Insurance Models have higher Strike possibilities

[Aquawind]

This years model tweak will be costing Floridians alot more money for insurance in the future and with all of the inadequate insurance out there we get higher rates.. They want their money upfront either way..

Paradise away from the beach..lol


Paul

http://www.news-press.com/apps/pbcs.dll ... 30518/1075

Storm models may boost premiums

Insurance companies factoring risk of hurricane strikes

By PAIGE ST. JOHN
GANNETT NEWS SERVICE
Published by news-press.com on March 13, 2005

TALLAHASSEE — The 2004 hurricanes have begun to affect future insurance rates.

New computer models that insurance companies use to justify their premiums show higher chances of strikes to Florida, and a 3.9 percent increase in predicted losses.

In one of the most widely used models, the probability of a Category 4 storm hitting the Panhandle doubles. For Southwest Florida it triples. In parts of the state, particularly Escambia County, the program boosts predicted losses as much as 25 percent.

If approved by the regulatory commission that reviews the models at its next meeting in June, those models will be the engines that generate higher insurance premiums in the next billing cycle.

"That has more impact than anything we do," said Rep. Dennis Ross, chairman of the House insurance committee that this week rolled out the first big package of hurricane insurance legislation.

The post-2004 climb in hurricane losses contradicts statisticians, who say the state's four-storm year should not change the risk insurers see in Florida.

Multiple strikes have always been part of the equation.

On average, Florida experiences 1.7 hurricanes a year. Four "was unusual but not unpredicted," said Sneh Gulati, a statistics expert from Florida International University.

Although the "black box" models are submitted for approval to a state commission on which Gulati is a member, its members can't see the assumptions and formulas used. The commission must hire private reviewers who sign confidentiality pledges. They decide if the models meet 35 state standards but cannot disclose much else.

Actuaries and statisticians on the commission are comfortable with the process.

The public often is not. "That right there tells you, it's smoke and mirrors," said Jim Bledsoe, a Pensacola businessman whose 32534 zip code, according to the computers, now has a 22 percent increase in future hurricane losses.

Across the street, predicted losses for zip code 32514 rise by 19 percent.

Those numbers and the complicated formulae used to derive them don't convince Bledsoe that insurance rate hikes are justified.

"The bottom line is, did you make money? Yes? How much?" he said. "How much more money do you want to make?"

Florida insurance regulators look critically at hurricane loss projection models used to justify rates. Insurance Commissioner Kevin McCarty has led a national push to crack open the so-called "black box" models, as well as effort at home to build a public version.

But, said OIR actuary Howard Eaglefeld, there is much regulators still don't know about how insurers use the secret models. For instance, insurers need not disclose if they have run several models and are using the version that produces the greatest losses in order to justify the highest possible rates.

That is an issue because hurricane loss projection models disagree greatly.

The 2005 versions given to the commission this month predict Florida's average storm losses as low as $1.8 billion and as high as $3.6 billion.

Likewise, when state-run Citizens Property Insurance ran several models to estimate damage from last year's actual storms, the amounts were off by millions of dollars.

One model predicted Hurricane Charley losses in Lee County for Citizens of $799 million.

Six months later, the company had paid out only $154 million in claims.

The models are best at predicting long-run losses, across large geographic areas.

"You can't look at a single storm and say, 'Here's what the answer is,' " said Marty Simons, former chief actuary for South Carolina and one of the professionals hired by the commission to review models.

AIR Worldwide Corp., whose model is used by half the residential property insurance market in Florida and 85 percent of the companies that underwrite insurers, calculates projections over storms across a 50,000-year span.

The models contain so many variables, it takes that many "trials" to approach a predictable average. Flipping a coin, for instance, has only two variables. It takes 62,500 "trials" — coin flips — to get a result within a 2 percent margin of error.

The more variables, the more trials required to get a dependable outcome.

Competitor Applied Research Associates this year lengthened its computer modeling from 100,000 to 300,000 years to get results within an acceptable margin of error.

Conversely, they are very sensitive to changes at small geographic levels.

