Citizens Board of Governors Meeting Report: October 23

Citizens Property Insurance Corporation (“Citizens”) Board of Governors (“Board”) met on October 23, 2009. 

Opening the meeting with his President’s Report, Scott Wallace discussed the progress and importance of the Florida Commission on Hurricane Loss Projection Methodology (“FCHLPM”) Wind Mitigation Committee study, which is being developed for presentation to Florida political leaders in early 2010.  The FCHLPM will begin formulating recommendations at its next scheduled meeting on October 29, 2009.      

Citizens’ CFO Sharon Binnun noted that Citizens’ collected premiums are decreasing because of a decline in policy count, which is positive because it reduces Citizens’ exposure.  However, this decrease is also because of the application of wind mitigation discounts, which may be negative.  Citizens’ financial statement for the quarter ending September 30, 2009 is being compiled and will be filed with the Florida Office of Insurance Regulation by the November 15 due date. Complete statements will be provided at the December meetings. 

Citizens Senior Vice President Paul Palumbo discussed the placement of policies into Citizens from the recently-liquidated American Keystone Insurance.  He indicated that other carriers are working with the Florida Department of Financial Services and the Office of Insurance Regulation to keep policies in the private market, but that the ultimate outcome of this process cannot be determined until December. 

Mr. Palumbo reviewed the Actuarial and Underwriting Committee report, which recapped a discussion on Citizens’ emergency plan to validate the accuracy of more than $700 million in wind mitigation credits provided to its policyholders.  The Board approved the plan, which will involve the physical inspection of a cross-section of in-force personal and commercial residential policies.  Results will be continually analyzed to determine whether or not the program should be expanded to include inspection of all 400,000 policyholders currently receiving mitigation credits.  

Mr. Palumbo also discussed Citizens’ non-catastrophe loss control activities, which have included pursuing policy language changes in an effort to appropriately reduce exposure to water losses. 

For quotations on commercial buildings exceeding $10 million in value, new procedures have been initiated to ensure consumer understanding of the policy via their signed acknowledgment that Citizens’ rates, rules, and coverages are uniformly applied and do not vary by agent.  This process is also expected to limit the number of quotes that Citizens’ staff will have to prepare for the same customer, while ensuring that consumers can continue to choose their own agent.

A new agent of record procedure discloses to the policyholder that a new agent does not have access to any rates or options that the customer’s current agent does not. In addition, it discloses that the submission by the new agent will be fully underwritten.

Citizens’ recent rate filings are expected to be effective by January 1, 2010.  Research is already underway for factors that may impact subsequent filings, such as inspection fees, a screened enclosure exclusion, water limitation/exclusion and optional sinkhole coverage for commercial policies and others.

Citizens’ Senior Vice President of Claims Yong Gilroy reported on the Claims Committee meeting, during which an emergency contract for commercial adjuster services for non-catastrophic and catastrophic claims was discussed.  Board Member Alan Katz expressed concern with the emergency procurement process.  The other Board members did not share the same concerns as Mr. Katz.

It was reported that clarifications have been made to Citizens’ policy form to strengthen the disputed claims/appraisal process.  This is scheduled to be implemented with the 2010 rate change.  To view a summary of the revised disputed claims/appraisal policy, click here.

Citizens is developing additional policy language clarifications and form changes that will be considered by the Actuarial and Underwriting Committee.  These include:

• Determining the feasibility of amending policy loss settlement sections so that all flooring claims are settled on an actual cash value basis.
• Clarification of policy language related to plumbing repairs.
• Development of a proposal to introduce a flooring sub-limit.  Further analysis by Citizens on this issue has indicated that, in addition to the introduction of a flooring sub-limit for any covered loss, Citizens should consider implementing a sub-limit for specific water perils. Due to the relative complexity of such a sub-limit, it would be made separate from, and subsequent to, the introduction of the flooring sub-limit. Competitive research has uncovered a Florida company that restricts water coverage by age of the covered home.  Its policies for homes 40 years and older exclude all water coverage and have an optional buyback option for $10,000 of coverage for limited water perils.  Citizens’ loss experience does not support the application of a water sub-limit or exclusion by age of home, but does indicate the need to mitigate certain causes of water claims across homes of all ages. Investigation into the possibility of a water deductible for risks with defined characteristics indicated that, while partially effective, such a deductible might not address the main drivers of Citizens’ water loss deterioration and could be deemed discriminatory.  A water sub-limit has the potential to address these drivers in an equitable manner and analysis is underway to determine the most effective and equitable way to utilize such a limit.

Citizens’ Chief of Internal Audit Joyce Bellows summarized the Audit Committee meeting, which reviewed the completion of Citizens’ 2009 Audit Plan.  Two audits have been completed and three are pending conclusion.  An audit services contract was identified as an important supplement to Citizens’ internal audit functions.   

Board Member Bill Corry provided the Information System Advisory Committee Report, which included details on Citizens’ procurement of a data center in downtown Jacksonville.

Citizens’ Executive Vice President Susanne Murphy presented the Consent Agenda, which was approved by the Board.  The individual contracts approved were for the following services:

• Leadership Development
• Bond Underwriters
• Language Interpretation
• Inspection Management
• Commercial Adjusters for Non-Catastrophic and Catastrophic Claims
• Investment Management
• External Auditing

There being no further business before the Board, the meeting adjourned.  To view the agenda and meeting materials, click here.

Should you have any questions or comments, please contact Colodny Fass.

 

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