CORRECTIONS: Citizens Mission Review Task Force Meeting Report: January 22
Jan 23, 2009
Please note the following corrections on the previously-issued Task Force Meeting Report bulletin:
1. Task Force members voted against a recommendation that both Citizens and the Florida Office of Insurance Regulation should be required to consider the effects of Citizens’ rate changes on the private market.
2. Task Force members voted against a measure to require a 13 percent increase in the Florida Hurricane Catastrophe Fund’s Mandatory Layer.
On Thursday, January 22, 2009, the Citizens Property Insurance Corporation (“Citizens”) Mission Review Task Force (“Task Force”) met to discuss pending issues before presenting its Final Report to the Florida Legislature. The meeting agenda, list of pending items and a master draft of the Task Force’s Final Report are attached for your review.
Task Force Chairman Bruce Douglas called the meeting to order and presented the pending items list to the Task Force, which proceeded to consider them for inclusion as recommendations in its Final Report.
Recommended Statutory Changes
Enforcement of the 15 Percent Eligibility Rule
During its most recent meeting, the Task Force approved adding a recommendation to its Final Report that would require a certificate from all personal residential policy applicants and agents stating that they have either received no coverage offers from the private market, or that any offers received were 15 percent more than Citizens’ rates for comparable coverage.
The Task Force approved adding the following eligibility enforcement recommendations to its Final Report:
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The adoption of fines or other penalties (such as a loss of eligibility) for agents or insureds who violate Citizens’ eligibility standards or place false statements on Citizens’ applications. (Vote: unanimous)
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The elimination of statutory language allowing a company to offer a multi-policy discount on an insured’s automobile policy when his or her homeowners’ policy is placed with Citizens. This change would not prohibit companies from offering actuarially-justified multi-policy discounts. (Vote: 9-2)
Policyholders’ Ability to Decline a Takeout Offer
By a vote of 6-4, the Task Force initially approved adding a requirement that Citizens must issue non-renewal notices for all recipients of takeout offers, which would require private market comparison shopping in order to secure coverage.
However, because public concern was expressed that automatically issuing non-renewal notices would degrade the agent-client relationship and create undue policyholder anxiety, the Task Force reconsidered the issue and, by a vote of 7-3, approved a recommendation that a policyholders be allowed to decline takeout offers if a document were to be signed by both an agent and policyholder stating that private market coverage falling within the 15 percent rule had been sought, but not found. Annual signature of this document would be required and retained by the agent for audit purposes.
Consumer Choice Statute
After discussion, a tie vote on retaining the current statutory language regarding consumer choice effectively eliminated the related recommendation from the Final Report. During the discussion, Task Force members stated that they feel that the present system is working, the Legislature should evaluate the current law to determine if it impedes depopulation efforts.
Actuarially-Sound Rates
Task Force members voted against a recommendation that both Citizens and the Florida Office of Insurance Regulation should be required to consider the effects of Citizens’ rate changes on the private market.
Statutorily-Required Responses and Recommendations
Personal Residential Wind-Only Policies
After lengthy discussion and public testimony, by a vote of 6-4, the Task Force rejected a recommendation that Citizens stop issuing new personal residential wind-only policies in its high-risk account. It was determined that Florida’s current property insurance market would not support discontinuing this type of policy.
Task Force members who voted in favor of the recommendation indicated that inadequate rates are Citizens’ main challenge.
Commission Structure
No action was taken by the Task Force regarding Citizens’ agent commission structure.
Creation of a High-Risk Account Panel
No decision was made by the Task Force on whether a panel should be created and charged with the task of restructuring Citizens’ high-risk account boundaries.
Geographic Wind Pool Boundary
The Task Force unanimously approved recommending a Legislative review of the current geographic wind pool boundary because it is considered to be inconsistent and difficult for consumers to understand.
Additional Recommendations
Chairman Douglas emphasized that mitigation is the best long-term solution to Florida’s homeowners’ insurance market challenges.
It was noted that some recommendations on the pending items list are not part of the Task Force’s statutory charge, but have been proposed by individual Task Force members for inclusion in the Final Report. These include:
Mitigation
Task Force members unanimously approved recommending increased mitigation program advocacy. It was suggested that personal responsibility for mitigation and storm preparedness should be undertaken as a major public education effort, rather than only as a cost-saving consumer benefit.
Coverages/Programs Offered
By a vote of 6-4, Task Force members approved a recommendation to eliminate the statutory requirement for Citizens to provide commercial non-residential policies.
Depopulation
A recommendation that the Legislature should conduct a study to determine methods by which to depopulate more commercial residential policies from Citizens was approved unanimously.
Agent Appointment
A recommendation that agents be required to provide evidence of an appointment with at least one other active property insurer that is not engaged in massive annual non-renewal was approved. A State Farm agent provided testimony against this recommendation.
Florida Hurricane Catastrophe Fund
Task Force members voted against a measure to require a 13 percent increase in the Florida Hurricane Catastrophe Fund’s Mandatory Layer.
Claims
Proposed claims measures were discussed by the Task Force, but no formal action was taken. Rather, discussion centered on the number of claims being filed, as well as on policyholders’ right to a fair and timely review of damages.
Rates
The Task Force discussed the importance of considering affordability and assessments when determining rates. No proposed recommendations regarding rates were approved.
Operations
No proposed recommendations on any operational changes to Citizens were formally approved. Instead, it was determined that Citizens’ management should consider these types of changes.
Eligibility
The Task Force approved a recommendation that new applications should be required from all policyholders who have held policies for more than three years, and that automatic renewals be limited to two years.
An additional proposal relating to sinkhole coverage also was discussed. Task Force Member Locke Burt suggested eliminating the statutory requirement for private insurance companies to offer optional non-catastrophic ground collapse coverage. After some discussion, the Task Force rejected this suggestion.
It was noted that State Representative Alan Hayes likely will be filing a bill during the 2009 Legislative Session that will include many of the Task Force recommendations.
It was decided to present the Final Report to the Legislature on Monday, February 2, rather than January 31, which is a Saturday.
The meeting was then adjourned.
Should you have any questions or comments, please do not hesitate to contact Colodny Fass.
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