Why ‘unintended consequences’ spur today’s Citizens insurance change

When it comes to the costliest claims not caused by hurricanes, Florida’s second largest home insurer acknowledged “unintended consequences” behind a change approved by the board of state-run Citizens Property Insurance Corp. Wednesday.

Chris Gardner (left), chairman of the Citizens board, and president Barry Gilway meet with the Post Editorial Board to discuss issues last year, (Lannis Waters / The Palm Beach Post)

The revision to the language in Citizens policies comes after the company launched its “managed repair” program last year to give consumers incentives to use company-approved contractors for certain repairs. Citizens maintains these claims are often inflated in a way that drives up costs for everybody

The program, criticized by contractors outside the company’s program as well as attorneys who sue insurers, aims to limit payment on non-weather-related water losses to $10,000 if homeowners are not using company-approved contractors.* Such claims often involve, say, a broken pipe or a leaking water heater.

It also established a $3,000 limit on water mitigation services, meaning initial clean-up, unless Citizens approves more. But company officials concluded that, whoops, that opened the door to the kind of lawsuits it says are driving up rates.

“The flexible provision has had the unintended consequence of increasing the potential for litigation,” a Citizens statement said. “Under the new language, additional water mitigation exceeding the $3,000 limit would be completed by Citizens managed repair contractors at no cost to the policyholder.”

Meeting Wednesday, Citizens officials portrayed the change as a fair way to address the problem.

“We believe this is the most customer-centric approach to address the abuse and anticipated rate increases tied to non-weather water claim abuse,” said Steve Bitar, Citizens chief of consumer and agent services. “Again, our overriding goal is to ensure that every Citizens customer has choices and access to full coverage.”

The new policy language is set to take effect Aug.  1.

Contractors not in the company’s managed-repair program have argued it artificially restricts consumer choices and can lead to inadequate or unfair insurance payments. Sometimes damage from real-life claims does not conveniently stop at a company-imposed limit, they said.

“This is a huge problem and is more of the continued effort to have Citizens and the other carriers control the whole restoration process and not allow the free market and the policyholder to make choices,” David J DeBlander, president of Pro Clean Restoration and Cleaning in Pensacola, told The Palm Beach Post last year.

Update: Florida Association of Public Insurance Adjusters president Jimmy Farach said Wednesday the program still works against consumer interests.

“Citizens (is) taking away their policyholder’s rights to receive full compensation unless they agree to let the Insurance company’s pet contractors do the job,” Farach said in a statement. “This will take away any ability for checks and balances.  Instead of having a contractor that will perform a full and fair repair, Citizens will hire contractors that will do the cheapest repairs possible, without regard to the quality of the repair.  If the contractors hired by Citizens don’t make the repairs cheaply, Citizens won’t continue to hire them. This is really bad for Citizens policyholders.”

* An earlier version of the blog has been revised to reflect when the $10,000 limit would take effect. A Citizens spokesman notes while the managed repair program and $3,000 flexible cap has been in place since last year, “the $10,000 cap on non-weather water claims has yet to kick in.” The company expects that provision to go into effect Aug. 1, 2018  if state regulators approve. 

 

 

Insurer Citizens expects to get bigger after Irma

After Hurricane Irma stung property insurers for $6.3 billion in claims and counting, Florida’s state-run and second-largest carrier expects to add customers in 2018.

The board of state-run Citizens Property Insurance Corp. met Wednesday in Maitland.

“We’re expecting to go from 442,000 back to 500,000,” Barry Gilway, president of Citizens Property Insurance Corp., told the company’s board about its customer count in a meeting Wednesday.

Citizens has not always been right in its own forecasts, initially failing to predict it would get as small as it has from a high of about 1.5 million customers several years ago.

But as private insurers’ appetite for new business grew during Florida’s 11-year hurricane hiatus ending in 2016, now it is predicted to weaken in Irma’s wake. Many private companies limit their risk exposure, particularly in southeast Florida, for reasons ranging from hurricane risk to assertions that claim costs in the region are abusively inflated by contractors, public adjusters and lawyers.

