in a federal lawsuit that United Property & Casualty had conspired with adjuster firms to systematically deny and underpay thousands of roof claims after Hurricane Irma.
The lawsuit, charging anti-racketeering law violations, purported to show copies of text messages by a desk adjuster, sent at the behest of UPC, to field adjusters directing them to avoid estimating roof damages altogether because the insurer planned to issue blanket denials.
A federal judge dismissed the suit in October, noting that a federal statute leaves it up to states to regulate the business of insurance, so the federal racketeering law did not apply.
Florida regulators this year deemed UPC insolvent and have placed the company into liquidation, likely making claims suits against the insurer a long shot.
Meanwhile, SFR has made similar allegations in state court against individuals associated with the insurer. In a suit filed last week in Pinellas County, SFR charges that a number of adjusters, UPC officials and UPC board members engaged in a scheme to underpay claims from Irma, “no matter how badly people’s roofs were damaged.” The complaint cites deposition testimony from a field adjuster who said that UPC officials demanded that he remove portions of his damage estimates.
Giasi (Florida Bar)
In the Lee County case, the judge said SFR was the party that engaged in misrepresentation, a judgment that has left some insurance defense attorneys with a strong sense of schadenfreude. They said that the alleged tactics by SFR have not been uncommon in the years of claims litigation against insurers, and have helped drive exorbitant defense costs.
The Rookery Pointe case began in 2019, when the condo association signed an AOB agreement with SFR. The restoration contractor initially provided an estimate of $355,759 for replacement of three common-area roofs – on the gatehouses and the clubhouse, plus a fourth building that was not clearly identified.
SFR contracted with Elite Claims Consulting as its public adjuster on the condos, and in 2020 Elite submitted its own estimate of $314,828, the court explained. The next day, SFR contracted with Castillo Roofing to replace the three roofs for $99,000. McGraw confirmed that in his own testimony during the court proceedings, the judge’s order said.
McGraw also signed a sworn proof-of-loss statement, based on the Elite Claims estimate of $314,828. SFR also directed Castillo Roofing to submit a permit application with a declared value of $233,525, something the judge said was intentionally misleading.
In response to Elite’s estimate, Tower Hill in March 2023 requested that the parties submit their differences to an appraisal panel. The insurer also requested information on any bids by roof contractors on the Rookery Pointe structures.
“Without question, the Castillo Roofing bid submitted to SFR Services would have been responsive to this request,” Judge McHugh wrote. “Yet, SFR Services did not approve it, nor did it provide the documentation to Rookery Pointe or Elite Claims to produce to Tower Hill.”
SFR argued in court that it was not obligated to provide the Castillo bid, because it was party to an AOB agreement: It had been assigned the rights and benefits of the policies, but not the duties or obligations.
McHugh
The judge noted that in years’ past, court rulings have found that assignees did not have to uphold certain duties of the insured. But that case law was superseded by a 2019 AOB reform law passed by the Florida Legislature. That statute also requires assignees to provide up-to-date and revised estimates of repair work, the judge said.
SFR also failed to provide the Castillo price during the appraisal process, the judge wrote, citing a 1999 Florida appeals court opinion that held that there must be a “meaningful exchange of information” for an appeals panel to accurately arrive at a fair number. But SFR’s chosen appraiser for the appraisal panel had testified that he was unaware of the Castillo price and based his conclusions on the higher estimates. Tower Hill’s chosen appraiser said the same. McHugh acknowledged that Tower Hill on its own could have solicited more estimates.
“Without the Castillo Roofing invoices and information, there was never a meaningful exchange of information necessary for a proper appraisal,” the judge noted. McHugh acknowledged that Tower Hill, on its own, could have solicited more estimates on the work.
A Tower Hill representative testified in the trial that the insurer would have paid the Castillo $99,000 price, plus standard overhead and profit, if the company had known about it – thus avoiding months of litigation.
The attorney for Tower Hill in the case, Michael Monteverde, could not be reached for comment for this article.
Rabb is Southeast Editor for Insurance Journal. He is a long-time newspaper man in the Deep South; also covered workers’ comp insurance issues for a trade publication for a few years.
Please call Lee from USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer.
