Gaetz Wants Hearings Into Heritage Property Insurance Deal

Florida Senate President Don Gaetz is calling for a special session to look into why the state run Citizens Property Insurance decided to hand over policies to Heritage Property Insurance. Heritage has nearly no track record to take the biggest risk property insurance policies. Heritage has been in existence less than a year. $110,000 to Scott's re-election campaign and now stands to make $52 million from the policies it claimed from Citizens.

Statement from Gaetz.

“The Florida Senate believes the facts and circumstances surrounding the Heritage transaction need thorough investigation so the people of Florida are assured that it and transactions like it are in the best interest of Floridians,” Gaetz, R-Niceville, said in a statement. “As such, as soon as Committee meetings begin this fall, the Senate Banking and Insurance Committee will conduct hearings to investigate and propose ]solutions to the concerns raised by this transaction and any others that might result from Citizens’ attempts to reduce its liabilities.”

Unsurprisingly, Gov. Rick Scott could not give a straight answer on whether or not he supported the Heritage deal. I noted before straight talk is not Scott's forte.

Reporter: A couple weeks ago, Citizens did a $52 million deal with a nine-month-old insurance company. We know how you feel about Citizens but you haven’t really said specifically how you feel about this unique and new type of deal. Do you support that type of economic activity at Citizens, are you against that specific deal?

Scott: First off, I want to try to do anything I can to try to reduce taxes in our state. As you know, my first year in office we reduced property taxes by over $200 million, so I think that’s a real positive. What Citizens is doing is, Citizens needs to make sure they downsize. They should be the insurance company of last resort. I’ll do anything I can to make sure they keep doing that. As you know I (appoint) two of eight board members and I don’t appoint the chairman. I want them to make sure they constantly look at how do we get them out of the business of being the insurance company of first resort. I want them to be the insurance company of last resort. That’s what they’re set up to do and that’s what they need to do.

Reporter: But, specifically. A couple weeks ago you went line-by-line and looked at budget issues and vetoed things were $100,000. This is a $52 million deal, and you’re the CEO of the state. Should you not look at this deal, specifically, and say, ‘I’m for this deal,’ or ‘I’m against this deal,’ or ‘I have issues with this deal,’ as others have?

Scott: Citizens has a board. I appoint two board members. I don’t appoint the chairman. My expectation is that they go through, and any program like that, they review it. And do the right thing.

The reporter made it easy for Scott by asking if Scott could state if "‘I’m for this deal,’ or ‘I’m against this deal,’ or ‘I have issues with this deal.’" This isn't rocket science. It is difficult for a man that takes pains to avoid the Florida's Sunshine Law and once gave a deposition where Scott the businessman couldn't give an answer to what a market is.

Cusack: Is Orlando a significant market for your company?

Scott (after attorney objects): I'm not sure what a 'market' is.

Scott is incapable of being truthful.

Rick Scott Making Government Incompetent on Purpose

I wrote about how Gov. Rick Scott signed SB 408. The bill would allow insurance rates to go up by 70 percent. Another wonder thing Scott and the Republican legislature did was to allow insurance companies to raise rates without state approval.

With a number of recent changes in state insurance laws leading to an unusually high number of filings, regulators don't have the ability to go through all the filings quickly enough. In such a circumstance, the law allows regulators to approve rate requests in certain circumstances, and follow-up with a full review later.

Contrary to what Scott wants to believe making government less efficient makes government more costly, not less. Scott campaigned on the claim that regulations were killing job creation. When pressed on what regulations were killing jobs Scott could not give an answer. Scott did manage to freeze food stamps with his anti-regulation frenzy. The result was a lawsuit that the Governor lost.

The rate hikes do not protect consumers. It does provide a financial windfall for insurance companies. Like eliminating early voting hours; Republicans make government incompetent to further crony capitalism.

The order drew criticism from Sean Shaw, a former Florida insurance consumer advocate who now works with a Tampa law firm that handles policyholder claims. He criticized the "use and file" that over the years has gained support in the Republican-led Legislature.

"It's a dangerous day in Florida when the Office of Insurance Regulation turns into the office of blind trust because they lack the resources to independently verify form filings from insurance companies," Shaw said in a statement.

Scott and the Republicans in the legislature want to keep the campaign donations from insurance companies coming in.

Here Come the Property Insurance Hikes

Gov. Rick Scott said these word when he signed SB 408.

“A healthy, stable and competitive private insurance market is critical to the success of Florida, given the hazards we face. I commend the Florida Legislature, especially Sen. Richter and Rep. Wood, for bringing this important legislation forward.”

The question is how stable is Florida's economy going to be after insurance companies raise property insurance by 70 percent?

More than half a million Florida homeowners could see their home insurance rates rise in the coming year following a wave of rate-increase requests from insurers.

In little more than a month's time, more than a dozen insurers have asked state regulators to approve new rates that will force some customers to pay 70 percent more to insure their homes.

