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June 9, 2023
Property Insurers Curb New Policies in Cat-Prone Areas Nationally
Insurance companies are pulling back on homeowners’ policies in vulnerable areas nationally out of fear of floods, storms and fires made worse by climate change and soaring costs of rebuilding. AIG is planning curbs on home-insurance sales to affluent customers in some 200 ZIP Codes across the U.S. at high risk of floods or wildfires, people familiar with the matter said. The states affected include New York, Delaware, Florida, Colorado, Montana, Idaho and Wyoming, the people said. AIG has already restricted new business in California.
In a little-noticed pullback, Farmers Group earlier this year stopped offering new home-insurance policies in hurricane-prone Florida. A spokesman said that “with catastrophe costs at historically high levels and reconstruction costs continuing to climb,” the pause was designed to help Farmers more effectively manage its risk exposure.
State Farm and Allstate, meanwhile, are pulling back from California’s home-insurance market. The shift is making it hard for some home buyers to get insurance and is sparking fierce wrangling over what is most to blame: climate change, inflation or regulations.
Insurers in California say regulatory curbs on pricing mean they can’t recoup an inflation-driven surge in rebuilding costs, as well as rising losses from wildfires.
Payouts on claims to California homeowners more than doubled in 2019 through 2022, while premiums increased by only around a third, according to the American Property Casualty Insurance Association, an industry group.
Consumer advocates accuse the major insurance companies of using their market power to push back on policyholder protections. “They’re trying to bully their way out of oversight,” said Douglas Heller, director of insurance at the Consumer Federation of America. “They’re exploiting the moment to get something they’ve always wanted.”
State Farm and Allstate declined to comment on the suggestion that they are trying to pressure regulators.
The insurers’ moves leave homeowners with fewer choices or, in some cases, no choice at all, according to insurance brokers.
In California, State Farm and Allstate were “the only game in town” for multimillion-dollar homes in wildfire-exposed areas such as Lake Tahoe or Carmel, according to Jim Tolliver, a San Francisco-based broker with Woodruff Sawyer.
The decision by insurers to stop writing new home-insurance policies means properties including a Beverly Hills mansion that Tolliver is trying to find coverage for might not be insurable, he said. Allstate and State Farm are two of the five biggest insurers in the state. California has an insurer of last resort, the Fair Access to Insurance Requirements Plan, but that is expensive and offers bare-bones coverage of at most $3 million.
“California is a broken insurance system,” Tolliver said. “It’s a ticking time bomb.”
Ricardo Lara, the state’s insurance commissioner, disagrees, saying insurers in the past have paused and restarted writing policies. “We have been here before after wildfires and market changes,” he said. Lara, an elected official, added that the pullback won’t deter his staff from scrutinizing insurers’ pricing strategies “to prevent unjustifiably high rates.”
The question of what rates are justified is a thorny one.
California hasn’t been a consistently bad place for companies to sell home insurance in recent years. The average loss ratio, which measures claims in relation to premiums, on these policies was better in the state than in the U.S. as a whole in six of the 10 years through 2022, according to the ratings company AM Best.
But wildfires, increasing in severity and frequency owing to climate change, have taken a toll on insurers’ earnings. Since the start of 2017, seven of the eight wildfires with the highest insured losses have occurred in California, according to the insurance brokerage Aon.
Reinsurers, which companies including State Farm use to take on some of the risks of the policies they sell, have reacted to escalating losses on catastrophes by pushing up their prices. Rates for property-catastrophe reinsurance policies renewed on June 1 rose 33% on average, according to a recent report from the reinsurance broker Howden Tiger.
Adding to these pressures, the postpandemic rise in inflation and supply-chain glitches have pushed up rebuilding costs. Reconstruction costs, including the cost of labor and materials, have risen 25% in California since the start of 2020, according to the analytics company Verisk.
“With inflation so high, insurers don’t have much profit padding to carry them through a market where they’re taking short-term losses,” said Amy Bach, executive director at the consumer-advocacy group United Policyholders.
State Farm’s Californian property-insurance arm posted a $312 million underwriting loss for the first three months of this year, more than its $241 million loss for all of 2022, according to public records.
Lara, the California insurance commissioner, said insurers have failed to ask for the rate increases they need. A law passed by California voters in 1988, known as Proposition 103, requires insurers to get approval from the commissioner for rate increases. Requests for hikes of more than 6.9% can go to a public hearing, which typically means a decision takes 18 months or more, according to industry insiders.
Insurers typically asked for increases below 7%, sometimes more than once a year. State Farm and Allstate have now put in for much higher increases. State Farm requested a 28% raise in March, and Allstate last month put in for a 39.6% boost, state records show.
Allstate blamed California’s rate-approval system for its decision to pause new applications, saying it meant adjusting prices quickly to reflect the inflationary increases in rebuilding costs wasn’t an option. As a result, “The cost to insure new home customers in California is far higher than the price they would pay for policies,” the company said in a statement.
Insurers are pushing for changes to the state system to allow them to increase premiums more readily. They argue that climate change means that the current system of using historical claims data only, rather than also using models of potential wildfires, doesn’t accurately reflect the risks. The industry is also advocating for being allowed to reflect reinsurance costs in their requests for premium increases.
Even without the changes that the industry wants, rates are already going up a lot in the state, according to Bach of the consumer group United Policyholders. She said the commissioner’s message to insurers to ask for what they need will likely accelerate that trend. “Buckle your seat belts, California,” she said.

