Running Clock Rant: “It Has Come To Our Attention”

July 23, 2009

It has come to our attention that some mortgage companies have recently mailed letters to Castle Key (formerly Allstate Floridian) property customers concerning the company’s recent downgrade by A.M. Best. We are in the process of contacting the two mortgage companies from which we have copies of customer notices to explain that Castle Key maintains a sound capital position and extensive reinsurance. Our emphasis in these discussions is that, despite the A.M. Best downgrade, Castle Key was recently reaffirmed with an A´ (A Prime), Unsurpassed financial rating from Demotech, Inc.  Demotech is an independent financial and actuarial services firm.  Many property insurance companies in Florida operate with only a Demotech Financial Stability Rating®.

One of the customer letters, from Midland Mortgage Company, indicated that they will accept a Demotech financial rating.  As stated above, we are having discussions with this company to advise them of our Demotech rating and will request that they discontinue sending customer notices.  We hope to resolve this issue with little customer disruption.  In the meantime, you or the customer may contact Midland and provide them a copy of Castle Key’s rating. The website www.demotech.com contains the ratings for Castle Key and other Florida property insurance companies.

The other letter, from Taylor, Bean, and Whitaker Mortgage Company, indicated that their company will accept policies written only by insurers who earned high ratings from A.M. Best.  We will contact them and request that they accept Castle Key policies based on the companies’ Demotech rating.  If they do not agree to accept Demotech for Castle Key, you may want to consider calling the customer and offering to place them with one of the available expanded market carriers.  If this transpires, we will provide you with an audit of policies listing this mortgage company that are associated with your agency.

Your agency can affirm to customers that the Castle Key companies are financially strong and stable companies.  At the end of 2008, the Castle Key group held $162 million in surplus and $233 million in cash and invested assets.  Our reinsurance program for 2009 was developed using methodologies supported by the Florida Office of Insurance Regulation (OIR).

We will provide you with additional details as they develop.  If you receive any additional customer calls involving mortgage companies other than those mentioned above, please contact your Product Management Consultant and if possible, provide a faxed copy of the mortgage company letter.

She Bangs!

Michele Linca runs an Allstate office in Jupiter, FL.

The county court database has some interesting material on her!

First, she has quite a driving record. Would you buy auto insurance from someone with a driving record like this? She bangs into parked cars? She bangs into moving cars?

Also, she’s been married to a couple of Romanians. Nicolae Linca and Mircea Sandulescu. They seem to be related.

After leaving Linca, even though she kept his name, she seems to have taken up with radiologist, Aaron Jay Goodrum. That did not end well either. It seems the court ordered him to undergo a “psychosexual evaluation” and it was probably paid for with bailout funds!

What a bunch these Allstate agents are!

In Good Hands?

Allstate Agents Bully Agency Employees!

I sat having coffee last weekend with a good friend who wanted to talk shop with me because he was thinking of changing jobs. He said, “I’m just so tired of being bullied by my boss.”
Both conversations got me thinking how some people make a short leap from schoolyard bully to workforce bully in one lifetime. No matter how old you are or where you are in life or career, abuse by a bully can pose a serious threat to your emotional and physical well-being. When bullying happens in the workplace, it creates a dysfunctional environment that can yield high staff turnover, lost productivity and increased litigation—and it may jeopardize employee health and insurance costs.
Ironically, both of us work in insurance. My friend works for an Allstate agency. You know the arrangement, the agent runs it as a business, the agent is not an Allstate employee. The agency, though, has employees. They are not employees of Allstate, they are employees of the agency.

As profits shrink, agents take it out on their employees. Allstate closes down unprofitable agencies and competition these days is fierce. Florida, with its bans, unpopularity with Governor Crist and high payouts from hurricane damage is really bad.

Ike: Allstate’s Day of Reckoning?

