Citizens Market Accountability Advisory Committee Meeting Report: June 18

On Wednesday, June 18, 2008, Citizens Property Insurance Corporation (“Citizens”) held a Market Accountability Advisory Committee (“Committee”) meeting to discuss Citizens’ Single Personal Lines (“SPL”) Project, and receive updates on executive operations, the month-end operations report and 2008 legislative issues.  To view the complete agenda, click here.

The meeting was called to order by Chairman George Grawe.  Committee members Skip Boylan, Scott Johnson, Nester Rivero, Greg Rokeh and Brian Squire were in attendance.  Also in attendance were Paul Palumbo, Christine Turner, and Susanne Murphy from Citizens, and a number of Citizens agents. 

Mr. Palumbo discussed the Executive Operations Status and Month-End Reports.  As of May 31, 2008, Citizens had a total of 1,216,960 policies in force.  In April 2008, Citizens received 50,534 personal residential multi-peril, 4,811 personal residential wind-only, 388 commercial residential multi-peril and 1,090 commercial wind-only policy applications.  To view policy summary tables with more information, click here and here. 

Ms. Turner reported on 2008 Florida legislative action.  Senate Bill 2860 was signed into law on May 28, 2008, with the exception of Section 16 which would have transfered $250 million from Citizens to the General Revenue Fund for the 2008 Insurance Capital Build-Up Incentive Program.  As signed, SB 2860 includes the following provisions that will directly impact Citizens:

• Rate freeze—Requires Citizens to make actuarially-sound rate filings beginning July 15, 2009 for all personal and commercial lines of business, which shall take effect no later than January 1, 2010. 
• Homestead vs. non-homestead—Eliminates the distinction between homestead and non-homestead properties for assessment purposes.
• Streamlined assessments—Eliminates multi-layered assessments on policyholders and instead requires:  surcharges of up to 15 percent of the policy premium for 12 months on all policies, whether collected upon issuance or renewal; an assessment against insurers of up to 6 percent of the policy premium or 6 percent of the remaining deficit, which may be recouped from policyholders if the first assessment is not enough; and funding of any remaining deficit through multi-year emergency assessments of up to 10 percent of policy premiums or 10 percent of the remaining deficit, whichever is greater.
• Eligibility of higher-valued homes—Increases the maximum allowable replacement cost of a residence in the High Risk Account from $1 million to $2 million to be eligible for coverage with Citizens. 
• Code-plus—Eliminates the code-plus building standard provision in current law affecting properties constructed on or after January 1, 2009 located within 2,500 feet of the coastal construction control line.
• Mission Review Task Force—Creates an 11-member “Citizens Mission Review Task Force” to analyze and report on changes necessary to return Citizens to its role as the “insurer of last resort.”
• Notice of non-renewal—Increases the notice of non-renewal for a personal or commercial residential insurance policy from 100 days to 180 days if the policy has been written consecutively (by the same insurer) for five years or more. 

Several provisions included in other bills were passed during the 2008 Legislative Session and, if signed into law, will impact Citizens as well.  These include:

• Public records/discrimination complaints—Provides a public records exemption for pending discrimination complaints
• Agent Continuing Education (“CE”) training—Prohibits insurers from requiring CE courses as a condition of appointment or renewal of appointment unless the course deals solely with the insurer’s internal procedures or products.
• Claims data sharing—Requires electronic reporting of claims data and histories upon request to consumer reporting agencies.

To view the 2008 Legislative Report, click here.

Mr. Palumbo reported on Citizens’ SPL Project.  The SPL Project will replace the outdated wind-only policy form with industry-standard ISO forms and move the writing of these policies to the same system used for other policy types.

Required steps to implement the SPL Project are:

• Policyholder education
• Agent education
• Issuance of wind-only policy non-renewal notices at least 180 days before expiration, because replacing the wind-only form with the ISO-based forms will require non-renewal of the existing wind-only policy.  This 180-day timeframe will give policyholders ample time to select proper coverages that correspond with the new forms. 

Lengthy discussion ensued regarding issuance of the non-renewal notices between Committee members and Citizens agents who were concerned the notices would cause policyholder confusion.  

Committee members and Citizens agents also discussed providing the notice in Spanish, since it was estimated that as many as 330,000 affected policyholders live in South Florida and speak Spanish as their first language. 

Citizens agents expressed concern that the non-renewal information sent to mortgage companies and financial entities would be interpreted as cancellation of policies instead of a non-renewal of a specific policy type and replacement with another. 

Agents were concerned this would place an undue burden on policyholders, since the policyholder would then receive a notice of forced-placed coverage from his or her leinholder.  During discussion, several suggested remedies were presented, including:  

• Sending notices to financial institutions closer to the time the policy is set to expire, which would give the policyholder time to have replacement coverage in place
• Including language in the notice further explaining the non-renewal situation 
• Sending bills directly to mortgage companies as if the policy is being automatically renewed, thereby circumventing the notification process (Citizens program already in progress)

Ms. Murphy stated that she would consider the solutions presented to determine which can be implemented before the notices must be sent out. 

The meeting was then adjourned. 

 

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

 

To unsubscribe from this newsletter, please send an e-mail to ccochran@cftlaw.com