Two clashing climatic behemoths, one natural and one with human fingerprints, will square off this summer to determine how quiet or chaotic the Atlantic hurricane season will be.
An El Nino is brewing and the natural weather event dramatically dampens hurricane activity. But at the same time record ocean heat is bubbling up in the Atlantic, partly stoked by human-caused climate change from the burning of fossil fuels.
Many forecasters aren’t sure which weather titan will prevail because the scenario hasn’t happened before on this scale. Most of them are expecting a near- draw – something about average. And that includes the National Oceanic and Atmospheric Administration, saying there’s a 40% chance of a near-normal season, 30% chance of an above-average season (more storms than usual) and a 30% chance of a below-normal season.
The federal agency Thursday announced its forecast of 12 to 17 named storms, five to nine becoming hurricanes and one to four powering into major hurricanes with winds greater than 110 mph. Normal is 14 named storms, with seven becoming hurricanes and three of them major hurricanes.
“It’s definitely kind of a rare setup for this year. That’s why our probabilities are not 60% or 70%,” NOAA lead hurricane seasonal forecaster Matthew Rosencrans said at a Thursday news conference. “There’s a lot of uncertainty this year.”
No matter how many storms brew, forecasters and Federal Emergency Management Agency Director Deanne Criswell reminded U.S. coastal residents from Texas to New England and people in the Caribbean and Central America that it only takes one hurricane to be a catastrophe if it hits you.
“That’s really what it boils down to is: Which is going to win or do they just cancel each other out and you end up with a near-normal season?” said Colorado State University hurricane researcher Phil Klotzbach. “I respect them both.”
The two forces couldn’t be more opposite.
El Nino is a natural temporary warming of the Pacific that happens every few years and changes weather worldwide. Climate models predict as the world warms, El Ninos get stronger.
Decades of observation show that generally the Atlantic is quieter with fewer storms during El Nino years. El Nino’s warmer waters make warmer air over the Pacific reach higher up in the atmosphere, influencing winds and creating strong upper level winds that can decapitate storms, killing them, Klotzbach said. It’s called wind shear.
El Nino’s effects are not direct and “it’s not as in-your-face as a very warm ocean,” said University of Miami hurricane researcher Brian McNoldy. El Nino and its variations are the single biggest yearly factor in NOAA’s forecast, accounting for up to 38% of its prediction, Rosencrans said.
The Atlantic, especially hugging the African coast to the far east where storms form, is about 1.8 to 3.6 degrees Fahrenheit (1 to 2 degrees Celsius) warmer than the average of the last 30 years and is the warmest it has been for this time of year, Klotzbach said. Warm Atlantic waters not only make storms stronger and more able to withstand El Nino’s shear but they create an opposite direction upper level wind that could counterbalance El Nino.
“It’s starting to outpace 2010 by a decent margin, which is sobering because 2010 was stinking hot,” Klotzbach said.
“The anomalously warm ocean temperatures unquestionably have a human fingerprint on them,” said former NOAA hurricane scientist Jim Kossin, now of the risk firm The Climate Service.
Scientists don’t even have past years that look the same to help figure out what will happen, Klotzbach and McNoldy said.
So which is going to win between El Nino and the hot oceans?
“I know it’s not a satisfying answer to say ‘we just don’t know,’ but we don’t,” said University of Albany atmospheric sciences professor Kristen Corbosiero.
The pioneer in the field, Colorado State, is predicting a slightly below normal 13 named storms, six hurricanes with two of them becoming major. All but a handful of nearly two dozen private, university and government forecast teams and models call for a near normal Atlantic hurricane season with between six and eight hurricanes.
But they hedge their bets too.
“AccuWeather is expecting a near normal to slightly below normal season due to the onset of an El Nino,” said AccuWeather senior hurricane forecaster Dan Kottlowski, who then added that the warm Atlantic complicates everything. “Due to extensive warm water, there is still a higher than normal chance for a high impacting hurricane to affect the U.S. this season.”
The University of Arizona looks at the same two clashing forces and sees a different outcome, predicting a higher-than-normal nine hurricanes, 19 named storms and five major hurricanes because it expects ”the Atlantic side to be dominant, leading to a very active season,” said University of Arizona atmospheric sciences professor Xubin Zeng.
