Preview: Florida Citizens Property Insurance Committees to Meet Prior to Wednesday’s Board Meeting

 

Leading up to this week’s June 26, 2013 Florida Citizens Property Insurance Corporation (“Citizens”) Board of Governors (“Board”) meeting, various Citizens committees are scheduled to meet tomorrow, June 25, in Miami. 

Following is a preview of topics on the agendas, including the consideration of a proposed Citizens rate increase and an update on the implementation of the Citizens Clearinghouse pursuant to SB 1770. 

A Colodny Fass& Webb representative will attend the meetings and provide a report on the proceedings.

 

Market Accountability Advisory Committee

The Market Accountability Advisory Committee (“MAAC”) will hear an update on SB 1770 and HB 573, passed during the recently-concluded Legislative Session and signed by Florida Governor Rick Scott.  SB 1770 is the enabling legislation for Citizens’ new Clearinghouse, which is intended to ensure there are no private market alternatives before a risk goes into Citizens.

Regarding the internal Clearinghouse implementation, the MAAC will review the following developments:

• A project steering committee has been formed and meets regularly
• Final analysis of SB 1770 has been completed by Citizens’ staff
• Formal solicitation for Single-Entry Multiple Company Interface (SEMCI) software was released on May 21, 2013
• Questions and answers with vendor(s) was completed on June 5, 2013
• A Board of Governors “observer” has been requested
• Carrier Visits
  • 28 visits to carriers have been planned through August 2, 2013
  • Completion of scheduling of visits targeted for July 5, 2013
  • Project organization and team(s) composition is complete
  • Definition of solution strategy and supporting processes is underway (pre-vendor and post-vendor selection)

The MAAC will also hear a presentation on Citizens’ 2013 catastrophe preparedness, including past experience with claims operation, scalability and quality assurance.  With regard to future storms, scalable claims workflow and reporting will be discussed, as well as an overview of modeling and projections, historical claims reporting, phases of a catastrophe response, and Emergency Operations Center procedures and goals.

In addition, a historical depopulation update on policies taken out of Citizens relative to in-force policies and the 2013 estimated claims paying ability will be provided.

Finally, the MAAC will be updated on the May 23, 2013 Agent Roundtable, at which ongoing development of the CORE system for commercial lines, outcome of the 2013 Florida Legislative Session and Agent Performance Standards were discussed.  The Roundtables are intended to help Citizens evaluate key performance indicators and data that agents can use to manage their businesses, such as agent loss ratios, cancellation ratios, claim frequencies, consumer complaint ratios and retention ratios.

 

Consumer Services Committee

Citizens’ Consumer Services Committee (“CSC”) will convene following the MAAC meeting.  Florida Insurance Consumer Advocate Robin Westcott is expected to make several recommendations on behalf of consumers, including asking the CSC to review the practicality and cost of implementing a monthly payment plan to assist policyholders living on a fixed income.  Currently, Citizens offers a quarterly payment plan. 

Ms. Westcott will also recommend the issuance of an advisory to ensure that Citizens’ inspection staff and inspectors are properly trained on which types of documentation are acceptable under the OIR-B1-1802 Mitigation Inspection Verification Form.  Specifically, an issue has arisen involving Citizens’ inspection officials instructing inspectors and insurance agents in Miami-Dade County that the only acceptable form of documentation is a Miami-Date Notice of Acceptance.  However, according to Form OIR-B1-1802, a Florida Building Code Approval is also sufficient.

Regarding Citizens’ ongoing depopulation process, Ms. Westcott will ask the CSC to consider factoring additional mailing time into the deadline requirement for policyholders to respond to opt-out notices, as well maintaining proof of such mailings.  She is also recommending the implementation of an Audit Procedure to ensure that policyholders receive proper notification in accordance to specific timelines.

Updates on other items presented to the Board at its March 22, 2013 meeting, include:

• Builder’s Risk:  The Board directed that Citizens coverage be offered under a Commercial Non-Residential Wind policy for single family homes under $1 million in wind-eligible territories.  This was completed and coverage was made available on June 1, 2013.
• Mobile Home Legislation:  The Board directed that Citizens offer an optional buyback for screened enclosures and attached structures.  Actuarially-sound rates were to be established.  Subsequently, HB 573 was passed and signed by Governor Scott, requiring Citizens to offer policy that includes coverage for various attached structure and mobile homes valued at $3000 and higher.  This change has been filed and approved.  Lower coverage amounts will be available August 1, 2013.
• Completed Requests from the Florida Insurance Consumer Advocate:
  
  • Modification of the existing shutter deployment incentive to apply only to hurricanes and only in areas of the state that are impacted by the relevant hurricane watch or warning. 
  • Introduction of additional exceptions for wind short rate cancellations when the insured has paid the mortgage in full and when there has been wind coverage in force for at least three years.

