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Sha'Ron James

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HCI Chief Says Florida Lawsuit Rate Reaches 35% in Assignment of Benefits Prlblem Area


Date: February 22, 2017
Source: AM Best Insurance News and Analysis


About 35 lawsuits are filed for every 100 homeowners claims received by HCI Group Inc., in Miami-Dade and Broward counties, according to Chairman and Chief Executive Officer Paresh Patel. That proportion has stabilized and could improve because of underwriting actions taken early in 2016, Patel said during an earnings call, because the claims rate is declining.

Lawsuits take up to two years to materialize, making the assignment of benefits litigation issue a long-tail event. Patel said HCI considers AOB a “problem in two counties out of 67 counties that we we operate in, and it’s in one product line out of five product lines we operate in. We have taken active steps to corral that problem area” and are increasing reserves.

A Florida House subcommittee is considering ways to address the practice in which policyholders typically assign the rights to any claims to a contractor.

Insurance Commissioner David Altmaier recently told the that panel loopholes are driving up costs and resulting in higher insurance rates (Best’s News Service, Jan. 13, 2017). HCI Group Inc. took in about 2,500 claims related to Hurricane Matthew in the fourth quarter, Patel said, totaling about $21 million in losses. He said the losses didn’t trigger coverage from any third-party reinsurers, but did impact net income, which fell 58.4% to $4.6 million.

For the year, net income dropped to $29 million from $65.9 million.

The combined ratio worsened 30.6 points to 104.9. Net premiums earned increased to $63.4 million, from $61.6 million. Net investment income increased to $3 million from $1.3 million in the prior year quarter. Total revenue rose to $72.4 million, compared to $63.4 million. Yearly total revenue declined to $264.4 million, from $286 million in 2015.

Subsidiary TypTap Insurance started issuing quotes for Florida residential flood coverage in March last year, allowing shoppers to get a quote after inputting a street address and saying how many months a year they lived there and how many flood claims have been reported at the property. Then they can bind it from their smartphone (Best’s News Service, March 4, 2016). Shares of HCI Group Inc. (NYSE: HCI) were trading midday on Feb. 22 at $47.61, up 10.44% from the previous close.