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FLORIDA CHIEF FINANCIAL OFFICER TOM GALLAGHER'S WEEKLY NEWSLETTER

Volume 3, Number 32, August 7, 2006

Does your child know how to burn a CD but not how to put money into one?

They say the two most important things we will do in life are the very things we don’t learn much about in school—how to be a parent and how to manage money. 

As your child heads off to another school year and begins comparing what their friends are wearing, carrying or driving, it might be a good idea to start now to teach your children strategies for saving money and why it is so important.   The Department of Financial Services can help.  Tips on our web page, www.yourmoney,yourlife.com include:

  • Provide an allowance but use it to teach your children about financial goals. Consider matching funds to reward a child’s saving discipline.
  • Set an example – avoid impulse buying! Involve your child in shopping. Create a shopping list together – and stick to it.
  • Teach children to comparison shop. Use the telephone to research the price of a purchase at different stores. Teach them to keep receipts so defective items may be returned.

Start now teaching your kids that it’s never too early – or too late – to have financial goals and to save money toward those goals.   You will feel good as a parent, and your kids will feel great having more money in their pocket and in the bank.

-- Tom Gallagher


GALLAGHER: CABINET VOTE BRINGS MUCH-NEEDED INSURANCE RELIEF TO FLORIDIANS

Tom Gallagher, Florida’s chief financial officer, applauded the decision by the Governor and Cabinet to approve reactivating the Commercial Joint Underwriting Association (JUA). The JUA will provide property insurance coverage to Florida’s business owners who have been unable to secure it from private companies. Gallagher recommended the JUA as a short-term solution last week in a letter to Governor Bush.

“Eight storms inflicting $38 billion in insured losses have created a crisis in Florida’s property insurance market, and our state’s homeowners and business owners are being held hostage as a result,” said Gallagher. “The solution I recommended and we approved today will help provide basic coverage to Florida employers who employ thousands of hardworking citizens and serve as the backbone of our economy. There are some real opportunities to provide further relief for Floridians, and fighting for homeowners remains my number one priority.”

Since the hurricanes of 2004, Tom Gallagher has made several recommendations to the Cabinet and Legislature which have provided relief to Florida’s homeowners, including the elimination of the double-deductible, the creation of a simplified insurance policy checklist, and the approval of $715 million dollars in insurance rate-relief to Floridians which eliminated a 20% percent surcharge on homeowners insurance bills this summer.

Gallagher, who serves on the Cabinet, also recommended last week that a working group comprised of representatives from the Governor’s Office, Florida Senate and House of Representatives, Department of Financial Services, State Board of Administration and the Office of Insurance Regulation explore lowering the threshold of the Florida Hurricane Catastrophe (CAT) Fund from $5.2 billion to $3 billion. The Catastrophe Fund provides reinsurance to insurance companies.

Gallagher said the Catastrophe Fund has proven to be a critical tool to Florida’s economy and cited in today’s Cabinet meeting that the fund saves homeowners living in a $150,000 home in Miami as much as $3,100 annually. He said that for homeowners in Hillsborough or Escambia County, the savings are as much as $500 a year.

Gallagher said these savings are possible because insurance companies pay 70 cents for every $1 of reinsurance in the worldwide market but pay less than a dime for that same coverage through our Catastrophe Fund. In addition, Gallagher said that when Florida insurers purchase reinsurance on the worldwide market, the money is gone even when no storms come. When those same insurers buy it through the Catastrophe Fund, that money stays in Florida and builds to pay future storm claims.

Gallagher said if a consensus is reached by the working group making changes to the CAT fund, then he recommends that the governor call for a special session.

“The sooner we put additional solutions in place, the sooner we will be able to stabilize insurance rates and provide desperately needed coverage to homeowners,” Gallagher said.


MULTI-STATE SETTLEMENT ANNOUNCED TOTALING $70 MILLION TO BENEFIT MILITARY PERSONNEL

A multi-state settlement concerning the improper sale of insurance and investment products to U.S. military personnel has been announced. The American-Amicable Life Insurance Company of Waco, Texas, and its affiliates will be required to provide immediate cash refunds and increased policy benefits totaling $70 million under the settlement agreement.

“Our soldiers are fighting and dying overseas to protect our country and fight terrorism,” said Chief Financial Officer Tom Gallagher, whose office will be assisting the affected soldiers. “To think these men and women were knowingly ripped-off is unconscionable.”

As a result of the investigation, approximately 57,000 current and former service members will receive refunds and modifications to their existing insurance policies, and an additional 13,000 service members and 22,000 civilians will receive increased cash surrender benefits.

“While this is great news to the service men and women who were victimized, it does little to mask the bad taste left by the actions of these entities. Our military men and women deserve to be honored, not taken advantage of,” said Kevin McCarty, Florida's insurance commissioner.

More than 5,000 consumers who purchased their policies in Florida will be covered under the agreement. Nearly all of the soldiers already had $250,000 in low-cost life insurance provided and partially subsidized by the federal government. Therefore, it was doubtful whether they needed even more insurance, so the term-life policies were often represented as investment vehicles that would return money rather than polices that would only pay off upon the death of the insured.

In addition to the penalties, the companies are banned from military bases for five years, and are prohibited from any military personnel membership listings for sales or solicitation purposes, as well as other restrictions on sales and contracts with military personnel.

