Citizens Property Insurance Corporation April 2012 Meeting Reports: Actuarial and Underwriting Committee, Claims Committee

 

Citizens Property Insurance Corporation’s (“Citizens”) Actuarial and Underwriting Committee, as well as its Claims Committee met recently.  Following are summaries of each meeting:

 

Citizens Property Insurance Actuarial and Underwriting Committee Discusses Exposure Reduction Initiatives, Measures to Reduce Incomplete Applications

Agents who repeatedly submit incomplete insurance applications to Citizens could be sanctioned under a proposal discussed on April 12, 2012 by Citizens’ Actuarial and Underwriting Committee (“Committee”).

To view the meeting materials, click here.

The Committee will further review the proposed disciplinary measures at its meeting in May 2012.  If the proposal is approved, Citizens’ Board of Governors (“Board”) would have to authorize Citizens’ staff members to implement the plan and make appropriate changes to underwriting manuals to clarify requirements.

The purpose for the proposed disciplinary action is to reduce the number of incomplete applications, which have been shown to increase costs and decrease efficiency for Citizens.

Seventy-five percent of all commercial applications sent to Citizens are missing documents, it was noted.

Under the proposal, agents would be held accountable for incomplete submissions by either having unbound applications returned before processing, or by the issuance of a binding violation for a bound application.  Penalties relating to commissions or rejection fees also would be established for the submission of incomplete applications.  Three violations for incomplete submissions could result in the suspension of the agent’s appointment, under the proposal. Any additional violations could result in the agent’s termination.

Committee Member Tom Lynch recommended that the term “inaccurate” also be included to further describe unacceptable agent submissions.  However, he expressed reservations about the proposed changes because they had not been vetted by an agents’ association.

Another Committee member agreed that the measure should at least be conveyed to agent associations and organizations before any change is implemented.  After some discussion, the Committee agreed to discuss it more extensively with trade associations and agent organizations before the next Committee meeting.

The Committee also discussed several pending exposure reduction initiatives, including the elimination of additional limit options for Coverage B (other structures) and Coverage C (contents).  Under this initiative, only the default limits of 2 percent for Coverage B and 25 percent for Coverage C (PL) would be retained.

The initiatives were to be filed with the Florida Office of Insurance Regulation in May 2012, but Committee members agreed to wait until August 2012 because of unanswered questions about the percentage of policyholders buying back coverage.

After some discussion, the Committee voted to monitor the number of buy backs and have this initiative placed on the list of exposure reduction initiatives to be filed in August 2012.

In other business, the Committee:

• Voted to recommend implementation of a re-underwriting program for sinkhole coverage, starting with Hillsborough County.
• Took no action on a proposal to introduce a maximum of $50 million per policy for the Commercial Residential program and non-renew policies that exceed that amount.

(Committee member John Rollins said he was not ready to commit to the imposition of a limit without further study, while Mr. Lynch wondered why the concern was focused on total exposure as opposed to probable maximum loss.)

• Voted to proceed with a measure to recommend uncapping new business rates.

A monthly update on Citizens’ ongoing commercial and residential inspection program yielded the following results:

• 152,601 inspections have been completed to date, resulting in $95.2 million in estimated gross premium, with an estimated net return of $71.9 million. An additional 5,534 have not been scheduled.
• 68 percent of inspections have resulted in a premium change, with 62 percent involving an increase and 6 percent involving a decrease.
• The current two-year program model estimates a two-year return of approximately $84 million.

The Committee also recommended the Board approve amending the Xactware Solutions Inc. agreement for replacement cost estimating software.  The $4.7 million contract includes $1.7 million for two two-year renewal periods.

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

 

 

Citizens’ Claims Committee Hears Updates, Reports

Members of Citizens’ Claims Committee (“Committee”) voted on April 13, 2012 to recommend that Citizens’ Board of Governors (“Board”) award a five-year, $1.7 million contract with two, two-year renewals to Acuity Management Solutions for a Legal Matter and Billing System.

To view the meeting materials, click here.

The Committee also heard several reports and updates during the brief meeting.

Highlights of the meeting follow:

• New litigation assignments through March 31, 2012 total 15,250, with an estimated total of 70,000 for the year, it was noted.
• Year-to-date 2012 First Notice of Loss Claim Volume increased 6 percent compared to year-to-date 2011.

Lance Malcolm, Citizens’ Vice President of Claims Operations, outlined the new claims distribution as follows: 

Distribution of New Claim Volume for 2012 indicates the greatest losses are due to water, at 49.8 percent, followed by weather, at 14.3 percent.  Burglary and theft are next at 8.5 percent; sinkhole,  6.5 percent;  fire, 3.7 percent;  dropped objects, 3.2 percent;  liability, 2.8 percent; vandalism, 2.2 percent and all others, 9 percent.

Citizens’ Senior Director of Insurance Operations Eric Ordway then gave an update on independent adjusting services, noting that 3,522 adjusters have been approved.  Of those, 939 have been deployed and 2,583 have been approved, but not deployed.  An additional 2,530 have not been approved, he stated.

David Boyle, Citizens’ Director of Claims Operations, then turned the discussion to sinkholes, noting that 42 adjusters were assigned to sinkholes in 2011, compared with 21 in 2010 and just nine in 2009.

Sinkhole claims for March 2012 totaled 1,069, representing a substantial increase from 184 claims in 2006.

A pie chart was presented that showed the distribution of 2011 sinkhole claims at 49 percent in Hernando County, 23 percent in Pasco County, 17 percent in Hillsborough County and 6 percent in Pinellas County.

Statistics were given showing that the paid indemnity distribution for 2010 indicated sinkhole indemnity represented 17 percent, or $75.6 million of all indemnity payments by cause of loss.

Other discussion touched on water loss, legal spending trends, and catastrophe preparedness exercises currently being conducted.

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

 

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