Citizens Property Insurance Corporation Actuarial and Underwriting Committee Report: June 2011

 

 

Citizens Property Insurance Corporation (“Citizens’) Actuarial and Underwriting Committee (“Committee”) met on June 30, 2011 to hear updates pertaining to personal lines and commercial policy issues.  To view the agenda and meeting materials, click here.

Citizens Chief Insurance Officer Yong Gilroy opened the meeting with a brief status report on the rise in policy counts.  He said there has been much discussion lately about the number of policies Citizens might get as an insurer of last resort.  Volume for four types of policies-Coastal Account (formerly High-Risk), sinkhole, older mobile homes, and buildings 50 years or older will likely not decrease, he said.

Citizens’ average personal lines count per week has jumped to 6,600, which represents a significant increase from the 3,600 per week before the 2011 Hurricane Season began, Mr. Gilroy said.  If the volume continues, Citizens might have as many as 1.48 million to 1.5 million policies by the end of the year, he added.

Personal Lines Underwriting Director Joe Bouthillier told the Committee that the volume of personal lines applications and endorsements coming in to agents is steady, with more than 169,000 requests for personal lines and 246,000 endorsement requests as of May 2011.

“We are seeing a slight growth in personal lines, averaging between 20,000 to 25,000 per month,” Mr. Bouthillier said.

With respect to sinkholes, one key initiative involves changes to the way sinkhole claims are handled.  Citizens is focusing first on four counties – Pasco, Hernando, Pinellas and Hillsborough – which account for 95 percent of the sinkhole claims, he noted. 

“If they have an endorsement for sinkhole coverage, they will be required to have an inspection before binding,” he explained.

Stephen Mostella, Director of Commercial Lines Underwriting, said Citizens has added seven underwriter positions, for a total of 37 positions, with 17 in Jacksonville and 20 in Tampa.   A five-day school for new commercial underwriters has been scheduled, he added.

A pilot program for a commercial lines re-underwriting project began in June 2011, with full implementation expected by the fourth quarter of this year.  The pilot program is targeting 2,000 policies, with a priority being commercial residential wind policies valued over $8 million.  Related inspections include securing information on replacement cost, wind mitigation features and general condition of the property.

Mr. Mostella explained that a committee evaluated the quality and accuracy of appraisals done by licensed and unlicensed appraisers.  The study included 55 unlicensed appraisers and 35 that are licensed.  The variances between the two groups were negligible, he said.

Citizens’ Insurance Operations Director Eric Ordway followed with an update on Citizens inspection program.  The highlights as of May 31, 2011 are:

• 32,628 inspection assignments have been fully processed by Citizens’ Underwriting Department
  • 577 involved credits being removed due to an inability to schedule
• $15,535,192 in estimated premium increases at renewal
• 68 percent of the policies involved a premium change
  • 60 percent involved removal of credits totaling $16,262,189
  • Eight percent involved the granting of new credits, totaling $1,044,463
• Two year return on investment estimates as of December 31, 2012
  • Completed inspections: 344,570
  • Net return: $71,900,000 in increased premiums

A review of the inspection program in regard to estimated dollars premium impact versus actual renewals showed the following:

• 86 percent of personal lines policies that were inspected were renewed
  • Of those policies that renewed, the actual premium increase was 22 percent
• 14 percent of personal lines policies that were inspected did not renew
  • Those policies that did not renew resulted in a $6.1 million loss of premium
• 55 percent of commercial lines policies inspected were renewed
  • Of those policies that renewed, the actual premium increase was 61 percent
• 45 percent of commercial lines policies that were inspected did not renew
  • Those policies that did not renew resulted in a $9.9 million loss of premium

Citizens’ Director of Legislative and External Affairs Christine Turner Ashburn gave a legislative update, focusing primarily on the changes made by SB 408 that affect Citizens, which include:

• A requirement that, beginning January 1, 2012, all new applicants must sign an acknowledgement form regarding the risk of potential surcharges and assessments on a Citizens policy.
• A requirement that Citizens Board of Governors commission a study to look at the relative costs and benefits of outsourcing certain policy issuance and servicing functions.
• Sinkhole reforms, including a limitation on what is covered under sinkhole loss coverage and a requirement that policyholders must make repairs to homes once the claim has been paid
• An allowance for Citizens to charge an actuarially sound rate for sinkhole loss coverage (above the statutory rate cap of 10 percent)
• A two-year claims filing deadline for sinkhole claims
• A three-year claims filing deadline for hurricane or windstorm claims
• Limitations on public adjuster fees specific to those representing Citizens policyholders
• Allowance for a holdback of replacement cost on structures until repairs are set to be made

In other business, the Committee discussed Citizens’ 2012 rate filing, which is targeted for late July.

Committee members voted to recommend that, in the next rate filing, the Board of Governors address the removal of Class C Opening Protection Credits and the removal of coverage for screened enclosures and carports.

With no further business before the Committee, the meeting was adjourned.