Citizens customers are free to choose other options in the marketplace where available, but most of its policyholders switch to private insurers through state-administered transfers, such as letters offering to move them to another company. In some cases, such as when private companies offer similar or lower rates compared to Citizens in a state “clearinghouse,” customers do not have a choice to remain with Citizens.

Even at a reduced size, Citizens remains the state’s second largest insurer. Growing to 500,000 customers next year would represent about a 14 percent increase.

The company’s risk exposure, or the value of the properties it covers, is expected to grow from about $112 billion to $120 billion, Gilway said.

Citizens has about 42,000 customers in Palm Beach County.

 

 

 

 

 

Citizens insurance customer? There’s a change in your rate change

State regulators approved a 6.6 percent statewide average increase for homeowners covered by state-run Citizens Property Insurance Corp. next year, and tens of thousands of Palm Beach County residents can expect about a 9 percent jump in premiums.

Chris Gardner (left), chairman of the Citizens board, and president Barry Gilway meet with the Post Editorial Board to discuss issues ahead of the Florida Legislative session in February. (Lannis Waters / The Palm Beach Post)

One twist: Because of unusual circumstances associated with Hurricane Irma, the new rates take effect May 1, not in February as originally requested.

The rate order “balances the needs of policyholders facing challenges from Irma” with a “responsibility to maintain a healthy property insurance market,” said Citizens board chairman Chris Gardner.

The average premium for a  single-family home in Palm Beach County would rise to $2,877 from $2,631, Citizens figured in its rate proposal. Costs will vary for individual policies and some customers, mostly outside South Florida, will see decreases.

Overall, regulators on Wednesday approved an increase only slightly lower than the 6.7 percent statewide hike Citizens wanted, which company officials blamed largely on inflated non-storm claims in South Florida such as plumbing leaks.

Citizens, Florida’s second largest property insurer, covers about 450,000 customers, with more than 42,000 in Palm Beach County.

Customers who get wind-only coverage from Citizens could fare a little better, with an approved increase just under 1 percent compared to a company request of 1.7 percent statewide. Such policies were projected to cost about 2.6 percent more in Palm Beach County in the company’s original request.

Rates in Monroe County have been frozen pending further review of storm damage there.

As of December 4, Irma had resulted in more than 850,000 claims against all  companies with insured losses of nearly $6.3 billion. Citizens said it expects to receive about 70,000 claims, including more than 9,000 from Monroe County, with losses expected to pass $1.2 billion.

After Irma: Citizens expects more than $1 billion in claims

State-run Citizens Property Insurance Corp. expects about $1.23 billion in claims from Hurricane Irma, though the number of claims is likely to be lower than once feared, officials said Wednesday.

Chris Gardner (left), chairman of the Citizens board, and president Barry Gilway meet with the Post Editorial Board to discuss issues ahead of the Florida Legislative session in February. (Lannis Waters / The Palm Beach Post)

About 56 percent of more than 45,000 claims filed so far are coming from Miami-Dade, Broward and Palm Beach counties, with another 15 percent in Monroe, where Citizens provides 60 percent of the wind coverage.

At one point Citizens projected 125,000 claims from Irma, but now expects about 70,000 over two years, chairman Chris Gardner told board members meeting by telephone.

The company’s capital position remains “strong,”  he said, though “given the magnitude of reported claims, we are sure to encounter unforeseen challenges.”

Citizens, the state’s second largest insurer, expects to be reimbursed $193 million from the state’s hurricane catastrophe fund and pay a net amount of about $1 billion from its surplus, leaving it with a $6.4 billion surplus after claims, Gardner said.

At this time, no private reinsurance has been tapped, a company spokesman said.

Though the company has had trouble arranging enough claims adjusters after previous storms, Gardner described  current staffing as “adequate,” with about 800 adjusters in the field.

 

 

 

 

After Irma: Insurer Citizens expects 125,000 claims

State-run Citizens Property Insurance Corp. has received nearly 16,000 claims by Thursday morning and expects perhaps 125,000 from Hurricane Irma, a spokesman said.

Citizens president Barry Gilway defended a proposed rate hike in a hearing in North Miami in August.