Miriam Perkins, a senior risk consultant for Boston-based AIR, said adding 2003 and 2004 hurricanes to the company's storm database causes some of AIR's increased hurricane probabilities in regions such as Northwest Florida.

She said strike probabilities also rise because the company has "re-sampled" the central air pressure of past storms.

There are such changes to the models every year, said Jack Nicholson, who runs the Florida Hurricane Catastrophe Fund and as well sits on the state's black box commission.

"I'm more comfortable with the models than with the science," Nicholson said.

The Cat Fund looks at all four commission-approved hurricane models when calculating the statewide hurricane loss risk.

It uses a weighted average of three of those models when deciding what rates to set.

On top of that, the Cat Fund tweaks the numbers further with "post-modeling" adjustments, such as factoring in reconstruction price surges as roofers and other contractors hike their own rates.

Ross and Sen. Rudy Garcia, his committee counterpart in the Senate, favor legislation that would make the ratemaking process more transparent and easier to understand.

Neither has put forward specific proposals.

"Why have we allowed this process to be acceptable?" Garcia asked.

[StormChasr]

Actually, a re-computation of INLAND properties will lead to the biggest increases. IN Central Florida, premiums have been low (comparatively) for non-barrier island property. Due to the extreme losses in Orlando, Oviedo, Winter Park, Deland, and all of Lake, Polk Counties, INLAND rates will be equal to beachside property. According to my insurance agent (I live beachside), my premium will go up about $50, but renewals across the bridge on the mainland will go up an average of an incredible $300-550 per policy. Amazing, issn't it, for inadequate coverage!!!!!!!!

With regard to roofing, forget about even getting a roofing job. The current wait in Daytona Areas is 6 MONTHS at a minimun, and prices for a $7000 roof start at $9000.

[Aquawind]

Well Said.. The inland areas took a massive hit from hurricanes. Other than the storm surge the damage continues well inland and thus they are making some serious adjustments. Crazy how these adjustments are already "finalized" in the models and yet their customers are still not finalized...

Paul

Hurricane victims sound off

Gallagher hears about issues in Punta Gorda

By MARY WOZNIAK
MWOZNIAK@NEWS-PRESS.COM
Published by news-press.com on March 13, 2005

http://www.news-press.com/apps/pbcs.dll ... 30499/1075

One family still is forced to use a portable toilet set up in their driveway. Some homeowners have yet to take the first step in fixing their roofs, seven months after Hurricane Charley hit.

These were some of the horror stories heard by Tom Gallagher, head of the state Department of Financial Services, at a town meeting in Punta Gorda on Saturday attended by about 500 people.

More than 100 of those people asked, pleaded and agitated for help with closing their hurricane insurance claims.

"The goal here is to get your homes fixed and get your lives back together," Gallagher told the crowd, packed into the cafeteria at Sallie Jones Elementary School in Punta Gorda. But one depends on the other, he said.

Gallagher promised to stay until every person was taken care of. He was true to his word. The 9 a.m. meeting was supposed to last for three hours. It lasted nearly twice as long.

Gallagher now has seen more than 2,000 people at three different town-hall meetings, in Pensacola, Sebastian and Punta Gorda. A meeting will be held next Saturday in Orlando and the last one in West Palm Beach in early April.

Gallagher told the crowd about the new rule he is proposing at Gov. Bush's Tuesday Cabinet meeting, calling for insurance companies to close hurricane damage claims within 30 days.

In an interview after the meeting, Gallagher said that penalties for not meeting the 30-day deadline could vary, depending on the infraction and how many people and dwellings were involved. Penalties could range from a $500 fine per incident from the Division of Consumer Services to a company's certificate to operate in Florida being taken away, he said.

Earlier fines levied against insurance companies that failed to begin the claims adjustment process by the end of November amounted to more than $1 million, Gallagher told resident Shari Wicks, in answer to her question.

The town meeting held several poignant, even tense moments.

Judith True's eyes became teary and her voice broke with emotion as she described her Punta Gorda home after seven months.