Forecasters ran out of names during a record 30 Atlantic named storms in 2020 and with 21 storms in 2021. Last year was normal. Earth had a La Nina for the past three years, which generally increase Atlantic hurricane activity. Hurricane season runs June 1 to November 30.
McNoldy said this summer may be quieter in the Caribbean where El Nino’s shear can have more sway, but busier in Bermuda and U.S. East Coast north of the Caribbean, where El Nino isn’t as potent.
Random chance plays a big role, Kossin said: “It’s a bit like rolling dice but with the addition (warm ocean) and subtraction (El Nino) of weights to the dice. ”
The warmer Pacific has forecasters expecting a “near-to-above normal” hurricane season for waters around Hawaii, said Chris Brenchley, the director of the Central Pacific Hurricane Center. That amounts to four to seven tropical cyclones in the region, but fewer could actually come ashore in the islands.
Photo: Wilbur-By-The-Sea, on Florida’s east coast, after Hurricane Nicole last November. (AP Photo/Rebecca Blackwell, File)
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As the 2023 Atlantic hurricane season approaches June 1, the National Oceanic and Atmospheric Administration is predicting “near-normal” activity.
The season’s expectations are mostly due to the fact NOAA scientists predict a high potential for the weather condition known as El Niño, which can inhibit the formation or prevent strengthening of hurricanes.
However, El Nino’s influence may be offset by other factors that are favorable to hurricane formation, such as warmer-than-normal sea surface temperatures in the Atlantic Ocean and Caribbean Sea, NOAA added in its latest update.
NOAA is forecasting a range of 12-17 total named storms, with 5-9 hurricanes (winds of 74 mph or higher) and 1-4 major hurricanes (Category 3 or greater). NOAA said it has a 70% confidence in these ranges.
The average hurricane season contains about 14 named storms, 7 hurricanes, and 3 major hurricanes.
The hurricane research team at Colorado State University in its early forecast of the 2023 Atlantic hurricane season predicted slightly below-average activity. CSU will release an update to its forecast on June 1.
AccuWeather meteorologists in late March predicted the 2023 season will have 11-15 named storms, four to eight hurricanes, and one to three major hurricanes.
NOAA said it is implementing upgrades and improvements, including expanding the capacity of its operational supercomputing system by 20% to run more complex forecast models.
The 2022 Atlantic hurricane season was close to average, with 14 named storms, eight hurricanes and two major hurricanes but one of those was Hurricane Ian – among the strongest hurricanes to ever make U.S. landfall on September 28 in Florida. Ian was also one of the costliest hurricanes in history in terms of insured losses, causing an estimated $60 billion. The storm will only trail 2005’s Katrina in insured losses.
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Florida investigators have charged a former Progressive Insurance claims adjuster with fraud, alleging that she used claimants’ identities to submit fraudulent auto claims, then pocketed almost $24,000 in settlements.
Kiyuana R. Pasley, 41, of Homestead, was an adjuster at Progressive from 2019 to 2022. She’s now appointed with Integon National Insurance, part of National General Insurance, through 2024, according to the Florida Department of Financial Services’ online adjuster search tool.
The department said Friday that Progressive notified the department’s Division of Investigative and Forensic Services last November that Pasley had allegedly issued fraudulent payments to herself on personal injury protection auto claims. She resigned after the allegations came to light.
An investigation “revealed that Pasley hijacked up to 11 active claims without the knowledge of the insured,” DFS said in a news release. “She added false information to the claims regarding bodily injury, deductibles, and wage loss payments, before diverting the claim funds on the 11 claims to her personal bank accounts.”
Pasley held multiple bank accounts and deposited the ill-gotten gains through smartphone apps and through direct deposit, the department explained. She used her insider knowledge of the process to her advantage, before she resigned from Progressive in October, the state agency said.
Pasley was booked into jail in Miami, but was out of the facility by Friday morning, the inmate center indicated. She could not immediately be reached for comment Friday.
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Kin, Slide Say They’ve Completed Reinsurance Programs Ahead of June 1 Renewal
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Two Florida-focused property insurers have announced they have completed their reinsurance programs, just days ahead of what some had warned would be a painful June 1 renewal deadline.