That’s around one in four customers of the state’s No. 2 insurer. The company could announce as early as Friday mobile operations centers in South Florida to help people process claims.

Most claims so far are coming from Monroe, Miami-Dade and Broward counties as well as southwest Florida, officials said.

State officials did not immediately have a statewide number for claims filed.

Insurance Commissioner David Altmaier said in advance of the storm, “Consumer protection is our number one priority as Hurricane Irma bears down on Florida. The Office is dedicated to constantly monitoring the financial health of insurers, and in the coming days, we will be available around the clock to address any insurer issues.”

 

 

 

Sen. Flores rips Citizens rate hike, ‘borderline unAmerican’ moves

The Florida Senate’s insurance chairwoman blasted a proposed rate hike up to 10 percent in South Florida by Citizens Property Insurance Corp. Wednesday and said she will consider legislation to limit its “borderline unAmerican” moves to restrict consumer choice in fixing certain claims.

“Make no mistake: This takes away a right someone already has,” said state Sen. Anitere Flores, R-Miami, interrupted several times by applause from the audience at a hearing in North Miami.

Sen. Flores

Flores said “unfortunately” the state’s Office of Insurance Regulation had already approved part of the state-run company’s plan before the hearing and before the public-comment period had ended on rates.

Citizens will limit payments to $10,000 for water claims if consumers do not choose contractors the company approves in a “managed-repair” plan.

Consumers under duress have little way to know how much fixing damage will eventually cost, and many do not trust Citizens, she said. In a follow-up statement later, Flores urged regulators to reject the rate increase outright: “Citizens has unfairly raised insurance rates on policyholders since 2010, forcing my South Florida constituents to pay $700 million more in premiums than in actual claims since 2004.”

Citizens president Barry Gilway  defended the repair policy as well as the rate increases to take effect Feb. 1, 2018, if approved by regulators in early September. He said the real problem is a “scam” perpetrated by some contractors and attorneys to inflate costs for non-storm claims such as water damage from a leaky pipe.  The cost of a water claim in South Florida has roughly doubled to $20,000 in recent years, he said.

Gilway said “we continue to experience a surge in non-catastrophe losses and litigation that have forced us to make policy changes and, for the purposes of today’s hearing, to seek rate increases again this year for more than half of our 452,000 policyholders.”

The average statewide increase for homeowners is 6.7 percent, but South Florida would see the highest increases.

Miami-Dade and Broward counties face increases of about 10 percent, but Palm Beach County is not far behind with a 9.3 percent average hike for a standard homeowner’s policy. A records request by The Palm Beach Post showed Palm Beach County’s share of water-claims lawsuits is proportionately small: 5.1 percent, below the county’s 7.1 percent share of the company’s insured risk.

Losses from water claims-related lawsuits totaled just $4.8 million in Palm Beach County in 2016, dwarfed by Miami-Dade County’s $70.7 million in losses, records show.

In Wednesday’s hearing, regulatory staffers inquired about whether Palm Beach County was being treated properly. Citizens officials acknowledged the county had a smaller water-damage problem compared to its southern neighbors but maintained the proposed increase was still  justified, with one saying, “Palm Beach really does pay for costs within Palm Beach.”

Customers and  the general public are welcome to submit comments on the rate proposal until 5 p.m. Aug. 31  by sending an email to: ratehearings@floir.com with “Citizens” in the subject line.

 

 

Fed up with Citizens rate hikes? Email or attend Aug. 23 hearing

Not happy with rate increases at state-run insurer Citizens? Now is the time to tell regulators.

Chris Gardner (left), chairman of the Citizens board, and president Barry Gilway meet with the Post Editorial Board to discuss issues ahead of the Florida Legislative session in February. (Lannis Waters / The Palm Beach Post)

Send an email or attend a hearing in person next week in South Florida if you want to comment on Citizens Property Insurance Corp.’s plan to raise standard homeowner premiums 6.7 percent statewide in 2018 and 9.3 percent in Palm Beach County.

The hearing is set for Wednesday, Aug. 23 at 4 p.m. at Florida International University in North Miami, at the Kovens Conference Center, Bayview Ballroom South, Room 214A.

