Citizens Market Accountability Advisory Committee Meeting Report: December 14

 

The Citizens Property Insurance Corporation (“Citizens”) Market Accountability Advisory Committee (“Committee”) met on December 14, 2010, during which it reviewed Citizens’ High-Risk Account (“HRA”) Reduction Plan and the most recent updates on the ongoing Inspection and Outreach Program. 

To access the meeting materials, click here.

 

HRA Boundary Reduction Plan Update

Christine Ashburn, Citizens’ Director of Legislative and External Affairs, updated the Committee on Citizens’ HRA boundary statutory boundary reduction requirements, which are triggered in the event that annually reported probable maximum loss (“PML”) data does not reflect a reduction of at least 25 percent compared to a benchmark set in 2000.  To achieve a 25 percent reduction from the 2000 benchmark this year, the PML in the HRA must be reduced from its current $8.8 billion to $4.7 billion. 

Because this year’s PML report did not reflect a reduction, Citizens prepared recommendations on HRA boundary changes and has submitted them to Citizens’ officers, Florida Governor Charlie Crist, Chief Financial Officer Alex Sink, incoming Speaker of the House Dean Cannon and Senate President Mike Haridopolos.  Governor-Elect Rick Scott and CFO-Elect Jeff Atwater also were copied.

According to the boundary change plan (“plan”), approximately 195,000 wind-only policies currently covered in the HRA will have to be non-renewed, leaving policyholders to seek multi-peril replacement coverage either in the voluntary market or within Citizens’ Personal Lines Account/Commercial Lines Account (“PLA/CLA”).  

It is also estimated that the 95,000 multi-peril policies currently written in the HRA would be transferred to the PLA/CLA, which Ms. Ashburn described as an easy transition, since certain underwriting data is already stored in ePAS. 

It is estimated that 121,000 policies will remain in the HRA following the implementation of these changes.   Ms. Ashburn said that, in some cases, HRA boundaries would be diminished to as little as 1,000 feet from the coastline.  She also said that the reduction will have a significant impact in some areas where the current HRA boundary encompasses the entire city limits.

The plan contemplates two scenarios:  one in which 90 percent of displaced HRA policies are rewritten by Citizens as personal or commercial lines policies and one in which 75 percent are rewritten. 

Florida Deputy Insurance Commissioner Belinda Miller said that it seems like this process will be “extremely expensive and disruptive” and that it would require the private market to absorb a lot of policies at one time.  She added that perhaps a suggestion could be made to the Legislature that Citizens not write any new wind-only policies, while allowing the approximately 400,000 current wind-only policies to continue.  

Ms. Ashburn replied that the number of wind-only policies has decreased and, because of that, Ms. Miller’s suggestion might be “more palatable.”  Ms. Ashburn went on to say that the Board’s direction was to ensure that, in providing the plan to the Legislature, the “substantial impact to Citizens and consumers” would be understood.

 

Underwriting Call Center Pilot Update

Steve Bitar, Citizens Director of Consumer and Agent Services, provided an update on the Call Center pilot program, which is scheduled to launch December 15, 2010 and designed to assist with underwriting call center call volume. 

Mr. Bitar reported that, because a significant number of calls from agents are related to general concerns such as payment questions that do not require an underwriter’s knowledge, the Citizens customer care department will “diagnose” incoming calls to determine whether underwriting support would be beneficial.   If that is the case, the goal is to transfer the call to an underwriter within 30 seconds, according to Mr. Bitar.

 

Replacement Cost Estimator Launch

Mr. Bitar reported that Citizens will now use Xactware 360Value as its replacement cost estimator tool for new business.  There are no plans to run current business through the tool. 

He said that “great feedback” was received from agents on Xactware 360Value after their preview.   Because the tool does “a great job of valuing high-end properties,”  he explained that appraisals are no longer required, but that for other types of properties, however, appraisals will be the only acceptable alternative valuation tool in the future.  

 

Rating Update

Mr. Bitar advised the Committee that new rate filings and rate structures for 2011 have been implemented and that comprehensive corresponding communications have been distributed. 

Ms. Miller noted that a “tremendous amount of actuarial work” relating to the new rates has taken place.

 

Mitigation Credit Inspection Project Update

In his update on Citizens 2010 Mitigation Credit Inspection Program, Eric Ordway, Citizens’ Director of Vendor Relations, said that two dedicated personal and commercial lines underwriting teams were deployed about three weeks ago for the purpose of working on over 14,000 completed inspections.

Mr. Ordway related that Citizens is working with MacNeill Group as an outsourcing partner to train employees for handling the administrative overflow.   Reprocessing has begun for approximately 2,500 commercial lines buildings that were inspected prior to the suspension of the commercial lines inspection program.   Related communications to impacted commercial agents on the inspection process and expectations were sent at the end of November 2010.

Mr. Ordway explained that slightly more than 7,200 inspections have been fully processed to date and that an estimated 12,000 will be completed by year-end.   Sixty-four percent of those resulted in increased premium, with eight percent resulting in a decrease.  He said there are instances where mitigation credits were awarded previously, but the policyholder might have had only 90 percent of the features, for example.   Although those credits will be removed, the policyholder will often make the upgrade, leading to better-protected dwellings. 

Mr. Ordway said that the 2010 inspection data should provide a lot of insight into the degree of market inaccuracies.

In preparation for 2011, contract negotiations for Inspection Program Administrators are expected by the end of December 2010. 

Insofar as continuing the inspection program, Mr. Ordway emphasized that communication with agents and policyholders is key. 

 

New Business

Yong Gilroy, Citizens’ Chief Insurance Officer, said that recruitment is underway for a Vice President of Underwriting following Paul Palumbo’s resignation from Citizens.   A search is also being conducted for a Director of Commercial Underwriting. 

It was noted that Citizens’ Director of Product Development vacancy was filled by Kim Chaney, who formerly served as the Assistant Director.

With no further business, the meeting was adjourned.  The Committee’s next in-person meeting is scheduled for March 29, 2011.

 

 

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

 

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