The Insurance Advocacy Forum of Florida

Rate vs Premium This is the second time we have done this topic. It is likely we will need to do this post over and over again, because even insurance professionals seem to confuse the two (we think often purposely to make their point). The Rate for a peril, is the cost per unit of exposure. In property insurance, the unit of exposure is usually $100 or $1000 of replacement cost. So a $250,000 replacement cost home has (whoops...here comes the arithmetic) 250,000/100 = 2500 total units of exposure (using $100 as the lot amount). If the?rate is $0.50 per $100 of exposure, then the cost for that peril for that policyholder is $1,250 THAT IS NOT THE?PREMIUM The premium is the sum of all of those peril costs, plus risk loads, plus reinsurance (sometimes these are combined), Profit margins, and finally distribution expenses (broker commissions etc). In Florida, we have turned the corner, where rates have been flat, and now decreasing, but premiums still seem to be going up. What's the deal? The deal is that while rates are flat or decreasing, the replacement cost of properties (exposure) is STILL INCREASING. This is more than offsetting the rate decreases. Unfortunately, some bad actors will take the sad reality of painful premium increases as an indicator of some sort of corporate greed, or regulatory capture. These people are harming the marketplace by spreading disinformation INSTEAD of clarifying the obvious... YES premiums are still increasing. It is painful, and forcing people to make tough decisions. This is a problem. A bigger problem, is the misinformation. Putting political pressure on the OIR to take action is the wrong move. ???? Nick discussed this with Tirzah Duren of American Consumer Institute (video below) - arbitrary decisions that appeal to outrage, often backfire. A great example is capping interest rates. Sound great in theory...in practice, it cuts off credit to those who likely most need it. Rates need to reflect risk and the regulators and legislators need to look at that rate, not as an enemy to be tamed, but as a price signal of economic health. https://lnkd.in/ebAE8t5f

As we have said, this was a completely manufactured story, timed right in front of the legislative session to be used as a wedge to try and roll back litigation reform. If the legislature allows a roll back, insurance capacity will leave - they will not wait for trial attorneys and public adjuster to pick them clean as they did post-Irma.

We continue to see anecdotal evidence that rates and premiums are coming down. This was forecasted based on the litigation reform and how those reforms encouraged more reinsurance capacity in, and at lower rates.

Every claims department should have audit and risk management protocols in place to avoid these scenarios.

February saw a decrease in lawsuits filed against Fortune 500 companies in Florida. Wondering if they consider 6,000 good?

How coincidental that the Affiliate "scandal" report was release A WEEK PRIOR to the legislative session. It was almost as if it was a coordinated timing. Ironic that there are bills to unwind the litigation reforms - guess a news story was needed to distract from the news that rates are finally coming down (partially due to the litigation reform) so that the legislature is backpedaling and can focus on the bringing back the litigation trough

Global reinsurance capital essentially can be broken down into two fundamental sources: internal reinsurer capital and external insurance linked securities. Since the genesis of Catastrophe bonds after the 2004/2005 hurricane season, the ILS portion of reinsurance capital has grown consistently and there is little reason why this trend wont continue. ILS capital is less expensive than traditional reinsurance. Florida domestic insurers have been adding ILS as a staple and stable source of reinsurance funding. Since the costs of these transactions are lower than traditional reinsurance, the cost savings can be transferred to the insurance buyers.

What if we could take all the litigation data stored at all the courthouse sites and put it into a database for analysis. That's what Michael A. Rosenberg, MP at Roig Lawyers, a NAMWOLF member law firm has done. Here are all the first-party litigated claims going back to 2020. This includes all lines of business including personal injury, AOB, property and more. A ton of useful insights are going to come out of this.

Notice the supercharged words. Here it’s “funneled”. In the articles I saw “divert”. A poster yesterday said “kicked out”. The payments from carriers to affiliate companies were for actuarial, underwriting, accounting and reporting, marketing, and claims services provided. Everyone of these agreements were negotiated and approved by the OIR. Every dividend, every payment has eyeballs in it from regulators to reinsurers (every dollar of payment to an affiliate is a dollar the reinsurers doesn’t get). Lawyers are master persuaders. They need to make this a “scandal” because they desire to role back litigation reform so that the premiums go to them. We are proponents of transparency. We believe every dollar of premium should be tracked all the way through the system…even post litigation. Whose making what?

Monthly Florida insurance litigation update. Huge increase in first party lawsuits last month. Over 25,000 lawsuits filed against insurance companies. Wonder what this month will bring