The general public is welcome to submit comments until 5 p.m. Aug. 31  until by sending an email to: ratehearings@floir.com with “Citizens” in the subject line.

Palm Beach County was largely spared severe damage from 2016 hurricanes, but that’s not the main driver of rate increases, according to Citizens.

Citizens wants not only to raise rates but also change the way it handles water-damage claims — not necessarily related to storms but issues like a plumbing leak. It would cap benefits for such claims at $10,000 unless consumers use contractors Citizens chooses in a managed-repair plan.

That requires a consumer ankle-deep in water to know repairs will conveniently cost less than $10,000 before making a choice, contractors have argued.

“This is a huge problem and is more of the continued effort to have Citizens and the other carriers control the whole restoration process and not allow the free market and the policyholder to make choices,” David J DeBlander, president of Pro Clean Restoration and Cleaning in Pensacola, told The Palm Beach Post in June. “There is a reason they cannot push their efforts through the legislature these last six to seven years. The people and the legislators can see the carriers are trying to control everything for their best interests and profit margins.”

Citizens officials say water claims are grossly inflated by some contractors and attorneys and they must act.

“It’s ironic that our rates for wind coverage are coming down, but Citizens policyholders in South Florida still must brace themselves for continued rate increases,” board chairman Chris Gardner said in June. “We don’t want to raise premiums, but Citizens is obligated by statute to set actuarially sound rates.”

The average premium for an H03 policy, covering a single-family home, would rise to $2,877 from $2,631 in Palm Beach County under the company’s proposal. Floridians already pay the nation’s highest average property insurance premiums.

Premiums for similar policies would rise 2.2 percent in Martin, 8.9 percent in St. Lucie and more than 10 percent in Broward and Miami-Dade counties, the maximum allowed in a single year for Citizens under a state rate cap.

Company documents said, “The peril of water continues to be the primary driver of Citizens’ increased rate need. In particular, litigated water claims in South East Florida (Miami-Dade, Broward, and Palm Beach counties) are driving the water indication.”

Still, records requested by the Post show Palm Beach County accounts for only 5.1 percent of the lawsuits against Citizens statewide associated with “assignment of benefits” — when a consumer signs over control of insurance benefits to a contractor.

Yet Palm Beach County has almost 10 percent of the company’s overall customers. Citizens had 448,802 customers statewide as of March 31, with 41,975 in Palm Beach County. So Palm Beach County has a lower than average share of AOB lawsuits compared to its total customer base.

Citizens officials insist the rate request for Palm Beach County is still justified. They note  31.3 percent of the county’s claims in 2016 used assignment of benefits, up from 8.5 percent in 2014,  though this did not mean they had lawsuits associated with them. It can take about a year after a claim is reported to enter litigation, if a lawsuit is going to happen, a company spokesman said.

But arguments about what might happen based on “trends” in water claims, as opposed to actual losses, have not always withstood careful investigation.

Regulators questioned a proposed 8.1 percent blanket increase that was subsequently withdrawn a year ago for Palm Beach, Broward and Miami-Dade counties by the state’s largest insurer, Fort Lauderdale-based Universal Property & Casualty Insurance Co. Universal consultant Kenneth L. Leonard Jr. said “increasing trends in the Tri-County region” create “additional uncertainty” not “captured through techniques traditionally followed to develop individual territory indications.”

State officials questioned why a special three-county rate increase based on such vague justification was not “unfairly discriminatory.”

Citizens officials said their proposal does not unfairly lump in Palm Beach County with its neighbors to the south.

“The recommended rate changes for Palm Beach is not a result of being ‘grouped’ with Broward and Miami-Dade,” a company statement  said. “The recommended rate changes for Palm Beach are due to the fact that Palm Beach is experiencing similar loss trends as Broward and Miami-Dade.”

Still, there’s little question where most of the losses are actually occurring.  In 2016 losses associated with AOB lawsuits, Miami-Dade Co. accounted for $70.7 million and Broward $26.4 million while Palm Beach’s total was $4.8 million, Citizens records requested by the Post show.

