Spike In Southeast Florida Water Damage Claims Reminiscent of Sinkhole Challenges, Citizens Property Insurance CEO Tells Florida Office of Insurance Regulation
Aug 25, 2015
The Florida Office of Insurance Regulation (“OIR”) held a public hearing today, August 25, 2015, to discuss Citizens Property Insurance Corporation’s (“Citizens”) proposed rate changes for its Coastal Account (“CA”), Commercial Lines Account (“CLA”) and Personal Lines Account (“PLA”). The effective date for the rate changes in all three accounts is February 1, 2016 for new and renewal business.
Florida Insurance Commissioner Kevin McCarty opened the hearing and introduced the OIR staff members in attendance, including Anoush Brangaccio, General Counsel; David Altmaier, Deputy Commissioner for Property and Casualty; Sandra Starnes, Director of Property and Casualty Product Review; Bob Lee, Actuary; Kayne Smith, Actuary; and Lacy End-of-Horn, Assistant General Counsel.
Commissioner McCarty noted that today’s hearing was conducted as one of fact finding pursuant to s. 624.324, F.S. and commended Citizens for reducing its policy count by 35 percent during the past year. He also thanked Florida Governor Rick Scott for bringing capital and investors to the state, the Florida Legislature for “making tough policy decisions,” and Chief Financial Officer Jeff Atwater for his leadership.
Commissioner McCarty questioned whether it was necessary for Citizens to buy reinsurance, since its policy count continues to dwindle and it has purchased additional pre-event funding. Regarding Citizens’ loss trends, he noted that water loss claims are increasing, especially in Miami-Dade, Broward and Palm Beach counties, and asked Citizens representatives on hand today to explain why and how this issue is being dealt with.
Citizens’ Chief Risk Officer John Rollins noted that the State-run insurer’s depopulation program, its Clearinghouse and its risk transfer program have significantly reduced the risk of policyholder assessments in the wake of a catastrophic storm.
Currently, Citizens has 592,000 policies in force. While Citizens’ risk transfer program factors as a significant part of its rates, the average consumer will save up to $1,000 in assessments because of the program.
It was explained that Citizens 2016 filing will indeed increase rates for coastal areas, but many inland areas will see rate decreases. Mr. Rollins pointed out that, while reinsurance costs are decreasing, Citizens has a multi-year strategy for its risk transfer program, so the savings may not realized solely in one year.
He also explained that Senate Bill 408 has paid huge dividends for Citizens, as illustrated in the current filing, which does not include rate increases for sinkhole coverage.
Water losses were described as a significant cost driver in Florida’s southeast region, given a “disturbing” rise in water loss claims there–both in frequency and severity. In Miami-Dade, for example, 56 percent of every premium dollar goes toward water loss claim-related expenses. Notably, a large number of these types of claims are being made with representation at the first notice of loss.
Citizens President, CEO and Executive Director Barry Gilway said that the State-run insurer’s average water loss claim in Miami-Dade is $15,000, whereas the average claim was $9,000 a few years ago. To combat this increase, Citizens has dedicated resources to manage water claims in the southeast region where, addition to applying consistent claims handling procedures, Citizens also has increased policyholder education and efforts to promote fraud awareness.
Mr. Gilway compared the water loss issue to sinkhole challenges faced by Citizens heretofore. He noted that it may take changes in Citizens’ policy language, as well as legislation to combat the problem. He agreed that Citizens’ policy count is very low and described the remaining policies as truly residual, older homes located in high-risk areas.
Two representatives of Fair Insurance Rates in Monroe offered input during the public comment portion of today’s hearing.
Commissioner McCarty stated that the record would be open for additional written comment until September 1, 2015.
To view the complete hearing video on The Florida Channel, click here.
To access meeting materials and accompanying information on the hearing, click here.
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