Kin Insurance Inc., a tech and data-heavy, direct-to-consumer insurer with offices in Chicago, and Slide, a Tampa-based homeowners insurer and insurtech company, said they had secured adequate reinsurance from multiple reinsurers before hurricane season begins next month.
Kin, which counts pro golfer Rory McIlroy among its investors, said in a news release that it had obtained a “remarkable” $860 million in reinsurance coverage for natural catastrophes, “protecting against a one-in-200-year first-event loss.”
Conlin
The company utilized traditional reinsurance and catastrophe bonds for its program. “Completing this reinsurance program is a significant achievement, considering the challenging market conditions faced by primary insurers,” the company noted.
“The continued strong support from capital market investors and reinsurance partners validates our proactive, technology-driven approach to support policyholders, prevent losses, and better handle claims,” said Angel Conlin, chief insurance officer at Kin.
The completion comes two months after Kin announced it had raised $109 million in Series D capital investments. The move also comes 10 months after Kin Interinsurance Network submitted use-and-file rate increases of of 61.5% for HO-3; 84.3% for DP-3; and 103.2% for condominium policies. Conlin said at a March rate hearing that the large numbers reflect soaring reinsurance prices, competitors’ recent rates, Kin’s surplus levels and a need to keep the company on a sound financial footing. Kin’s HO-3 rate increase affected some 27,150 homeowners, raising their annual premiums an average of $1,395, the filing shows.
Slide Insurance, helmed by former Heritage Insurance CEO Bruce Lucas, said its completed tower exceeds regulatory and rating agency requirements and protects the company to the 185-year return period, reduces retention to $5 million, and includes all perils coverage and multi-year and third event protection.
“We are tremendously happy to have placed an oversubscribed reinsurance program, especially during a difficult market cycle,” Lucas said in a statement.
Slide had more exposure to cover this year, after it was allowed in January to take on more than 90,000 policies from now-insolvent United Property & Casualty Insurance Co., along with $272 million in premium.
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Additional pressure in worker shortages is coming from other white-collar industries, which find they are all competing for the same workers when it comes to people with advanced technological skills. (Photo: 1st Footage/AdobeStock)
Insurers attempting to hold the line on premium increases are staring down a number of industry trends conspiring to undermine that resolve, according to a number of industry execs.
Supply chain woes, worker shortages, already high premiums for electric vehicles and a growing incidence of unsafe driving are all exerting pressure on the industry to raise premiums.
Observes Nathan Houdek, insurance commissioner, Wisconsin Office of the Commissioner of Insurance: “Insurance reflects the underlying cost of covered service… So supply chain issues can impact rates across multiple lines of business as insurers adjust their rates to correlate to the risk of loss…If an automobile repair shop is having to wait longer for a part and that results in a person having to use a rental car for more days, then those delays can have a cost impact.”
Here is an up-close look at the trends pressuring premiums:
Supply chain woes linger
While the nightly death tolls on the TV news chronicling the pandemic have gratefully faded into the past, the supply chain slowdown triggered by the coronavirus still looms large.
Insurance industry execs say car repair shops are still having major problems securing replacement parts for vehicles — months after the apparent victory over COVID. Even when auto repairers can snare the parts, they often find those parts are significantly more expensive.
Observes Chance McElhaney, communications director, Iowa Insurance Division, “We’ve received some complaints from consumers voicing concerns about their auto repair claims taking longer to complete than appropriate…Our investigations have confirmed in these situations, supply chain issues have been responsible for the auto parts not being available.”
Adds Troy Downing, state auditor, Montana commissioner of securities and insurance, “In many cases, repairs are not starting for up to three-to-four months due to supply chain issues.”
Christopher Bernish, VP, head of operations and IT, protective asset protection, agrees. “We have certainly seen repair timelines impacted.”
Meanwhile, auto repair shops — like virtually all industries — are finding it tough to find enough workers to fill jobs, which is adding to repair delays. The repairs miasma is further compounded by the fact that there are fewer new cars on the market; yet another symptom of the global supply chain slowdown.
That leaves more consumers hanging onto their older cars longer, putting even more pressure on repair shops to scramble for parts when they show up for a makeover.