September 7, 2008

As Hurricane Ike barrels toward South Florida, Americans can be sure they won’t have to endure another catastrophic failure of a hurricane protection system. That’s because South Florida doesn’t have a hurricane protection system. As South Floridians like to say: Ay dios mio! Ike is now scheduled to pass just south of Miami as a Category 4 storm; National Hurricane Center researchers recently concluded that a Cat 4 hitting Miami could cause $70 billion in damage. To use another South Florida-ism: Oy vey!

Dangling into the Gulf like a continental afterthought, Florida has always been Mother Nature’s favorite American target, absorbing eight named storms in 2004 and 2005 alone. The state has gotten better at preparing for hurricanes, with stricter building codes and well-rehearsed evacuation plans. But it’s still dangerously exposed — not only to the elements, but to financial ruin. It’s got the nation’s most dysfunctional property insurance market, a byproduct of life in harm’s way. Fitch’s ratings agency concluded in March that if a big storm hits Florida, “the fragile market could effectively collapse.”

Ike could well be a Gustav-like bust rather than a Katrina-like disaster. But eventually, disaster will visit the peninsula, and it’s still not clear who’s going to pay the tab. “It’s going to be a financial nightmare,” says Cecil Pearce of the American Insurance Association. “Florida is the nation’s basket case.”

It’s not that Florida’s vulnerability is a secret. Florida homeowners pay some of the nation’s highest insurance premiums; in a recent poll, despite a housing crisis, an economic crisis, a water crisis and an environmental crisis, Floridians named those premiums their number-two concern about the state’s future, behind property taxes but ahead of jobs, education, health care and the dying Everglades.

Since Hurricane Andrew put most Florida insurers out of business and scared several national insurers out of the state, the state government has helped to hedge the risk of hurricanes. It provides subsidized insurance to 1.3 million high-risk homeowners who can’t get private policies, an increase of more than 50% in just three years. It also has a Hurricane Catastrophe Fund that provides subsidized reinsurance to the state’s private firms.

But a series of studies have made it clear that if the Big One or even a Pretty Big One strikes, Florida is going to have very serious problems. The state-run insurance firm and the Catastrophe Fund have just a few billion dollars on hand, so a major storm would force both entities to float massive bond issues in an unfavorable market, and to make up their shortfalls through gigantic assessments on policyholders. A House committee recently warned that the state would have “extreme difficulty paying its obligations” after a 100-year storm, and that premiums on nearly every property, car and business could skyrocket. A report for the state Office of Insurance Regulation found that even a 50-year storm would cause extreme financial stress, especially given the current credit crunch.

Industry actuaries say the problem is simple: Florida’s insurance rates, high as they may be, are not high enough for a state with an estimated 25% of America’s high-risk property. Reinsurance rates are soaring, and private insurers like State Farm and Allstate have scaled back in Florida, forcing an additional 500,000 customers into the state pool. “For some areas in Florida, insurance companies could not obtain reinsurance at any price,” Insurance Commissioner Kevin McCarty recently told Congress. And last year, Republican Governor Charlie Crist pushed through reforms to decrease premiums, a politically popular move that will create even more pressure if disaster strikes. “I get the concerns,” Crist recently told me. “But we’re not going to stand for gouging.”

The gouging fears are understandable; McCarty told Congress that some insurers have insisted on 25% profit margins, while using computer models that overstate risk. But no one denies that the risk is real: it’s been 80 years since a major storm hit a major Florida city, but hurricane researchers have calculated that the next one could cause as much as $150 billion worth of damage. And Crist’s reforms, while reducing premiums, included other changes that increased the risk that taxpayers and policyholders will have to bail out the Cat Fund. “The risk was removed from the insurers’ portfolio and is now being supported by the people of Florida,” McCarty explained.

That’s why Crist and just about every other Florida politician is pushing for a national catastrophe insurance fund, which would shift some of that risk to federal taxpayers. But the idea is not so popular with other states, for the obvious reason that other states don’t have as much risk. Florida has spent the last 80 years ignoring its vulnerability, developing its floodplains and shorelines, selling the dream of the Sunshine State to northerners and foreigners. But the day of reckoning will come.

