on February 29, 2012 by admin in Insurance Industry, Comments (0)

Insurance companies cry poor, but have $500 Billion in surplus – Sun

Florida homeowners premiums exceeded direct losses by more than $10 billion since the 2004 and 2005 hurricanes.

Why are we not surprised? From Charles Elmore in the Palm Beach Post we learn what we already suspected. And the insurance companies still cry poor. This doesn’t include Citizens, which we learned previously, due to a miracle, no doubt, is in excellent financial condition.

Gouging? Heaven forfend. They paid 33 cents in direct losses for every premium dollar they got between 2006 and 2010. The Palm Beach Post got this information from the Florida Catastrophic Storm Risk Center at FSU. They collected nearly $40 Billion in premiums through 2010, but only paid $28.8 Billion in claims since the 2004 and 2005 hurricanes.

Insurance companies don’t count the interest they make on premium investments when they calculate loss ratios. How convenient. Loss ratios, even counting the 2004-2005 seasons, are lower in the 21st century than the previous one, without including that interest.

The article reported that USAA, the company that specializes in serving military families and stands at No. 145 on the Fortune 500 list of America’s largest companies, saw its net worth jump to $18.7 billion in 2010, up 10 percent from 2009.

USAA has reported nearly $6 billion in net income the last two years combined, and returned another $2.5 billion to members in distributions, dividends and rebates. A retired Air Force officer and USAA policyholder mentioned in the article said he filed no claims from hurricanes Charlie, Frances, Jean or Wilma but got a letter announcing a $2,500 annual premium increase related to storm discounts.

But after the Post contacted USAA the company called him last week and said it had discovered a “typo,” and he owed only $26 more. Another miracle, no doubt.

Insurance companies say rates are suppressed. The article quotes J. Robert Hunter, director of insurance for the Consumer Federation of America, a former Texas insurance commissioner who was a consultant to Florida regulators after Andrew and in 2007. “Saying rates are suppressed does not make it true.”

He says the property and casualty insurance industry as a whole is “significantly overcapitalized,” with well over $500 billion in surplus, more than triple 1991 levels, and it would still have $1.20 in surplus for every dollar in premiums even if it had to pay right now for all 10 of the most costly disasters in U.S. history.

And this is the industry that Governor Scott and some legislators would have us believe is not only in need of more capital, but will also ride into Florida like competing knights in armor to save us once Citizens is relieved of most of its obligations? If you believe that, I have some very well irrigated land that I’d like to sell you.

Article source: http://blogs.sun-sentinel.com/condoblog/2012/02/insurance-companies-cry-poor-but-have-500-billion-in-surplus.html

Tags: , ,

No Comments

Leave a comment

XHTML: Allowed tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>