Equally worrisome: Longer waits for repairs are also forcing consumers to drive replacement rental cars longer than usual. That particular challenge has created a separate headache for insurers, who must choose between footing the bill for more days on rental cars than normally anticipated or leaving customers in the lurch without a rental car — and perhaps alienating them for life.
Katha Treanor, communications manager, Virginia State Corporation Commission, says many insurers in her state are picking up the costs for additional days on rental cars.
“We have noted insurers are paying for additional rental days — especially on third-party liability claims,” she says.
However, Jeff Rude, insurance commissioner, Western Zone Wyoming Insurance Department, says in his state, consumers are not as lucky. He shares that consumers are the ones stuck with the bill when the official rental car cost reimbursement agreement in their insurance policy hits the limit.
Yet another challenge: The increased costs for car parts, car repairs and replacement rental cars are also driving up the overall cost of salvaging a car after a major accident. The result is more cars suffering major damage are simply being written off by insurers as a total loss in light of those inflated charges — often to the consternation of consumers.
Worker shortages add to industry woes
Meanwhile, insurers have found that the worker shortage plaguing so many industries has shown up in their sector.
Observes Mike Causey, commissioner of insurance, North Carolina Department of Insurance: “Many insurance companies have done away with their adjusters and are depending on outside adjusters.”
The dearth of workers was triggered in part by the ‘great resignation’ of workers, which is being experienced across virtually all industries. In addition, a significant percentage of older workers looking at future unknown risks associated with the coronavirus are simply checking out early from work life rather than risk their health in uncertain times.
Additional pressure in worker shortages is coming from other white-collar industries, which find they are all competing for the same workers when it comes to people with advanced technological skills.
Observes Wisconsin’s Houdek, “In the financial services space, (insurers) face aggressive competition to recruit and retain qualified and talented staff…As the use of technology has increased, insurers are also competing with the tech sector to find experienced developers, computer scientists and experts in AI.”
The upshot these stressors are exerting on the day-to-day operations of insurers: Fewer workers on hand means it sometimes takes longer than usual to process claims.
Additionally, the exodus of older workers is leaving some insurers with an experience and perspective gap. In some cases, there are fewer ‘old hands’ on board at some insurers to help guide new recruits through tricky or unusual claims.
Montana’s Downing adds, “There has been a shift in the experience and knowledge levels of adjusters due to skilled claims professionals retiring or leaving the workforce.”
Janet Ruiz, CPCU, AIM, director, strategic communications, Insurance Information Institute, believes that despite challenges, the industry has been able to respond to the worker shortage with a combination of technology and aggressive hiring.
“Insurers have increased their use of technology to streamline the claims process,” and help lighten staffer workload, Ruiz says. “Insurtech continues to provide cutting-edge solutions to the claims process and improved customer experience throughout.”
Despite competition from other white-collar industries, insurers have found ways to bring more tech-savvy workers on board, according to Ruiz.
Those workers have broader skills and education and are “able to integrate the use of digital platforms, artificial intelligence, workflow process, project management, etc. into the insurance claims process,” Ruiz says.
Wyoming’s Rude is another big believer in using technology to solve the worker shortage problem. Specific tech moves Rude believes hold the most promise for the industry are wider adoption of apps that monitor driving behavior, increased use of drones that assess damage and overall increased use of software in underwriting.
Electric vehicles: More environmentally friendly, but at a cost
Meanwhile, insurers are also finding that electric vehicles are putting upward pressure on premiums, given that as a vehicle genre, EVs are much more costly to insure and repair than their traditional counterparts.
For example, EVs tend to throw nearly twice as many fault codes as gas-guzzlers due to their heavier reliance on their electrical system and related components.
Since systems in an EV are much more tightly interdependent than in traditional vehicles, an EV experiencing a collision may often have more systems simultaneously impacted by that accident than a traditional car.
Case in point: Many EV owners in Florida saw some especially heavy losses after hurricanes there during the 2022 season wreaked havoc on their vehicles’ electrical systems.