 

Allstate Claims from Fay: Preliminary Report from Florida

Allstate Claims from Fay: Preliminary Report from Florida

August 29, 2008

Allstate reports 1,443 homeowners’ claims and 701 auto claims as of August 29, 2008. In addition, Allstate is processing 377 NFIP claims.

HANNA SAVANNAH: Another Allstate Nightmare?

HANNA SAVANNAH: Another Allstate Nightmare?

SAVANNAH, Ga. – Nervous residents rushed to buy plywood and generators while emergency officials in Georgia, Florida and the Carolinas weighed possible evacuations Tuesday as Tropical Storm Hanna shifted toward a tough-to-predict landfall along the southern Atlantic coast by the end of the week.

Florida Gov. Charlie Crist declared a state of emergency as Hannah, downgraded from hurricane status Tuesday but with ample time to regain strength, began a turn to the northwest from the Bahamas. Emergency officials in Georgia and South Carolina went into 24-hour alert mode.

In Savannah, which hasn’t seen a direct hit from a major hurricane in more than a century, Janey Miley took her 15-year-old daughter to Home Depot at lunchtime Tuesday for an impromptu lesson in hurricane preparedness.

They waited in a busy checkout line with a 5-gallon gas can, a circular saw and 10 sheets of plywood in case they needed to board up the windows of their home on nearby Tybee Island. A steady flow of customers pushed carts stocked with everything from batteries to 5,000-watt generators.

“We’ve never really bought plywood, but it seemed like maybe we’d better do it this time,” said Miley, 43, who had also booked hotel reservations in Columbia, S.C., in case her family needed to evacuate.

The National Hurricane Center predicted Hannah would most likely come ashore as a hurricane between Friday and Saturday somewhere between the east coast of Florida and the North Carolina coast. Forecasts Tuesday showed the storm making landfall near the Georgia-South Carolina border.

Local emergency officials for Savannah and surrounding Chatham County urged residents to have an evacuation plan ready. But no decisions on voluntary or mandatory evacuations were expected before Wednesday.

Ken Davis, spokesman for the Georgia Emergency Management Agency, said Hanna’s unpredictable path made it “a pretty difficult storm” for planners to gauge whether to order evacuations with just a day or two left to decide.

“We’re getting closer and closer to the point where decisions have to be made,” Davis said. “It’s a fine line between calling an evacuation and crying wolf.”

Davis said state officials were looking ahead to the possibility of turning Interstate 16 into a one-way escape route westward out of Savannah.

The highway bore the brunt of 2.5 million people fleeing Georgia, Florida and South Carolina when Hurricane Floyd menaced the coast in 1999.

The Georgia State Patrol has since equipped 115 miles of the interstate with orange-striped control gates, much like railroad crossing arms, that can be dropped at entrance ramps to block cars from traveling east during a one-way evacuation.

In Florida, where Hanna is the third storm to threaten in three weeks, Crist’s emergency declaration allows the state to more easily mobilize employees, law enforcement personnel and other resources. The governor said residents should prepare for possible flash floods and winds up to 111 mph.

The state Emergency Management Division in South Carolina was monitoring Hanna closely around the clock, but spokesman Derrec Becker said it was too early Tuesday to call for residents to flee.

“At this time there is still so much level of uncertainty, what we’re doing right now is simply paying attention to this storm,” Becker said.

Meanwhile, college administrators at Coastal Carolina University in Conway, S.C., and Charleston Southern University watched the storm for a possible call on whether to cancel football games Saturday, coaches at both schools said.

The North Carolina Division of Marine Fisheries asked fishermen to monitor Hanna and two other tropical storms — Ike and Josephine — developing far out in the Atlantic. It said fishermen should remove gear such as nets and crab pots from the coastal waters ahead of storms and check their own safety equipment.