Miami Dade Co. has 31.6 percent of the company’s total exposure (the potential cost to cover all properties) but 64.1 percent of the AOB lawsuits. Broward has 14.6 percent of the exposure and 26.5 percent of the AOB suits.

Unlike them, Palm Beach Co. has a lower share of Citizens’ AOB suits (5.1 percent) than its share of the company’s total exposure (7.2 percent).

Citizens officials acknowledged Miami-Dade and Broward counties “are in a class by themselves” and that Palm Beach County shows a “much better result.”

But they maintain Palm Beach County is still “worse” than the rest of the state outside the tri-county region, which collectively accounts for 4.3 percent of  AOB lawsuits compared to Palm Beach County’s 5.1 percent.

Source: Citizens Property Insurance Corp. response to request from The Palm Beach Post.

If Citizens officials believe rate hikes in Palm Beach County are  justified for reasons other than water claims, that’s different from the clear message in the company’s public statements about this rate request.

Want regulators at the Florida Office of Insurance Regulation to give this request close scrutiny? Now is the time to speak out.

For more information, visit the Citizens rate hearing web page.

 

Few switch from Citizens insurance as up to 50,000 Oct. offers await

Up to 50,000 transfer offers are in the pipeline for October, but customers of state-run Citizens Property Insurance Corp. are accepting less than 10 percent of the offers regulators approved so far in 2017.

That’s 13,460 accepted offers to transfer to private insurers this year compared to 139,244 offers approved by the state’s Office of Insurance Regulation as the heart of hurricane season draws near.

Readers can compare financial safety ratings and complaint information about Citizens and private companies at The Palm Beach Post’s Insurance Explorer.

Private companies don’t necessarily follow through with the maximum offers they are allowed, and up to 19,520 August offers are still outstanding, but the bottom line is still a relative trickle leaving Florida’s second largest property insurer.

Citizens downsized to fewer than 500,000 customers from a high of 1.5 million five years ago, largely through such offers. Customers are automatically switched unless they take pains to decline. About 10 percent of the company’s customers live in Palm Beach County.

Now offers from private insurers are slowing down as many remaining Citizens customers are becoming choosier about taking offers if they don’t see clear advantages in price or coverage.

Approved for October offers are Safepoint Insurance Co. (35,000) and Southern Oak Insurance Co. (15,000). No offers were made for September.

Meanwhile, the Citizens board finds itself without a representative from Palm Beach County. Florida Chief Financial Officer Jimmy Patronis announced the appointment of former Florida Senate president John M. McKay of Bradenton to the board Tuesday, a day after Wellington accounting executive Juan Cocuy’s three-year term ended. Cocuy did not seek reappointment, according to company officials.

Chris Gardner, who has been chairman since 2013, received another term on the board  as Gov. Rick Scott appointed him, this time to fill a vacant ninth seat.  Scott also reappointed Jim Holton of Indian Shores and Bette Brown of Tavernier.

Biggest Citizens rate hikes aim at S. Fla. as contractors oppose plan

The board of state-run Citizens Property Insurance Corp. voted Tuesday to raise homeowner premiums 6.7 percent statewide in 2018 and 9.3 percent in Palm Beach County and make sweeping changes in the way it handles water claims, drawing fire from contractors who say the moves go too far.

Chris Gardner (left), chairman of the Citizens board, and president Barry Gilway meet with the Post Editorial Board to discuss issues ahead of the Florida Legislative session in February. (Lannis Waters / The Palm Beach Post)

Citizens president Barry Gilway called the moves “stopgap measures” in the wake of repeated failures to get state legislators to change laws that insurers say allow contractors and attorneys to inflate the cost of claims. He told board members meeting in Maitland the problem “truly is getting worse.”

A restoration company president who has spoken out in meetings around the state questioned how it’s a fair choice for consumers, who have little way to know when water is rushing out of a failed pipe whether damage will be limited conveniently to $10,000.