Observes Montana’s Downing: “CSI’s Insurance Consumer Services division reports that hourly body shop rates are approximately 50% higher for electric cars due to the manufacturer’s required standards and access to certified technicians. When it comes to electronics in general as it relates to even traditional vehicles, additional wiring is added to the body of the vehicle — for example under the carpets, in doors, etc., as vehicles become ‘smarter’…When these vehicles experience significant water damage, they are also often totaled due to the risk of fire associated with wiring.”
III’s Ruiz believes EV manufacturers need to take the lead in bringing down the relatively high costs of repair for their vehicles.
North Carolina’s Causey has a different perspective: “My opinion is the local, state and national leaders need to move away from forcing electric vehicles on the public. If people want to buy electric vehicles that should be their choice. We could become an energy-independent nation if they would dig for more oil…The cost for an electric bus is three or four times that of a regular vehicle because of the high cost of batteries. I favor gas-powered vehicles over electric vehicles. We simply don’t have the infrastructure to support electric vehicles at the time.”
Drivers not as careful
As if these uncontrollable market forces are not enough for insurers to deal with in their drive to keep down premiums, another new pressure point — an increasing number of drivers who are simply not as careful as they used to be — could be easily solved if some people were simply more responsible.
Spikes in unsafe driving are up across-the-board, according to North Carolina’s Causey.
Drivers are speeding more than has been typical in recent years and they’re driving under the influence more, despite decades of campaigns by groups like Mothers Against Drunk Driving.
Even worse, more drivers are getting on the road without wearing seatbelts and are also driving in greater numbers while distracted — with smartphones and texting as the primary culprits.
Joe Dysart (joe@breakingnewsintech.com) is an internet speaker and business consultant based in Manhattan.
Please call Lee from USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer.
With the June 1 reinsurance renewals a week away, the outlook for Florida-based property insurers may not be quite as dire as many had predicted earlier this year, at least according to a top official with one of the world’s largest reinsurance brokers.
“So far, what we’re seeing is a much more orderly renewal process than what we saw in 2022,” Rhandahl Fuller, managing director and Florida practice lead for Guy Carpenter & Co. He spoke this week at an online Florida market briefing hosted by the AM Best financial rating firm.
While some in the industry have warned that reinsurance renewal costs could rise another 40% next month, along with tightened availability, Fuller suggested the feeling now is more of “cautious optimism.”
“We saw a bit more overall appetite as some of the reinsurers that had stepped back last year either reentered or they increased their participations this year,” he said.
And one big reason for the measured sanguinity is that recent Florida legislative reforms, which have limited assignments of benefits and one-way attorney fees, already appear to be having an impact on many carriers’ long-suffering bottom lines.
Claims litigation and defense containment costs in Florida rose steadily from 2014 to 2018, dipped a bit in 2019, then rose again, explained Chris Draghi, AM Best’s associate director, who has studied the Florida market. Since 2013, defense costs have increased more than six-fold and since 2018, Florida insurers have spent $2.6 billion in that category for homeowners, allied lines and fire insurance claims, what Draghi called “a material amount.”
Looked at another way, the direct defense and cost-containment expenses for Florida carriers were about 8% of direct premiums earned in 2022, compared to 2% for most other states. The next-closest state was Louisiana, with about a 4% cost number.
But since late 2022, those defense costs have started to drop in the Sunshine State, after May and December legislative changes, the AM Best-compiled data show.
“We really started to see the impact pretty quickly,” Fuller said. “We’re already starting to see companies observing pretty significant decreases in reported claims and frequency of AOB, and frequency of litigation. So a lot of that stuff is kind of happening behind the scenes and not all of it’s going to be reflected in operating results right away.”
Combined ratio for Florida carriers, excluding major national companies and Citizens Property Insurance Corp., also has dropped since 2020, after rising steadily for six years, Draghi pointed out. In 2014, those carriers enjoyed a luxurious combined ratio in the high 70s. But by 2020, that had almost doubled before sliding back slightly. For many insurers, though, the bellwether measure of profit is still well above 100, he noted.
Direct-loss ratios also are improving, Fuller said. For the first quarter of this year, the Florida domestic industry saw the ratio drop 5 points from the same time in 2022. The average ratio is now 15 points lower than the five-year average for Q1 – “pretty meaningful movement there,” Fuller said.