FEMA regional administrator Phil May said the agency will send federal liaisons and disaster response teams to Georgia, South Carolina and North Carolina on Wednesday to prepare for Hanna.

FEMA is already pouring supplies and resources, like search and rescue teams, into the region. And it’s scrambling to move some supplies from the Gulf Coast back toward the Atlantic seaboard.

“We’ll be moving things that may have been in position for Gustav back this way in case of Hanna,” said May, who is based in Atlanta. “There’s a lot of moving parts.”

He said a team dispatched to Florida to deal with the remnants of Tropical Storm Fay will stay there to plan for Ike, which could threaten Florida after Hanna passes.

 

Tropical Storm Hanna – Unpredictable!

August 31, 2008

Frustration at Allstate: McKinsey Unable to Predict Hanna’s Path!

While powerful Hurricane Gustav bore down on the U.S. Gulf Coast on Sunday, Tropical Storm Hanna swirled east of Florida, embedded in a complicated climatic environment that made it impossible to forecast its destination and likely strength.

The eighth tropical storm of the 2008 Atlantic hurricane season could just as easily end up over Cuba, bring heavy rainfall to citrus country in central Florida or drift northward toward South Carolina. It was not possible to say if the storm might eventually end up in the U.S. oil patch in the Gulf of Mexico, hurricane experts said.

“Unfortunately there is still considerable uncertainty with the forecast,” said Jamie Rhome, a hurricane specialist at the U.S. National Hurricane Center in Miami. “It’s impossible to say that this system is going to do this or that.”

The cyclone was tangled up in a middle to upper level low that was making it difficult for Hanna to develop, and was likely to slow down in two days when it came across conditions of weak steering current that could make it meander.

Another trough would then swoop over the tropical storm, bringing with it considerable uncertainty as to the likely wind shear as Hanna drifted near the Bahamas. Wind shear — the difference in wind speed at different levels of the atmosphere — can tear storms apart.

“At the end of the forecast track the wind shear could let up a bit,” Rhome said.

None of the computer models used to predict storm tracks actually took Hanna into the southeastern United States at this point, Rhome said.

Some oil analysts reported on Friday that one of the myriad computer models available to forecasters had indicated that Hanna could eventually make landfall on the U.S. Gulf Coast near New Orleans where Hurricane Gustav was expected to come ashore on Monday as a dangerous storm.

Those reports triggered concerns in energy markets of a potential one-two punch by Gustav and Hanna on some of the 4,000 Gulf of Mexico offshore platforms that provide a quarter of U.S. crude oil and 15 percent of its natural gas.

Hurricanes Katrina and Rita destroyed more than 100 oil rigs in 2005 when they roared through, causing oil prices to soar to then record highs. Katrina went on to swamp New Orleans, kill 1,500 people on the U.S. Gulf Coast and cause $80 billion in damages.

Rhome said it was folly to highlight a single computer model, especially so far out. “It’s a mistake, and often a grave one, to focus on a single model,” he said.

The accuracy of hurricane forecasting has come a long way since the days when entire fleets of Spanish galleons sank in unexpected storms as they carried South American gold and treasure back to Europe.

But even with the start of “hurricane hunter” flights in 1944 and the advent of satellite imagery in the 1960s, long-range forecasts are prone to enormous margins of error.

The National Hurricane Center estimates the average error in its track forecasts is near 260 miles by day four and 345 miles by day five. The hurricane center does not project a storm’s track beyond day five.

Intensity forecasts are even more difficult. The hurricane center calculates that the error in its forecasts for a storm’s top sustained winds averages 23 miles per hour (37 km per hour) per day.

The last official forecast for Hanna takes it in five days to minimal Category 1 hurricane strength with 80-mile-per-hour (130 km per hour) winds by next Friday.