She bought 50 Rubbermaid containers to store household belongings because her home was unlivable after the hurricane, True said.

Instead, "they're used as drip buckets — for what the fourth tarp is not handling," True said. Her roof has yet to be dried in.

She has American Superior, an insurance company that went bankrupt since the hurricane.

Her family did get $3,925 in living expenses in November. "Now we're over $11,000 in living expenses in the hole," and they can no longer afford to pay their mortgage, or for the condo they must rent until their home is fixed, she said.

True went through four insurance adjusters and finally hired an independent adjuster. "Nobody will talk to us since we hired the public adjuster," she said.

Renee Smith was even more desperate. She pulled a red Radio Flyer wagon bearing a tinfoil-covered tray of baked goods and some hurricane debris up to the stage where Gallagher sat.

Smith's daughter, Isabella, 4, took the microphone.

"Will you fix my home?" the little girl asked Gallagher.

Smith presented him with home-made cinnamon rolls, then launched into an account of the damage to her 1909 home on Marion Avenue in Punta Gorda, her voice rising.

"We have a Port-O-Let in the driveway," Smith said. "Seven months of going into a Port-O-Let at night with a flashlight," she said, holding up small baggies used to hold human waste.

Smith hoisted a misshapen concrete block from the wagon over her head. "This put a hole in the ceiling above my bed," she told Gallagher. " I pay $2,300 a year (for insurance). I've never been late."

Smith said her insurance company, American Security, has offered her about $59,000, and the damage to her home is about $180,000.

Voices shouted out from three different sectors of the crowd, echoing one another.

"It's criminal."

"It's criminal."

"It's criminal."

Tension was thick for a minute. Some security folks moved in along the sidelines.

But there was no need.

"We'll take care of you," said Lisa Miller, Gallagher's chief of staff.

Smith gave her the microphone.

After residents finished talking to Gallagher, they were led away by a staff member to have the issue explored further with an insurance specialist from the state Department of Financial Services, a representative of the residents' insurance company, or both, if possible.

Others attending the meeting were given numbers that were called at intervals, so they could meet individually with insurance specialists or insurance company representatives.

Several companies were there, including Liberty American Insurance Group, Allstate, State Farm, Citizens, Vanguard, Tower and others.

The majority of the crowd appeared to be satisfied that their questions at least had been addressed, a novelty in contrast to months of leaving voice mails on company or adjuster phone lines that weren't returned or writing letters that weren't answered.

A lucky few had their claims resolved on the spot, or got promises that the check would be in the mail. These promises were met with a mixture of skepticism and hope.

True was promised that checks totaling $80,000 would be sent in the mail on Monday. "Based on the past, I'm skeptical," she said. But at least the money would at least fix her air conditioning and roof, she said. "From nothing to this is wonderful."

[flashflood]

Just got my insurance bill Friday, it went up $100, 90% of that is the Hurricane insurance part. They are now limiting the Fungi, Rot or Bacteria coverage, and want an additional $60 or $90 for increased coverage. I have not heard much about Fungi/Rot etc. after the Hurricanes, but I guess that was a big issue last year.

[StormChasr]

Fungi, especially Aspergillus Mold was extremely prevalent in Florida, particularly in homes that had either a) seepage through walls in inadequately waterproofed homes, or b) homes that lost roofs. The irony of all of this is that the 2% named storm deductable was a rouse---most companies would have written a policy with a $ 500 deductable for only about $200 more a year, but DID NOT tell residents of this fact. Of course, now they're no longer offering this choice, but prior to 2004, if one ASKED for it, they were offered that option.

The fact that it was kept a virtual secret infuriated many of the customers in Florida. Citizens (the State Insurance Pool) denied ever writing policies with only a $500 deductable, but several of my friends own that exact policy.

Since it is very hard to find any home in the Daytona area worth less than $250,000, and with a majority worth $300,000-500,000, it indicates how seriously so many people got screwed. Most folks had to eat $6000-10,000 of damage before collecting one dime (that is, if they were even able to get a settlement from their companies).