“We saw that more than 75% of the companies were reporting improvements year-on-year on that direct-loss ratio,” he noted. “So that’s really, really encouraging.”
But the Florida market is not out of the woods yet, Fuller and Draghi said. Capital contributions since 2018 for those Florida carriers, excluding Citizens and major nationals, have increased significantly, totaling $1.8 billion. But in that time, surplus amounts have risen just $158 million, or about 7.6%, Draghi’s data show.
“So what this indicates is that there has been a substantial amount of capital that has been flowed into these primary insurance carriers that is almost needed in order to keep them afloat,” he said. “And you have to wonder how long that can continue, if there’s any concerns in that kind of dynamic.”
Top photo: AM Best’s Jeff Mango, left, and Guy Carpenter’s Randy Fuller, in the webinar.
Please call Lee from USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer.
A granular look at the most expensive hurricane in Florida’s history, written by respected catastrophe-modeling firm Karen Clark & Co., highlights building practices that had a major impact on the scale of insured losses:
Contrary to what may seem like common sense, low-sloped and flat roofs fared much worse than more steeply pitched roofs. With low roofs, the air pressure above decreases compared to the pressure below, creating suction that ripped a number of roofs completely off of buildings when Hurricane Ian hit southwest Florida in September 2022, the report found.
But even flat and low roofs that were made of metal, reinforced concrete or built-up wood-deck systems sustained less damage than other types of roofs. “These built-up roof systems perform better because the multiple layers add redundancy,” KCC’s engineers and data analysts found.
Exterior insulation finishing systems, a popular siding material for commercial buildings and multifamily residential structures, proved to be especially vulnerable even in lower-than-peak winds during Ian. The sheets of insulation boards are lightweight and can detach easily. “Wind can exploit small cracks and cause significant siding damage, which can then lead to extensive interior damage due to water infiltration,” the report said.
Soffits on site-built homes also were damaged in and around the hard-hit Fort Myers area, but the damage is usually visible only from below and not from aerial surveys. Soffit damage can happen when high winds pull the fascia board off the edge of the roofline and exposes the soffit, the underside of the eaves or roof overhang. And soffits on corners of homes are especially vulnerable to wind that’s directed upward by exterior walls. “Soffit damage can necessitate complete replacement of a building’s siding because wind-driven rain gets under the siding and into the walls. Rainwater can also be driven over the exterior wall into wall breaches and attic spaces. Water infiltration can then lead to significant interior damage, increasing the ultimate loss,” the report noted.
Garage doors were a common failure point in the areas that saw only Category 3 winds during the storm. The winds can cause the doors to bulge and buckle, increasing wind pressure on the overall structure of the property and raising the chance that the roof and walls will fail.
Karen Clark, whose engineers and scientists surveyed Ian damage shortly after the storm, then again in March, found that newer homes and buildings survived Ian in much better shape than older structures. Other studies have said that’s due to newer building codes and construction techniques. Older, low-rise structures, especially those made of wood frame or masonry, suffered severe damage, while concrete and steel buildings saw less of an impact from wind and water.
Many older homes that were elevated were not elevated enough to overcome Ian’s storm surge, which reached 12 feet at Fort Myers Beach. About 20% of the buildings on that beach were total losses and the majority of those were not elevated. Those structures that sustained severe damage or total losses saw the failure of foundation connections or the failure of the foundations themselves, the report found.
KCC photo showing how flat roofs at multifamily complexes were lost in the storm.
“Anchor bolts create a much stronger connection than clips or nails because anchor bolts are often cast in place and connect to a concrete surface, which creates a higher load capacity,” the analysts noted. The report included many photographs of damage, including one home that had shifted completely off its foundation, while others were wiped away altogether by the surge.
“Because coastal areas experience a combination of the highest wind speeds and storm surge inundation, it can be challenging to separate the cause of loss, but assigning the damage to the correct sub-peril is necessary to assess the insured loss,” KCC wrote. “Wind-related damage typically initiates at the roof and progresses downward, while coastal flood damage initiates at the ground and progresses to other parts of the building.”
