Task Force on Citizens Property Insurance Claims Handling and Resolution Meeting Report

Recently, the Task Force on Citizens Property Insurance Corporation Claims Handling and Resolution (“Task Force”) held a meeting to review the draft Final Report (“Report”) regarding hurricane claims handling and vote to accept it.

Pursuant to the provisions of House Bill 1A, the Final Report is the last and third report required of the Task Force. It examines the following areas:

• 2004-2005 hurricane claims
• Future catastrophe preparedness
• Agency management program
• Customer care centers
• Policy administration for homeowners policies
• Daily (non-hurricane) claims
• Office of the Internal Auditor
• Proposed Legislation
• Other Areas of Interest

The meeting was called to order by Task Force Chairman Senator Mike Fasano with the following members in attendance:

• Governor’s Task Force appointee, Michael Twomey
• House Speaker Marco Rubio’s Task Force appointee, State Representative Julio Robaina
• Terry Butler, Florida Office of the Insurance Consumer Advocate (“OICA”)
• Insurance Commissioner Kevin McCarty’s appointee, Heather Carruthers
• Citizens Property Insurance Corporation (“Citizens”) Executive Director Scott Wallace

Also in attendance were Vicki Twogood and Gloria Strickland from the OICA and representatives from Citizens.

The Task Force’s First Interim Report established milestones for Citizens regarding closure of claims that arose from the 2004-2005 hurricane season, and the training of contracted independent claims adjusters and agents. The Second Interim Report noted Citizens’ progress in closing the 2004-2005 claims and its level of preparedness for future catastrophic events.

2004-2005 Hurricane Claims

• As of May 1, 2008, Citizens closed 3,197 of the 3,330 open claims reported in the first Task Force report.
• Between June 18, 2007 and April 30, 2008, Citizens received 1,828 new claims and 8,531 reopened claims from the 2004-2005 hurricane seasons.
• As of May 1, 2008, Citizens closed 8,517 of these new and reopened claims.

The Task Force recommends that Citizens review the level of supervision/oversight provided on the claims outsourced to independent adjusters in order to ensure that the resources provided are adequate to supervise the large number of adjusters, monitor compliance with vendors’ contracts, review claims handling, address training needs, and ensure that Citizens’ procedures and service standards remain consistent throughout the organization. The Task Force also recommends that Citizens review its communications plan to ensure that the claims process is outlined for consumers in a realistic, step-by-step format.

Future Catastrophe Preparedness

As outlined in its Second Interim Report, the Task Force monitored Citizens’ 2007 hurricane season preparedness and found its preparations adequate. The contracts Citizens negotiated are for two-year terms, therefore Citizens should be prepared for the 2008 season.

Agency Management Program

The Task Force found that Citizens’ Division of Agent Services has addressed communication and training concerns aggressively for approximately 9,000 Citizens insurance agents. Therefore, the Task Force recommends that Citizens continue its Agent Certification Program, which includes education and training.

Customer Care Centers

Citizens has made customer/consumer service a priority, and as such, has hired an Internal Consumer Advocate who continually evaluates Citizens’ departmental processes to ensure that consumer contact points support their needs. Citizens also is working to consolidate call center operations as a way to provide uniform service throughout the organization. The Task Force recommends that Citizens continue this consolidation.

Policy Administration for Homeowners Policies

During previous meetings, the Task Force heard testimony from Citizens’ managers regarding its application process, underwriting and inspection criteria, insurance to value, and Coverage A validation, premium collection procedures and renewal processes. The Task Force has observed that Citizens’ management is continually striving to improve its policy administration process and services, and has no further recommendations.

Daily (Non-Hurricane) Claims

Daily (non-hurricane) claims are processed by Citizens’ claims staff in the Tampa and Jacksonville services offices, and by independent contracted adjusting (“ICA”) firms. Citizens currently has a dedicated claims staff of 67 (hurricane and non-hurricane combined), which processed 36 percent of claims reported in 2007. Citizens also has three staff members who oversee the claims processed by ICA firms.

By the end of 2009, Citizens plans to increase the number of total daily claims staff to 153 employees.

The Task Force recommends that Citizens review the current level of supervision/oversight provided on claims outsourced to ICA firms to ensure that resources are adequate to supervise the large number of ICA adjusters, monitor compliance with vendor’s contracts, review claims handling, address training needs and ensure that Citizens’ procedures and service standards remain consistent.

Office of the Internal Auditor

The Task Force’s Second Interim Report stated that Citizens hired HuffThomas & Company to conduct the 2007 Internal Audit. Citizens since has filled the position of the Chief Internal Auditor and formed the Office of the Internal Auditor (“OIA”).

The OIA has developed a comprehensive 2008 Audit Plan and will submit the 2008 Annual Report to the Financial Services Commission and Florida Legislature by February 15, 2009. The Task Force has no further recommendations at this time.

Proposed Legislation

As a result of findings revealed by a review of Citizens’ 2004-2005 hurricane claims, the Task Force drafted legislation aimed at protecting consumers from unqualified or unscrupulous Public Adjusters and ensuring that homeowners receive and maintain adequate funds in order to re-build their homes after a loss. These recommendations were adopted by the Florida Legislature as part of the package of amendments to SB 2012.

The Task Force also found that the appraisal process is inadequate in addressing consumers’ needs and drafted legislation that would define the appraisal process and ensure that appraisal umpires are qualified to make binding decisions on the re-construction of consumers’ homes. This legislation was not adopted during the 2008 Session.

The Task Force recommends that the OICA monitor implementation of adopted legislation relating Public Adjusters to ensure that consumer interests are protected adequately, and to recommend additional legislation, if needed. The Task Force also recommends that the OICA continue to monitor the appraisal process and pursue related legislation during the 2009 Legislative Session.

Other Areas of Interest

The Task Force also reviewed other insurance issues that adversely impacted Florida policyholders during the 2004-2005 hurricane seasons. One such issue was the wind-driven rain exclusion applicable to all policies, both residential and commercial.

Most interior-only water damage claims resulting from wind-driven rain were denied during the 2004-2005 seasons because there was no opening caused by direct force of the wind—water entered the property through soffits, roof vents, siding and around windows.

The Task Force recommends that the OICA review this issue to determine how this gap in coverage can or should be remedied.

The Report was approved by Task Force members.

A copy of the Final Report is available by clicking here.

Subsequent to this meeting, a presentation was given during the Cabinet meeting by the State Board of Administration regarding the FHCF and the impact of the large number of reopened 2004-2005 hurricane claims. Based on the Cabinet’s interest in this issue, it was determined that there is a need for the Task Force to conduct an analysis of 2004-2005 hurricane claims that were reported or reopened between June 17, 2007 and May 1, 2008. As a result, Citizens announced that the Task Force will submit a special report or addendum to its Final Report at the conclusion of the review of these additional claims.

No future Task Force meetings have been scheduled as of the date of this report.

 

Should you have any questions or comments, please do not hesitate to contact Colodny Fass.

 

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