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UPC Chief: Insurers Must Fight Assignment of Benefits Problem in Florida


Date: February 21, 2017
Source: Best's News Service


The assignment of benefits litigation environment is robust in Florida, with some claims drawing more than one lawsuit, the chief executive officer and president of United Insurance Holdings Corp. (UPC) said during an earnings call.

“Every company has to fight its own fight, on its own terms, and fight the machine,” CEO John Forney said.

Hurricane Matthew and smaller event losses, along with the non-cat environment in Florida drove a net loss of $10.5 million in the fourth quarter at UPC, Forney said. He said he was unhappy with bottom line results for the year and quarter. The fourth-quarter loss compared to a net income of $13.8 million in the prior year.

Net income for the year fell to $5.7 million, compared with $27.4 million in 2015. The combined ratio for the quarter rose 37.5 points to 122.7. The company is taking rate and continuing to refuse new business in Miami-Dade and Broward counties because loss ratios are about double the rest of the state, despite writing the same type of business. “The growth in Florida is not coming from Miami-Dade or Broward at all,” Forney said.

“It’s only about 5% of our book of business … Thank goodness.” Elsewhere in Florida, he said, business remains profitable. UPC has also expanded its presence in other states.

A Florida House subcommittee is considering ways to address assignment of benefits, in which policyholders typically assign the rights to any claims to a contractor. Insurance Commissioner David Altmaier recently told the panel loopholes are driving up costs and resulting in higher insurance rates (Best’s News Service, Jan. 13, 2017).

Asked about the correlation between climate change and an increasing severity and frequency of storms, Forney said he didn’t want to get into a philosophical or political debate, but said he’s not sure “that’s a fact.”

Whatever the cause of those storms is, he said UPC needs to write, reinsure and price to account for losses. Executives said some expenses were higher because of merger and acquisition activity. The company expects this quarter to close a merger with RDX Holding LLC, the parent of American Coastal Insurance Co., to create a specialty personal and commercial lines property underwriter focused on coastal states (Best’s News Service, Feb. 7, 2017).

American Coastal was the largest commercial multiperil writer in 2015 in Florida, based on direct premiums, according to BestLink. Forney said some competitors are pressuring rates as they try to undercut American Coastal, but said the company has a “good understanding of the cost of ownership. They’ve been able to navigate that.”

In 2015, UPC expanded its reach to the New York homeowners market with a $57 million deal to acquire Interboro Insurance Co. (Best’s News Service, Sept. 28, 2015). Shares of United Insurance Holdings Corp. (NASDAQ: UIHC) were trading on the afternoon of Feb. 21 at $14.82, down 7.08% from the previous close.