And despite five years with no hurricanes, more increases are expected, affecting not only coastal communities, but also homeowners in inland areas such as Orlando.

To be fair: the these possible property insurance increases are not related to Scott signing SB 408. There will be rate increases in the upcoming months that will be because of SB 408.

How does Scott expect to bring businesses to a state where people cannot afford a home?

How will Scott draw enough tax revenue to fund Florida if homeowners are fleeing the state?

How does Scott plan to improve housing sales when people can't afford the property taxes? Okaloosa County has been decimated by foreclosures. All State has requested a 75 percent rate increase for Okaloosa. Do not kid yourself into thinking that property insurance rates aren't part of the reason for foreclosures.

Rick Scott Signs SB 408

Gov. Rick Scott's office has been flooded with emails and phone calls urging him to not sign SB 408. Florida Sen. Mike Fasano said homeowners would see their insurance increase if Scott signed the legislation.

“On behalf of the constituents I represent, and all homeowners in Florida, I am disappointed that this bad piece of legislation has been signed into law,” Senator Fasano states. “For an administration which vowed not to support new taxes or fees, this bill virtually guarantees a 15% premium “reinsurance” increase for Florida policy holders. This is a backdoor tax and fee increase that will hurt most homeowners with a mortgage, consumers and small business owners at a time with very high foreclosure and unemployment rates, all during a fragile economic recovery.”

Of course, Scott signed SB 408.

When Florida Gov. Rick Scott signed SB 408 today, he said, “A healthy, stable and competitive private insurance market is critical to the success of Florida, given the hazards we face. I commend the Florida Legislature, especially Sen. Richter and Rep. Wood, for bringing this important legislation forward.”

The new law allows insurers to raise rate without the approval of the Florida legislature. Homeowners will have to pay for their own repairs before insurance companies will offer reimbursements. If you can't pay for your own repairs then insurance companies won't reimbursement. Homeowners previously were allowed five years to file a claim. The new law shortens the time to three years.

The man who pushed for this legislation is Mark Wilson, president of the Florida Chamber of Commerce.

“Despite what the critics say, signing this bill into law is the first step toward stabilizing Florida’s property insurance market. It will increase competition by attracting insurance companies that currently do not write property insurance policies in Florida,” said Mark Wilson, president Florida Chamber of Commerce.

Wilson fails to mention the 15 percent cost increase homeowners will likely face yearly. Insurance companies claim that they are losing money. Fact: State farm made $2.6 billion profit during the past decade. State Farm is involved with the offshore company DaVinci Reinsurance Ltd. Since DaVinci is not based in the Florida it can charged the highest rates. State Farm claims not to own DaVinci. Yet DaVinci has picked up its clients from State Farm and refuses to disclose who is on its board. A Google Map search of DaVinci's Burmurda address reveals it to be located at a yacht club.

The insurance industry isn't hurting in Florida. They are rigging the system to its advantage.

Rick Scott Too Radical For Lobbyists

It says a lot when Gov. Rick Scott is to the right of the insurance industry? Insurance industry lobbyists spoke to the Gainesville Sun about Scott wanting to kill Citizens Property Insurance.

The industry lobbyists protested that Florida carriers could not absorb all of Citizens' business, records show. The gap would force many Florida property owners to turn to the unregulated surplus lines market, where rates are unchecked and policies are not backed by a state guarantee fund.

A lobbyist who attended the meeting advised others by email that Gov. Scott knew about the gap, but was not bothered.

"He doesn't seem to care whether they are insured in the voluntary market or surplus lines," the lobbyist wrote.

The concept of shutting down Florida's largest and, at the moment, best-capitalized insurance company outraged lawmakers whose constituents rely on the public company.

Emphasis on Scott doesn't care.

I have been critical of Citizens in the past. Unfortunately, it is needed because insurance companies won't provide property insurance to homes in high risk hurricane areas. Citizen has had financial problems in the past. Currently it is running in the black. Scott wants to kill a financially solvent government program and the insurance industry isn't sure why? This will open the floodgates for fly-by-night unregulated insurance scammers to take advantage of homeowners. Scott want propose new regulations because he has made it clear he is against regulations.

Documents show Scott brought insurance in the insurance industry to write legislation. (Remember, this is the Governor that campaigned against special interests.) The insurance industry did not want to have to compete with Citizens. The very reason Citizens was created is because insurance companies were denying property, sinkhole and flood coverage. Now insurers wanted to peel some of those customers back from Citizens. Scott went a step further by planning to eliminate Citizens.

Insurers knew that homeowners would demand coverage from these companies. Sentiment would eventually grow so that the Florida legislature would either have to restart Citizens or create regulations forcing insurance companies to provide coverage to high risk homes. This is what happens when lobbyists do business with a radical maniac.

Who Is Peter Corrigan?

Peter Corrigan has been named to Rick Scott's economic transition team. Corrigan is the president of Florida Family Insurance Company. Attorney Mark Nation blogged about suing and beating Florida Family Insurance Company in court. FFIC refused to pay a sewage claim to Nation's client. FFIC claimed the language of the insurance policy made and "unambiguous exclusion for sewage backups." Nation found that the FFIC made the policy's language ambiguous.