June 9, 2023
Supreme Court Narrows the Reach of an Aggravated Identity Theft Law
The Supreme Court on Thursday narrowed the scope of a federal law that adds two years of prison to various felonies if identity theft is involved, unanimously ruling that the government had interpreted what can count too broadly.
The case centered on a Texas man, David Dubin, who was convicted of overbilling Medicaid for a psychological services firm. Because he submitted an inflated claim using a patient’s Medicaid number, prosecutors convinced a judge that the law on aggravated identity theft applied, and Mr. Dubin received a longer prison sentence.
But in a 21-page opinion joined by seven of her colleagues, Justice Sonia Sotomayor wrote that a defendant’s misuse of another person’s identity must be “at the crux of what makes the underlying offense criminal, rather than merely an ancillary feature of a billing method.” She rejected the government’s more sweeping interpretation that the law lacked any limit.
Under the government’s reading, she wrote, “as long as a billing or payment method employs another person’s name or other identifying information, that is enough. A lawyer who rounds up her hours from 2.9 to three and bills her client electronically has committed aggravated identity theft. The same is true of a waiter who serves flank steak but charges for filet mignon using an electronic payment method.”
“The text and context of the statute do not support such a boundless interpretation,” she added.
Congress enacted the law, the Identity Theft Penalty Enhancement Act, in 2004. It says that for a list of felonies, whoever “knowingly transfers, possesses or uses, without lawful authority, a means of identification of another person shall, in addition to the punishment provided for such felony, be sentenced to a term of imprisonment of two years.”
A House Judiciary Committee report at the time justified it by citing the frequency of identity theft when people opened credit card or utility accounts in someone else’s name and warned that such a tactic could help terrorists. Some Democrats opposed the bill because of the mandatory minimum sentence.
But the law has proved problematic for another reason: Congress left unclear what kinds of misuses of other people’s means of identification should trigger the law. While Mr. Dubin’s case does not fall squarely within an ordinary understanding of “identity theft,” both a district court and appeals court had ruled that it fit within the statute’s text.
Even with the new test established by the majority on Thursday, Justice Neil M. Gorsuch, in a concurring opinion, expressed worry that lower courts would still struggle to interpret the vague wording of the statute. He urged Congress to clarify the law, writing that it alone could fix the matter.
“Until it does, I fear the issues that have long plagued lower courts will persist,” he added. “And I will not be surprised if someday, maybe someday soon, they find their way back here.”
June 9, 2023
Cyber Models Put 1:200-Year Loss Event at Up to $33.4B: Guy Carpenter

