Citizens Actuarial and Underwriting Committee Meeting Report: March 12
Mar 13, 2009
The Citizens Property Insurance Corporation (“Citizens”) Actuarial and Underwriting Committee (“Committee”) met via teleconference on Thursday, March 12, 2009. The meeting agenda and materials are accessible via hyperlink below.
The Committee discussed Citizens’ new personal residential rate restructuring plan for 2010 and presented a draft of a HO-3 Homeowner Premium Calculation Worksheet to determine new base rates for personal residential properties. To see a copy of the draft, click here.
Citizens has completed a new overall rate structure, but has yet to determine base rates, which will be adjusted based on premiums Citizens is allowed to charge. The process to determine Citizens’ actuarially-sound base rate, which is derived from loss analysis and risk load, is scheduled to be completed at the end of March, although adjusting premiums will take longer.
Numerous variables could alter what ultimately determines an actuarially-sound rate. The Florida Office of Insurance Regulation (“OIR”) and the Florida Legislature may determine a rate different from that of Citizens. A Committee member pointed out that Citizens will present its figures in a rate filing and wait for a determination.
Citizens’ new rate implementation is scheduled for no earlier than January 1, 2010, although factors such as rate hearings and Legislative action could force a delay. In order to meet the target date of January 1, Citizens would have to be ready to issue renewal notices in November, but may not be prepared to do so. Committee members anticipate at least one public hearing on rate increases, after which the OIR must approve a plan. In turn, Citizens would have to incorporate the OIR’s directives.
Committee members agreed that, potential variables notwithstanding, Citizens would proceed with the plan to implement a new rate structure by January 1, 2010, and act on contingencies as they are raised.
The new rate structure will only affect personal residential premiums. Because commercial residential property premiums are much more diverse, and there is currently not enough data on which to create a new base rate, Citizens is still developing an adequate commercial residential rate restructure plan. Thus, it will continue with current base rates, which are expected to be adequate in the short term.
The Committee considered whether it would be a worthwhile expenditure to initiate a study on determining accurate mitigation credits for commercial residential properties. Current mitigation credits for a combination of commercial residential multi-peril and commercial residential wind policies total $183 million, but are projected to grow to $291 million. Committee members said a study would help guide long-term commercial rates and future mitigation credits and agreed to develop a proposal on the potential benefit and length of such a study. The proposal will be presented at either the next, or following Committee meeting.
Project Updates
Citizens Underwriting School: The first student session will take place in April, 2009. The objective is to provide all Citizens underwriting and product development staff with a core foundation of insurance knowledge in order to improve the quality of underwriting, thereby resulting in improved service for agents and policyholders.
Inspection Proposal: Citizens’ Underwriting Department is developing an inspection and loss control proposal for personal and commercial lines to help ensure Citizens policyholders receive appropriate coverage, credit for age/type of building, and claims handling.
The proposal will focus on higher-loss risks that have a significant premium impact, including:
- Higher-value commercial buildings
- Wind mitigation features more likely to need verification, such as retrofitted homes
- Sinkhole-prone areas
- Four-point inspections for older homes
Automated Underwriting: A pilot program allowing for complete electronic multi-peril policy application submission has been operational since late November, 2008, and recently was expanded from the original 20 pilot agencies to approximately 35 in order to obtain a better spread of business.
Development of a parallel automated underwriting program for personal residential wind-only policies is progressing, with underwriting development almost completed. Only one policy form template remains to be developed and it is expected to be completed by the end of March, 2009.
Other Business
- A working group has been established this year to report on non-catastrophe losses, with a focus on water loss drivers could determine how Citizens settles those types of claims. The group held its first two meetings in March, 2009 and has drafted a report, which will be ready for presentation at the next Committee meeting.
- Citizens is streamlining windstorm policy forms for agents, who are in the process of rewriting 330,000 policies. A Committee member said this information will be communicated to agents in the next few days.
The Committee’s next meeting is scheduled for June 4, 2009, but members acknowledged they may need to meet earlier to discuss how action during the 2009 Legislative Session will impact Citizens’ 2010 rate determination.
With no further business to discuss, the meeting was adjourned.
Meeting Documents
Main Agenda Document: Actuarial_and_Underwriting_03_12_09_Agenda.pdf
Agenda Items:
01A: 01A 01 22 09 Meeting Minutes.pdf
02A: 02A Rate Restructure 2010.pdf
Should you have any questions or comments, please contact Colodny Fass.
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