Overall, Hurricane Ian, with winds as high as 160 miles per hour as it made landfall, caused more than $100 billion in economic damage. One number in the report shows just how destructive Ian was in Florida: Total privately insured losses from all 2022 storm events in the U.S. are expected to be about $64 billion. Almost $63 billion of that was from Ian, and most of that was in Florida. The Florida loss estimate assumes a large number of litigated claims, typical for recent storms in Florida’s litigious atmosphere, before some of the 2022 and 2023 legislative litigation reforms were enacted.
Forecasts on the impact of future hurricane seasons do not look rosier. A hurricane needs three main ingredients to rapidly intensify, as Ian did twice as it churned across the Caribbean and the Gulf of Mexico: low vertical wind shear; high ocean heat content, and high sea surface temperatures.
Climate change is driving an increase in surface temperatures and rapid intensification of storms is likely to become even more frequent, the report predicted.
U.S. meteorologists last week reported that the weather phenomenon known as “El Nino” will likely form off the west coast of South America. Historically, El Nino patterns have been linked to a lower-than-average number of hurricanes in the Atlantic basin. The U.S. National Oceanic and Atmospheric Administration will post its outlook for the 2023 Atlantic hurricane season on Thursday, May 25. Researchers at two universities have predicted six to eight hurricanes for the season, which begins June 1. That’s slightly fewer than what last year saw.
But as Karen Clark and other reports have noted, it takes just one rapidly-intensifying storm to produce record losses.
The firm was founded in 1987 by Karen Clark and Vivek Basrur, producing one of the country’s first catastrophe modeling companies, the firm has said. Clark was awarded the Nobel Prize in 2007 for her contributions to work of the Intergovernmental Panel on Climate Change. The full report on the 2022 Atlantic hurricane season can be found here.
Rabb is Southeast Editor for Insurance Journal. He is a long-time newspaper man in the Deep South; also covered workers’ comp insurance issues for a trade publication for a few years.
Please call Lee from USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer.
Just as the plaintiffs’ law firm of Morgan & Morgan warned, the number of Florida lawsuits filed across the state has shattered previous records, topping 280,122 in April, the Florida Bar reported.
That’s more than double the previous record set in May 2021 and is largely due to anticipation of the Legislature’s passage of a far-reaching tort reform bill that Gov. Ron DeSantis signed into law March 24, the Bar noted.
As it became clear that House Bill 837 was about to pass in March, limiting one-way attorney fees and multipliers in almost all insurance and injury litigation, and slashing damages if the plaintiff is found to be 50% at fault, Morgan & Morgan and other claimants’ firms told insurance defense attorneys that they were getting ready to file tens of thousands of lawsuits in the days before the law took effect upon the governor’s signature.
The firms were not exaggerating. And insurers and county clerks of court are now dealing with the impact.
“Our primary concern is having adequate resources to process the high volume of cases and appropriately serve all parties and the judiciary,” Martin County Clerk of Courts Carolyn Timman told the Bar.
Sarasota County Clerk Karen Rushing said the flood of new cases began around March 17, Rushing told the Bar’s news site.
The total number of documents in the case filings was almost 3.6 million in March, a third more than the previous month. About 44% of the new cases were filed in Miami-Dade County and in Hillsborough County, home to Tampa.
Some clerks have said they already are facing budget shortfalls, spiraling costs and understaffed offices – even before the tort wave hit, the Bar noted.
The Florida Department of Financial Services, which must be included on notices of intent to litigate against insurers, also reported a spike in planned litigation. The agency in March recorded 8,637 notices of intent to initiate litigation, up from 7,634 in February. That’s double the number of notices filed in March 2022, the DFS web page shows.
John Morgan (AP)
In previous eras, many of the insurance claims behind the lawsuits would have been dropped or settled without litigation, Florida Justice Association Secretary Todd Michaels told the Tallahassee Democrat news site. But with the law taking effect immediately in late March, firms felt compelled to file the suits to avoid the law’s fee limitations and protect their clients, Michaels said.
“At this moment we are doing what all lawyers should be doing – protecting the interests of our clients,” John Morgan, head of the Orlando-based plaintiffs firm, said in a statement in March.
The tort-reform law clamped the attorney fee and other restrictions on suits filed after March 24. It does not apply retroactively in most cases, although some insurer lawyers have indicated they may challenge that in some circumstances.
The Home Insurance Guru 