It might then be somewhere off central Florida. But its potential position at that point also encompasses the southern Bahamas, eastern Cuba, south Florida and South Carolina.

 

Fay: Were You in Good Hands With Allstate?

August 22, 2008

Were you in good hands with Allstate?

The storm’s death toll rose to six in Florida and nearly 30 overall since Fay first struck in the Caribbean. Florida officials said four people died in traffic accidents in the heavy rain and two others drowned in surf kicked up by the storm. Before the storm ever blew through the state, a man testing generators as a precaution also was killed.

Tens of thousands of people from Melbourne to Jacksonville to Gainesville were still without electricity, and residents of Florida’s storm-stricken Atlantic coast faced a weekend of cleanup after chest-high flooding. Florida Insurance Commissioner Kevin McCarty said so far nearly 4,000 flood claims from Fay had been filed.

“The damage from Fay is a reminder that a tropical storm does not have to reach a hurricane level to be dangerous and cause significant damage,” said Florida Gov. Charlie Crist, who toured flooded communities this week.

On Friday, Crist asked the White House to elevate the disaster declaration President Bush issued Thursday to a major disaster declaration. Crist said the storm damaged 1,572 homes in Brevard County alone, dropping 25 inches of rain in Melbourne.

 

Allstate (Florida) to Pay Fines, Lower Rates, Write More Policies…

Allstate settlement will cut rates

ASSOCIATED PRESS

August 16, 2008 12:39 PM

 

Homeowners insured by Allstate Corp. in Florida will get an additional 5.6 percent rate cut through a settlement state regulators announced Friday.

The company, based in Northbrook, Ill., also agreed to insure 100,000 more Florida homeowners against hurricanes and other perils, forgive a $175 million loan to its Florida subsidiaries and pay a $5 million fine, Insurance Commissioner Kevin McCarthy said.

The latest reduction will bring total rate cuts to 19.8 percent since June 1, 2007. That’s when a 14.2 percent cut went into effect to comply with a new law designed to reduce windstorm insurance premiums. They had skyrocketed following a series of hurricanes in 2004 and 2005.

The agreement resolves McCarty’s complaints that Allstate failed to provide rate- related documents regulators had demanded, falsely claimed the material contained trade secrets and falsely certified a request to raise rates by more than 40 percent.

“It’s unfortunate that Allstate’s disregard for Florida’s laws required the office to take such drastic actions, however, I’m glad that we’ve reached this agreement,” McCarty said. “We’re looking forward to restoring the confidence of Allstate insurance companies.”

He added, though, that his office will continue to investigate the company for other possible violations of state law in claims handling and potential collusion with rating organizations, trade associations and other entities.

If substantiated, the company could face fines, suspension or revocation of its licenses to do business in Florida.

The settlement is in the best interests of Allstate, its customers and agents, said company spokeswoman Kathy Thomas in St. Petersburg.

“What the settlement demonstrates is our desire to work with the Office of Insurance Regulation,” Thomas said. “Put the issues in dispute behind us.”

Allstate has 2 million auto and property insurance customers in Florida, including 250,000 with homeowner’s policies. It is only that latter group that will be affected by the rate reduction. Thomas said the company dropped its request to raise rates because the state has taken steps to lower the risk of covering Florida property including providing backup coverage for insurers.

The requirement to sell at least 100,000 new residential policies — half for homeowners and half for condominium owners and renters — is important because some insurers including Allstate have been trying to flee the state, claiming it is too risky because of the threat of hurricanes.

In May, McCarty issued an order prohibiting Allstate from writing new policies for all types of insurance including auto because of its failure to cooperate with the property insurance investigation. He lifted it after the company began complying with his request to turn over documents on its business practices.

A hearing before an administrative judge on McCarty’s complaints had been scheduled for next month but will be canceled because of the settlement.

Allstate has 10 Florida companies that will be affected by the agreement. They operate under the names Allstate and Encompass.