A coverage update on sinkhole eligibility will also be reviewed.

 

Audit Committee

Citizens’ Audit Committee (“AC”) will meet at 12:30 p.m.  First on the agenda is an presentation from Citizens’ Office of the Internal Auditor (“OIA”), including a status report on the execution of Citizens’ 2013 Audit Plan, an update on a forensic audit methodology that was developed, as well as completion of a high-level fraud risk assessment.

Outgoing Chief Financial Officer Sharon Binnun is slated to update AC members on Citizens’ March 31 financials, as well as its Enterprise Risk Management and December 31, 2012 audited financials.

Citizens’ General Counsel Dan Sumner will discuss the Tell Citizens hotline and review internal complaint case data.  At the beginning of the five-month reporting period (January 1 – May 31), all outstanding complaints had been resolved.  During the period, 32 reports were received from the Tell Citizens hotline. Of those, 20 (62.5 percent) were closed during the reporting period and 12 (37.5 percent) remained open. 

The AUC will also review the issue of privacy governance.  In 2012, an internal audit found that no privacy governance process was established at Citizens.  In late March, Citizens hired Brent Neal to serve as corporate Privacy Officer, and an Information Privacy/Security Workgroup was formed. 

Work is in progress to classify the types of data Citizens possesses and determine appropriate security measures for each.  Mr. Neal and the Workgroup will present a Privacy Governance Framework for approval and will continue to address identified issues.

 

Finance and Investment Committee

Following a presentation by CFO Binnun on the Year in Review, Investment Performance/Compliance, and Committee Charter, the Finance and Investment Committee will consider several action items for Board recommendation at its 2:00 p.m. meeting:

• Reinsurance Brokers Renewal (approval will be requested to exercise two one-year renewal options for  reinsurance advisory and brokerage services with Guy Carpenter and another broker.  The Board approved the base term and renewals on January 11, 2011)
• Bond Counsel (approval will be requested to engage law firms for future Bond Counsel Services.  Citizens issued a competitive solicitation seeking proposals from qualified Bond Counsel firms)
• Investment Management Services Renewal (approval will be requested to exercise the current option to renew the contract for Investment Management Services for the contract’s two one-year renewal options. The Board approved the entire five-year contract on August 26, 2010. Renewing vendors are Blackrock, Inc., Cutwater Asset Management, Federated Investment Counseling, General Re New England Asset Management Inc., Northern Truest Investments, NA, PFM Asset Management LLC, RBC Global Asset Management (US) Inc., Standish Mellon Asset Management, UBS Global Asset Management, US Bancorp Asset Management Inc., Wells Capital Management Inc.

Ms. Binnun will also review Citizens’ 2014 Reinsurance Plan.

 

Actuarial and Underwriting Committee

Citizens’ Actuarial and Underwriting Committee (“AUC”) will meet at 3:30 p.m., concluding tomorrow’s slate of Committee meetings.  Several action items will be considered, including a proposed rate increase that must eventually be approved by the Florida Office of Insurance Regulation.  The Associated Press reported in Insurance Journal today that, if approved by the Board, and then by the OIR, Citizens’ overall statewide rates will increase next January for approximately 1.26 million policyholders by 6.9 to 8.8 percent.

The following action items are also on the agenda:

• Policyholder Assessment Notice:  The AUC will also consider, for eventual recommendation to the Board, modifying the current assessment notice to policyholders based on recent legislative changes. The following language must be added to the notice:  “I understand that I can avoid the Citizens policyholder surcharge, which could be as high as 45% of my premium, by obtaining coverage from a private market insurer and that to be eligible for coverage by Citizens, I must first try to obtain private market coverage before applying for or renewing coverage with Citizens. I understand that private market rates are regulated and approved by the State.”
• Sinkhole Rule Revisions:  Additional changes to sinkhole eligibility rules are recommended based on legislator and realtor feedback, including providing an HO3 and other available policy forms on properties that experienced a total or partial sinkhole loss but utilized alternate repair methods to fix the damage. These would not be eligible for sinkhole coverage.  Also, provision of a DP1 without sinkhole loss coverage on properties with prior sinkhole claim activity but no documentation of repairs.

In order to comply with s.627.351(6)(n)6., F.S. (10 percent glide path), Citizens’ personal lines programs apply complex “capping logic” to renewal policies.  Citizens’ staff recently learned that the complexity of this methodology resulted in an unintended consequence, causing policies that remove sinkhole premium to be charged a lower premium than intended.  An Action Plan to correct the error will be discussed at tomorrow’s AUC meeting.

 

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

 

 

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