Florida Underwriter spoke with Insurance Consumer Advocate Steve Burgess following his recent statements contesting requests for steep rate increases by Citizens Property Corporation. Burgess offered an analysis indicating the rates should be just under three percent instead of Citizens' proposed 45.2 percent. He spoke at one of the public hearings dealing with the Citizens rate hike requests held in Miami last month. He also objected in writing to CFO Tom Gallagher and Insurance Commissioner Kevin McCarty. Burgess contested parts of the larger increase saying that they involve public policy matters and, by law, should be debated by the legislature.
Burgess actually was the first to hold the advocate's role as established by the legislature, and served in the early 1990s under then-Commissioners Gallagher and Bill Nelson. Gallagher reappointed him in August 2004 upon the retirement of the most recent advocate, Elsie Crowell, who held the post for seven years.
Q. How do you see your role in Florida's high-profile, frequently-in-crisis insurance industry?
A. The process of transacting insurance business involves a number of valid interest groups. Most of the groups have the resources to make sure policymakers hear their concerns. My responsibility is to voice the concerns of consumers to the best of my ability.
Q. How tough is it to make calls that are in contrast to current state policy? Do you feel any bureaucratic pressure to adapt opinions closer to stated policy?
A. It is not difficult at all for me to make a call when I believe the consumers' needs conflict with current state policy. The greatest challenge I have is when there is some natural tension within the consumer interests themselves. For example, the Citizens' rate statement was not difficult to point out, but because of the competing interest in the overall consumer body, if Citizens' rates are too high, there are people who cannot afford a policy at all. But if rates are not high enough, losses will be underwritten by people not in Citizens.
I really struggle with — as do all the policymakers — how to best resolve those competing interests. Other examples are rates and claims. In trying to get a claim paid, I press for liberal policy on a company's part. On the other hand, in a rate case, I'm usually trying to find a way to keep rates at affordable levels. Another is the issue of availability vs. affordability. For products to be available, there has to be an adequate rate for companies to earn a reasonable return.
Q. On the heels of your work with the Standard Personal Lines Advisory Committee and the Task Force on Long-Term Solutions for Florida's Hurricane Insurance Market, how do you think the industry performed in the series of recent hurricanes?
A. From a macro level, I would say the industry performed well. The sheer number of claims that they adjusted, processed, and settled on a percentage basis was very high. The overwhelming number of people who were dealt with were satisfied. But for those who don't feel they reached a satisfactory settlement, no matter how many others were served, theirs was unsatisfactory. I deal with a lot of those. I've talked to a lot of people who say the industry performed poorly, but I want to acknowledge that on a percentage basis, the vast numbers were satisfied. By the nature of my post, I'm not going to hear from many who were satisfied. Ninety percent of the people who call me would tell me they would give low grades for insurance companies, but they reflect the small amount not satisfied.
Q. How well prepared do you find us for this coming storm season?
A. As a matter of process, we're very well prepared. Private companies that have gone through major storms are very prepared for business processes. Citizens is much better prepared, with an infrastructure that gives it a lot better oversight of contracted adjusters.
From a regulation standpoint, refinements to the process in mediation are very successful. We provided such a service in past storms — once after Andrew, then after the 2004 season, and now after Wilma. Lessons have been learned. Of the people who went into mediation, a 93 percent success rate at full or partial settlement was achieved. The process was allowed to evolve, and you must remember that some of the worst cases then went into mediation, so that success rate is very gratifying.
Q. What is the status of whether homeowners' policies should or should not include screen-enclosures since the collapse of so many in the past storms?
A. This topic still needs dealing with. My last encounter in the arena was that code compliance at local levels was still an issue. What should we do with this problem? It is unknown how much it would cost to build screen structures to withstand the 146-mph winds [that residential structures must pass]. Should their insurability be examined? There are valid concerns from two different consumer groups who are at odds.
Q. What's different now from when you served before under then-Commissioners Gallagher and Nelson?
A. A significantly different structure has changed so that the CFO for whom I work is no longer the insurance commissioner. So most of the areas where I might challenge regulation, are now under the Office of Insurance Regulation. It makes it a little better now when I have to make a challenge.
Q. What fills most of your time?
A. It is such a mixed involvement — I travel a lot to rate hearings that require lots of prep work, study overall concepts, do a lot of legislation review.
I think the single most satisfying occurrence so far is involvement in the mediation process after the 2004 season. We were able to help so many who had reached a dead end. I was heavily involved in the training and establishing of the practice of sending state Department of Financial Services' lawyers to each mediation to help shepherd the policyholder through the process. Companies had their knowledgeable adjusters, so we had lawyers present to make sure the policyholders had a level of comfort so they could make good decisions in their best interest. Our lawyers were there to step in if a fairness issue came up. Most of the mediation is paid for by the insurance company. Through the Collins Center at Florida State University, DFS hired Supreme Court-certified mediators to run the process. There were no costs to homeowners.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.