However, based on the language of the policy, I believed that the policy could be read to only exclude sewage backups which originate from a sump. As this was a gravity fed line, there was no sump involved. The court agreed, leaving one very happy condo owner.

Interestingly, upon reviewing the information which Florida Family had previously filed with the Department of Financial Services, Bureau of Rates and Forms, I found that the insurer's policy was a standard ISO policy; however, the insurer had modified this particular part of the policy. By modifying the standard policy, the insurer actually created the ambiguity which led to the confusion. Had the insurance company not modified the standard ISO form, then this loss would have been excluded.

Here is a 2006 video of Corrigan making a request to the Florida government to raise property insurance prices. Corrigan's rate increase request was for 14.1 percent. Representatives from the Office of Insurance Regulation had problems with FFIC not having reinsurance cost numbers to justify the rate increases. FFIC had discrepancies in their numbers.

Fun fact: FFIC was asked the cost discrepancy between the managing general agent compeensation at 18 percent. However, commissions are 19.9 percent. Corrigan did not have an answer for the difference. Go to 32:16 of the video and see for yourself.

Related: Who Is Timothy Kuebler?

Alex Sink Cat Fund Plan

Florida House Speaker Marco Rubio (R) and CFO Alex Sink (D) are behind a plan to require homeowners to install hurricane-proof windows and strengthen roofs.

“Basically if people can afford to, you make them do it,” Rubio said in a recent interview. “If they can’t afford it, you give them a low-interest or a no-interest loan. And if they can’t pay back the loan because they’re so poor, then in some cases we’re better off paying for this mitigation than funding or subsidizing Citizens in the long run.”

Charlie Crist believed in trickle down economics. If Florida increased the catastrophe fund to $28 billion than insurance companies would magically lower rates. I was shocked to find an old post, that I was warm towards Crist's proposal. There are several things wrong with Crist's plan. The state doesn't have the money for the CAT fund. Crist does not have the leverage to make insurance companies lower rates. They would rather not sell policies in Florida than insure high-risk homes.

Sink backed the House on the CAT fund since Jan. 2007. There is nothing shocking about Rubio and Sink being on the same side on the CAT fund.

Here is where Sink's plan is going to hit a snag. She wants insurance companies to increase by 30 percent what they must after a disaster. They companies will balk. Sink's proposal would save taxpayers $3 billion on the CAT fund. Florida would still be on the hook for a $25 billion CAT fund. That money does not exist. The state will be asking for a federal bailout if a major hurricane hits.

Rubio and Sink are aware that the CAT fund was a bad idea. Bill Posey is going to sponsor Posey's plan in the Florida Senate. How long until members of the state legislature attempt to end the CAT fund? Insurance companies don't want greater risks and the economy isn't going to magically get the state out of a fiscal deficit.

Allstate vs the State of Florida

This is a fascinating exchange between Deputy Insurance Commissioner Belinda Miller and Allstate Floridian Vice-President Bonnie Gill. The dialogue is about how ALLstate sets it's rates.

Miller: "You have to insure to two Hurricane Andrews in one year? Why to that level?"

Gill: "We have a very fragile surplus position."

Miller: "Was your decision driven by rating agency A.M. Best?"

Gill: "We are protecting our surplus."

Miller: "Was that decision driven by A.M. Best?"

"Gill: "In part, yes."

Gill can actually say "very fragile surplus" with a straight face. Well done!

A.M. Best rates Allstate's financial books for stockholders. Allstate used a A.M. Best's hurricane catastrophe model without the state of Florida's approval.

This is getting interesting. I hope Charlie Crist keeps digging into the working of the insurance agency.

State Farm to Drop 50,000 Homeowner Policies

I'm disappointed, but not surprised that State Farm is going to drop 50,000 homeowners policies. Governor Charlie Crist temporarily freezed property insurance. The industry responded by suing the state. Homeowner insurance companies view Florida as a financial loser. State Farm will drop the policies starting Jan. 1, 2008. Many coastal homeowners will have to search for new insurance. Other inland homeowners are also affected.

Florida government appears to be playing tough with State Farm.

"If State Farm reduces exposure in Florida through the non-renewal of property insurance policies, the Office of Insurance Regulation will revisit State Farm's rates to ensure they are not excessive," Florida Insurance Commissioner Kevin McCarty said.

Short answer: if State Farm doesn't want state government looking into their rates then they better increase homeowner coverage. McCarty is not finished with State Farm.

"These actions are inconsistent with State Farm's previous statements outlining their underwriting intentions," McCarty said in a statement released by his office. "The office is in the process of reviewing these filings to ensure they are consistent with Florida law."

The South Florida Business Journal reports that McCarthy's comment might mean that he will not allow any of the policies to be cancelled.

CFO Alex Sink described State Farm as having "disregard for long-standing customer relationships."