“This is a huge problem and is more of the continued effort to have Citizens and the other carriers control the whole restoration process and not allow the free market and the policyholder to make choices,” said David J DeBlander, president of  Pro Clean Restoration and Cleaning in Pensacola. “There is a reason they cannot push their efforts through the legislature these last six to seven years. The people and the legislators can see the carriers are trying to control everything for their best interests and profit margins.”

DeBlander said he was won awards for ethical service from local business groups, but he contends firms like his are often shut out of company managed-repair plans because his loyalty is to the consumer, not the insurer.

“The homeowner deserves to use the vendor of their choice,” DeBlander said. “I currently have a case against them where, after not paying us for 10 months, they had an attorney call me to tell me they would give my company $3,800 for a job we legitimately billed them for $6.500. They didn’t even have an adjuster call us to try to negotiate a deal, only an attorney who said take it or leave it.”

A Citizens spokesman declined comment on that case, but company officials said at Tuesday’s meeting said water claims are a big reason why it needs to raise rates.

“It’s ironic that our rates for wind coverage are coming down, but Citizens policyholders in South Florida still must brace themselves for continued rate increases,” board chairman Chris Gardner said. “We don’t want to raise premiums, but Citizens is obligated by statute to set actuarially sound rates.”

The average premium for an H03 policy, covering a single-family home, would rise to $2,877 from $2,631 in Palm Beach County, according to proposals approved by the board. Statewide, it would jump to $2,681 from $2,512.

Such premiums would rise 2.2 percent in Martin, 8.9 percent in St. Lucie and more than 10 percent in Broward and Miami-Dade counties, the most allowed in a single year for Citizens under a state rate cap.

The average state increase for all Citizens residential policies including condos and renters would be 5.3 percent.

Wind-only policies that cover storm winds, and not fire, water claims and other hazards, would rise less, 1.2 percent statewide and 2.6 percent in Palm Beach County to an average of $2,964.

If approved by regulators, rates would take effect Feb. 1, 2018.

“The peril of water continues to be the primary driver of Citizens’ increased rate need,” a company proposal said. “In particular, litigated water claims in South East Florida (Miami-Dade, Broward, and Palm
Beach counties) are driving the water indication.”

Citizens also proposes to refuse coverage for more than one water claim in three years or two in five years. Currently homeowners must have fewer than three “non-Act of God” losses in three years.

In other cases, Citizens moved to ease some restrictions, such as no longer requiring additional inspections for homes more than 50 years old.

The company’s rates have been complicated by a rapid downsizing from 1.5 million customers in 2012 to less than 500,000 now, though transfers to private insurers have significantly slowed and the company expects to add customers in 2017.

In 2016, Citizens posted its first loss since 2005, $27.1 million, after it paid more than six times that amount to private offshore firms for optional reinsurance coverage that covered no claims in a hurricane year, The Palm Beach Post reported.

 

 

 

Insurer Citizens plans rate hikes, 9.3% in Palm Beach Co.

As its board meets Tuesday, state-run Citizens Property Insurance Corp. wants to raise standard homeowner premiums 6.7 percent statewide in 2018 and 9.3 percent in Palm Beach County.

Citizens president Barry Gilway.

The average premium for an H03 policy, or single-family home, would rise to $2,877 from $2,631 in Palm Beach County, according to filings approved with little debate by the Citizens actuarial and underwriting committee Monday.

Wind-only policies would rise 2.6 percent in the county to $2,964 and 1.2 percent statewide.

If the full Citizens board approves, the proposals would be sent to state regulators for consideration. They would take effect in 2018.

The board will also consider several changes to company rules, including a number to address to address claims from water losses that company officials say are inflated by contractors and attorneys in South Florida. These are not from hurricanes or severe storms but things like plumbing leaks.

“The peril of water continues to be the primary driver of Citizens’ increased rate need,” a company proposal said. “In particular, litigated water claims in South East Florida (Miami-Dade, Broward, and Palm
Beach counties) are driving the water indication.”

Homeowners would have an option to use the company’s own contractors in a managed repair plan or face a $10,000 limit on what Citizens will cover in water losses. Citizens also proposes to refuse to coverage for more than one water claim in three years or two in five years. Currently homeowners must have fewer than three “non-Act of God” losses in three years.