The settlement alleges that the American-Amicable companies violated insurance and consumer protection statutes in the sale and marketing of certain life insurance products to U.S. service members. The term life policies, marketed as “Wealth Builder” or “Horizon Life,” were sold primarily to military personnel and were often represented as investment products.

The companies included in the settlement are American-Amicable Life Insurance Company of Texas, Pioneer American Insurance Company, and Pioneer Security Life Insurance Company. To date, 42 states, the District of Columbia and Guam have signed on to the agreement.

Under the settlement, the companies will be required to:

To make cash payments to former and current service members who were issued a “Horizon Life” policy from January 1, 2000, through July 28, 2006. Approximately 57,000 service members, including 5,000 in Florida, are eligible to receive this relief.

To increase the cash surrender value for all in-force “Horizon Life” and “Wealth Builder” policies regardless of when the policy was issued or military status. Approximately 53,000 current policyholders will receive this benefit.

Cease soliciting or selling any insurance product on any military installation for five years. Additionally the companies are prohibited from transacting insurance with any active duty military personnel for two years within the state of Florida.

Immediately terminate any agent discovered selling company products on a military installation.

Not accept any insurance applications for Army enlisted personnel with the rank of E-1 through E-3 without proof the applicant has been counseled by a superior officer.

Not offer any gift with a value greater than $5.00 to any individual who has direct command authority over service members who rank between E-1 and E-4.

Not participate in or assist with any class, seminar, or other training for service members who rank between E-1 and E-4.

Not participate in or assist with any class, seminar, or other training for service members regarding personal finance when such class, seminar, or other training occurs on a military base, installation, or reservation.

The settlement agreement can be found at www.floir.com. Consumers who have questions regarding the settlement can call the Department of Financial Services consumer hotline at 1-800-342-2762 or the companies’ consumer service center at 1-800-736-7311.


PROPERTY AND CASUALTY INSURANCE REFORM COMMITTEE TO HOLD INAUGURAL MEETING

The Property and Casualty Insurance Reform Committee will hold an organizational meeting on August 8th in Tallahassee.
Chaired by Lt. Governor Toni Jennings, the Committee will make recommendations to the Governor, President of the Senate and Speaker of the House of Representatives regarding insurance issues in Florida. As the first meeting is organizational, no public testimony will be heard. Future meetings will offer opportunities for residents across Florida to provide input and comments to the committee. For more information, please visit www.myflorida.com.

The event will take place from 10:00 a.m. till 2:30 p.m. on Tuesday, August 8, 2006, in Room 412 of the Knott Building at 111 West St. Augustine Street in Tallahassee.

Governor Jeb Bush appointed the following citizens to the Property and Casualty Insurance Reform Committee:

Lieutenant Governor Toni Jennings, of Tallahassee, appointed as Chair, for a term beginning July 26, 2006 and ending May 15, 2007. 

Senator JD Alexander, of Lake Wales, appointed for a term beginning July 26, 2006 and ending May 15, 2007.

Lee Arnold, of Clearwater, chief executive officer with Colliers Arnold International, appointed for a term beginning July 26, 2006 and ending May 15, 2007.

Representative Donald Brown, of DeFuniak Springs, appointed for a term beginning July 26, 2006 and ending May 15, 2007.

Leslie Chapman-Henderson, of Tallahassee, president, Federal Alliance for Safe Homes, appointed for a term beginning July 26, 2006 and ending May 15, 2007.

Joseph Collins, of Jacksonville, chief executive officer and owner, Collins Group, Inc., appointed for a term beginning July 26, 2006 and ending May 15, 2007.

Manuel de Zarraga, of Coral Gables, executive managing director, Holliday, Fenoglio Fowler, LLP, appointed for a term beginning July 26, 2006 and ending May 15, 2007.

Robert Helms, of Jacksonville, Florida chief executive officer, Wachovia, appointed for a term beginning July 26, 2006 and ending May 15, 2007.

Frank Kowalski, of Palmetto Bay, president and chief executive officer, Koski & Co., Inc., appointed for a term beginning July 26, 2006 and ending May 15, 2007.

A.D. “Sandy” MacKinnon, of Tampa, chief executive officer and owner, Yale Lift Trucks of Florida and Georgia, appointed for a term beginning July 26, 2006 and ending May 15, 2007.

Bill Montford, of Tallahassee, chief executive officer, Florida Association of District School Superintendents, appointed for a term beginning July 26, 2006 and ending May 15, 2007.

Representative Dennis Ross, of Lakeland, appointed for a term beginning July 26, 2006 and ending May 15, 2007.

Larry Schultz, of Rockledge, Mayor, City of Rockledge, appointed for a term beginning July 26, 2006 and ending May 15, 2007.

Linda Shelly, of Tallahassee, shareholder, Fowler, White, Boggs, Banker, appointed for a term beginning July 26, 2006 and ending May 15, 2007.

Barbara Weese, of Leesburg, retired, appointed for a term beginning July 26, 2006 and ending May 15, 2007.

Additionally, Governor Bush will appoint insurance industry representatives to a technical advisory council to serve as a resource to the Property and Casualty Insurance Reform Committee by providing expertise on industry related matters.


Consumer Services HelpLine (800) 342-2762

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