Citizens Actuarial & Underwriting Committee May Meeting Report

Recently, Citizens Property Insurance Corporation (“Citizens”) held an Actuarial and Underwriting Committee (“Committee”) meeting to discuss Florida’s 2008 Legislative Session, and receive updates on regional underwriting, the disputed claims appraisal process, multi-peril quote acknowledgment and agent communication efforts. To view the complete agenda, click here.

The meeting was called to order by Chairman Richard DeChene, with the following members in attendance: Carol Everhart, Jeff Kucera, Paul Palumbo, John Rafferty, and Fred Strauss. Also in attendance were Citizens’ staff members Joe Bouthillier, Kimberly Abate and Loren Gallogly.

Mr. Bouthillier gave an update on Citizens’ Agent Services Department’s (“Department”) communication and education efforts to keep agents informed of upcoming Citizens policy and procedure changes.

Currently, Citizens has approximately 8,900 agents in over 5,000 locations across the State of Florida, the majority of who communicate electronically. In addition to other pertinent information, e-mail is sent to agents regarding process changes and bulletins are sent regarding rule changes. The Department has implemented online training modules on new product lines and systems, as well as an online agent certification course.

Ms. Abate reported on proposed changes to the policy form for the disputed claims appraisal process following a loss. These changes would amend the policy form’s language to include rules for the appraisal of disputed claims. To view the policy form changes report, click here.

In the event of a dispute related to the amount of a loss, either Citizens or the policyholder may demand an appraisal of the loss. Currently, Citizens uses industry-standard language in the policy, which does not provide rules for the appraisal process. As a result of these ambiguities, insurers legally are required to pay damages that may not be covered by the policy form or supported by substantial evidence. The current language also does not provide for any recourse through meaningful judicial review.

Proposed revisions to this language would reform the process substantially, without the need for legislation or elimination of the provision altogether. The proposed revisions include:

• Requiring both parties agree to a “memorandum of appraisal” that lists the specific items related to the appraisal

• Requiring each appraiser to independently set the amount of damage for each item on the memorandum

• Requiring that the loss amount determined in the appraisal process be adjusted for prior payments, policy deductibles and policy conditions

• Limiting the time period either party has to demand an appraisal

• Adding an option to require examination under oath and record statements for all property claims

After clarifying which party chooses the appraiser (Citizens chooses from a set of 20-25 authorized vendors; policyholders may choose whomever they wish), and which party is responsible for which fees (each party pays its own appraiser fees; the appraisal umpire fees are split), the Committee approved preparation of these revisions to submit for Board approval.

Ms. Abate then gave an update on 2008 legislative impacts to Citizens’ products. These changes include:

• Personal residential structures or single condominium units with a combined dwelling and contents replacement of $2 million or more are no longer eligible for coverage with Citizens. This threshold was increased by the 2008 Legislature from a previous eligibility level of $1 million. Affected property owners may re-apply for coverage with Citizens if they can provide sworn affidavits from one or more insurance agents stating that the agents have been made their best efforts to obtain coverage and the property has been rejected for coverage by at least one authorized insurer and three surplus lines carriers.

• Statutory definitions of homestead and non-homestead property were repealed, as well as the non-homestead assessment. This change will become effective on July 1, 2008, at which time a new assessment will take its place. Details on the change will be provided at a subsequent meeting.

• Insurers now are required to provide policyholders with written notice at least 180 days in advance of a non-renewal or cancellation if the residential structure has been insured with the carrier for at least a five-year period prior to cancellation. Citizens will notify all policyholders who face non-renewal or cancellation until it can be determined which policies fall into the five-year category. Citizens also will follow that 180-day notice with a 90 or 60-day reminder notice. This noticing requirement will reduce the list of policies eligible for take-out at any given time.

• The rate freeze due to expire on January 1, 2009 has been extended for one year. This extension prohibits implementation of the screened enclosure exclusion and appropriately-priced optional buyback program until the freeze is lifted. This rate freeze also will delay providing wind-only products on the ePAS system that currently is used for multi-peril policies.

• The code-plus building standard eligibility requirement for properties constructed in 2009 or later and located within 2500 feet of the coastal construction control line was repealed. Citizens will not have to implement or enforce this construction standard.

• To view the complete legislative update, click here.

Mr. Gallogly updated the Committee on regional underwriting and direct agent communication efforts. Personal and Commercial Lines Underwriting Divisions have been divided into three regional territories. To view a map of the Personal Lines regions, click here. To view the Commercial Lines regional map, click here. To view a copy of the agent communications update, click here.

A pilot program initiated during early April has been expanded to include four Personal Lines and two Commercial Lines regions. Currently, Personal Lines regional underwriting is operational in the Miami-Dade, Broward, North Florida and Tampa Bay regions. Commercial Lines underwriting is operational in the Miami-Dade/Broward and remainder of the State regions. Response to the program has been positive; it will be operational statewide in several weeks.

Ms. Abate gave an update on the Multi-Peril Quote Acknowledgment Form for personal residential wind-only risks. As a result of 2007 legislative action, Citizens began offering multi-peril policies for defined areas of the High Risk Account (“HRA”) residential policyholders. Prior to this change, HRA risks only were eligible for wind coverage with Citizens. Other peril coverages were provided through a separate policy under the Personal Lines Account (“PLA”).

As required by law, all Citizens policyholders and eligible applicants now have the option to purchase either a wind-only or multi-peril policy. To ensure that consumers applying for a wind-only policy are provided with the option for a multi-peril policy, Citizens’ staff proposed the use of a Multi-Peril Quote Acknowledgment Form. This form will require acknowledgment from the applicant and agent that a quote for multi-peril coverage was provided but declined. To view a copy of the proposal detailing the Acknowledgment Form, click here.

After discussion, the Committee voted to approve the Acknowledgment Form. Citing Citizens’ increasing competitiveness Mr. Strauss abstained from voting.

Chairman DeChene expressed the desire to make a public, indicated rate filing at the end of 2008 for the purpose of informing Floridians of Citizens’ status.

Concern was expressed by Committee members that the Florida Office of Insurance Regulation might not review the rates, since they would be indicated rates only. Committee consensus was reached to continue developing actuarially-sound rates for a filing to be completed by the end of 2008.

The meeting was then adjourned.

 

Should you have any questions or comments, please do not hesitate to contact Colodny Fass.

 

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