June 9, 2023
Lawyers Blame ChatGPT for Duping Them into Citing Bogus Case Law
Two apologetic lawyers responding to an angry judge in Manhattan federal court blamed ChatGPT Thursday for tricking them into including fictitious legal research in a court filing.
Attorneys Steven A. Schwartz and Peter LoDuca are facing possible punishment over a filing in a lawsuit against an airline that included references to past court cases that Schwartz thought were real, but were actually invented by the artificial intelligence-powered chatbot.
Schwartz explained that he used the groundbreaking program as he hunted for legal precedents supporting a client’s case against the Colombian airline Avianca for an injury incurred on a 2019 flight.
The chatbot, which has fascinated the world with its production of essay-like answers to prompts from users, suggested several cases involving aviation mishaps that Schwartz hadn’t been able to find through usual methods used at his law firm.The problem was, several of those cases weren’t real or involved airlines that didn’t exist.
Schwartz told U.S. District Judge P. Kevin Castel he was “operating under a misconception ... that this website was obtaining these cases from some source I did not have access to.”
He said he “failed miserably” at doing follow-up research to ensure the citations were correct.
“I did not comprehend that ChatGPT could fabricate cases,” Schwartz said.
Its success, demonstrating how artificial intelligence could change the way humans work and learn, has generated fears from some. Hundreds of industry leaders signed a letter in May that warns “ mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war.”
Judge Castel seemed both baffled and disturbed at the unusual occurrence and disappointed the lawyers did not act quickly to correct the bogus legal citations when they were first alerted to the problem by Avianca’s lawyers and the court. Avianca pointed out the bogus case law in a March filing.
The judge confronted Schwartz with one legal case invented by the computer program. It was initially described as a wrongful death case brought by a woman against an airline only to morph into a legal claim about a man who missed a flight to New York and was forced to incur additional expenses.
“Can we agree that’s legal gibberish?” Castel asked.
Schwartz said he erroneously thought that the confusing presentation resulted from excerpts being drawn from different parts of the case.
When Castel finished his questioning, he asked Schwartz if he had anything else to say
“I would like to sincerely apologize,” Schwartz said.
He added that he had suffered personally and professionally as a result of the blunder and felt “embarrassed, humiliated and extremely remorseful.”
He said that he and the firm where he worked — Levidow, Levidow & Oberman — had put safeguards in place to ensure nothing similar happens again.
LoDuca, another lawyer who worked on the case, said he trusted Schwartz and didn’t adequately review what he had compiled.
After the judge read aloud portions of one cited case to show how easily it was to discern that it was “gibberish,” LoDuca said: “It never dawned on me that this was a bogus case.”
He said the outcome “pains me to no end.”
Ronald Minkoff, an attorney for the law firm, told the judge that the submission “resulted from carelessness, not bad faith” and should not result in sanctions.
He said lawyers have historically had a hard time with technology, particularly new technology, “and it’s not getting easier.”
“Mr. Schwartz, someone who barely does federal research, chose to use this new technology. He thought he was dealing with a standard search engine,” Minkoff said. “What he was doing was playing with live ammo.”
Daniel Shin, an adjunct professor and assistant director of research at the Center for Legal and Court Technology at William & Mary Law School, said he introduced the Avianca case during a conference last week that attracted dozens of participants in person and online from state and federal courts in the U.S., including Manhattan federal court.
He said the subject drew shock and befuddlement at the conference.
“We’re talking about the Southern District of New York, the federal district that handles big cases, 9/11 to all the big financial crimes,” Shin said. “This was the first documented instance of potential professional misconduct by an attorney using generative AI.”
He said the case demonstrated how the lawyers might not have understood how ChatGPT works because it tends to hallucinate, talking about fictional things in a manner that sounds realistic but is not.
“It highlights the dangers of using promising AI technologies without knowing the risks,” Shin said.
The judge said he’ll rule on sanctions at a later date.

June 9, 2023
Lionel Richie Becomes an Acrisure Brand Ambassador

June 8, 2023
A Surprisingly High Number of Americans Think Insurance Fraud Is Not a Crime: Survey
- More than 36% of all Americans believe it’s acceptable to submit an inflated auto damage claim
- Over 30% of 25-34-year-olds “definitely would” submit a fraudulent property damage claim
- 27% of those 18-24 would commit workers’ compensation fraud, compared to less than 10% of those 45 and older
- Over a quarter of those 18-34 are “motivated” to commit insurance fraud compared to less than 7% of those over 45

June 8, 2023
Flood Insurance Costs Have Risen for More than Half of Policies: FEMA
Where has flood insurance increased the most?
Across all states and territories, the average cost of flood insurance was $888 per policy prior to Risk Rating 2.0, according to FEMA data. With Risk Rating 2.0, the average cost of insurance is projected to be $1,808. Here are some of the states that could see the most expensive flood insurance costs on average, based on FEMA’s Risk Rating 2.0, which was implemented in October 2021 for new policies and in April 2022 for policies that were renewed.- Hawaii: $3,653
- West Virginia: $3,074
- Connecticut: $3,000
- Maine: $2,700
- New Hampshire: $2,545
- Guam: $2,438
- Vermont: $2,248
- Florida: $2,213
- Kentucky: $2,201

June 8, 2023
Two Insurers Approved to Take Over 26,000 Policies from Florida State-run Insurer Citizens
State Law
A new state law signed by the governor would allow companies to charge up to 20% more than Citizens. “So maybe they might have a slight increase on their homeowners, but now they don’t have to carry flood insurance so it could really be a benefit to them,” McDaniel explained. Citizens is requiring all policyholders to eventually get flood insurance, something they may not need with a private insurer. “It could be a silver lining for those people,” McDaniel predicted. Florida’s Insurance Commissioner Michael Yaworsky called the move to depopulate a good sign “It’s a sign of a healthy market when there are private carriers that are available to depopulate citizens,” Yaworsky stated. Notices are expected to go out soon but no word on how much more it may cost policyholders. “You could have some sort of rate hike or you could have no rate hike. It will entirely depend on what the individual policy looks like,” Yaworsky said. Citizens policyholders should closely monitor their mailboxes for warnings of change.
June 8, 2023
PGA and LIV Partnership Risks Antitrust Scrutiny

June 8, 2023
AI Insurtech Concirrus Launches New Multi-line Submissions Solutions

June 8, 2023
ATS Underwriting Chooses Gradient AI to Expand Medical Stop Loss Insurance Business

June 7, 2023
Florida Joins Other States in Fight Over Flood Insurance Revamp
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