June 20, 2017

Citizens Property Insurance seeks average hike of more than 10 percent in South Florida, blames Legislature

Citizens water damage@MaryEllenKlas

South Florida homeowners insured by Citizens Property Insurance Corp. will likely see annual premiums rise by more than 10 percent next year if the rate increase requested on Tuesday is approved.

“The horizon looks really cloudy out there,” said Barry Gilway, president and CEO of Citizens, the state-run insurer of last resort and the second largest holder of property insurance in Florida -- behind Universal Property & Casualty -- at a meeting of the insurer’s Board of Governors in the Orlando suburb of Maitland.

He was not referring to the start of what is expected to be an active hurricane season. Instead, he said, the soaring rates in Miami-Dade, Broward and Palm Beach counties are because of something regulators have been unable to track: excessive water damage claims buoyed by homeowners who assign their claims to a contractor doing the repairs, giving the contractor — and often the aggressive law firms they hire — the right to collect payments directly from the insurance company.

If approved by state regulators, the statewide residential rate increases will average 5.3 percent, but because each policy is based on the homeowner’s risk, no one pays exactly the average. The company wants an average rate increase of 10.5 percent for Miami-Dade, 10.4 percent for Broward, 9.3 percent for Palm Beach and 3.8 percent for Monroe.

It’s a problem affecting not only Citizens, but most other insurers, too, and it has been mounting for years. But, for the third year in a row, the Florida Legislature left Tallahassee last session without doing anything to address the problem.

Citizens Board member Gary Aubuchon, a former Republican state representative from Cape Coral, placed the blame squarely on lawmakers.

Citizens Property Insurance “is sailing into shark-infested waters in a ship that was created by the Legislature,” he said. “Each year they send us out, and we come back asking to fix our ship and they send us back out with duct tape.”

Unlike South Florida, most counties are projected to see multi-peril rates go down. In Tampa Bay will be less than the state average next year.

Pinellas County will see its Citizens rates for multi-peril homeowners lines drop by 5.7 percent. Hillsborough County residents will see a 0.8 percent increase, Pasco County a 2.7 percent drop, and Hernando County a 2.2 percent increase.

"Outside of South Florida, we don't see the degree of assignnment of benefits abuses that we see in south florida and that's been reflected in the rates,'' said Michael Peltier, Citizens spokesperson. He said that the drop in reinsurance costs and more competitive pricing related to windstorm coverage has contributed to the rate declines in the other markets.

"We are concerned some of the trends we are seeing in South Florida are spreading to the Tampa Bay area and Orlando," Peltier said. "But the rate proposed for 2018 reflects the hard numbers we've seen in the last two or three years."

State law allows policyholders who need repairs to their homes to assign their rights to seek reimbursement from the insurance companies to third-party contractors. Some contractors persuade homeowners whose pipes or appliances have ruptured to assign over the benefits (AOB) and, working with attorneys, file lawsuits against the insurer if the claims are denied or payments are reduced.

The cost of the litigation, on top of the repairs, has increased the cost of an average Citizens multi-peril homeowner policy from $367 in 2011 to a projected $2,083 in 2017, the company reported.

Gilway said that 50 percent of the water claims in South Florida are litigated, which can make a case five times more expensive to settle. (Without litigation, the average cost per claim is $6,000 to $7,000, but if a lawyer takes the case, the cost rise to $30,000 to $35,000 per claim, the rate request said.)

In South Florida, water claims make up 95 percent of all litigation claims and 56 percent of the company’s multi-peril homeowners exposure, Gilway said. For that reason, insurers have warned Florida lawmakers to tighten the rules in an attempt to curb the litigation, or the mounting losses will continue costing customers more.

State law limits Citizens to a maximum rate increase of 10 percent a year per policyholder, but doesn’t include the portion of the rate included in the Hurricane Catastrophe Fund, so some rates will rise above the cap. The company predicts the cap will lead to a loss of about $124 million this year and $182 million in 2018 in its multi-peril homeowners lines, Gilway said. Profits from commercial lines of insurance will offset some of those losses in 2017, he said, but not in 2018.

Private insurance companies, which aren’t under the same restrictions, are seeking rate increases that are even higher than Citizens. Deerfield Beach-based People’s Trust, which insured 54,267 single-family homes in South Florida asked for 14.5-percent average rate hike for multi-peril homeowner coverage in March. The Florida Office of Insurance Regulation rejected the company’s request and instead improved a higher one — an average of 16 percent — to cover its losses.

In addition to rate increase, the Citizens board authorized the company to ask the Office of Insurance Regulation to also approve changes to the way the company handles claims, in an effort to persuade homeowners to avoid litigation and curb the costs. If the changes are not approved, Citizens said its losses and exposure will rise.

Among the changes:

Give homeowners a limit of $10,000 in non-weather related water damage repairs unless they voluntarily agree to follow Citizens repair guidelines, in which case they can overcome the cap and get full coverage.

Require any third part who elects to receive a homeowner’s insurance benefits to be subject to the same duties after a loss as the homeowner — something that is not currently required in law.

Limit coverage to one non-weather loss every two years and two in five years.

Waive the deductible in water claims if the homeowner agrees to work with Citizens’ “managed repair” program — often using the insurers’ contractors — when repairing the damage in an effort to avoid litigation.

“In no way, shape or form will this issue ever be resolved without legislation,” Gilway added. “These are stop-gap measures.”

Steve Bitar, chief of underwriting and agency services, emphasized that the changes they are seeking are voluntary for homeowners.

“We don’t want to take coverage away, so all customers will have the option to elect the managed repair program,” he said. “It is key to that partnership and that balance in our proposal.”

This is the second time in three years that Citizens is seeking a rate increase for South Florida. This year, rates rose 8.9 percent to 10 percent for policyholders who renewed in Palm Beach, Broward and Miami-Dade.

“At the end of the day, the AOB situation not only continues, but it is truly getting worse,” Gilway told the board. “It’s not just a Citizens problem. It’s an industry-wide problem.”

The House in April approved a bill (HB 1421) that attempted to curb litigation over the AOB claims. It had the support of Citizens and other insurance industry backers but was criticized by lawyers, restoration and repair companies, and consumer groups as too favorable to the insurance industry. The Senate did not hear a similar bill and lawmakers adjourned without addressing the problem.

Don Glisson said he had his doubts that the same Legislature will do anything different. “We have to come up with assumption we are not going to get any relief next year, the year after, who knows?,’’ he said.

Insurance Commissioner David Altmaier told Gov. Rick Scott and the Florida Cabinet last week that excessive AOB costs, which had been a problem mainly in South Florida, is now becoming a problem in other parts of the state. 

“We are going to continue to see homeowners' insurance companies raise their rates for our consumers in a best-case scenario, and in a worst-care scenario just simply stop offering their products in certain regions of the state,” he said.

Florida Chief Financial Officer Jeff Atwater also urged the Legislature to address the issue when it returns in regular session Jan. 9. but he described the situation as a “balancing act.”

“We never want to harm any individual out there in getting the absolute quick and full coverage they deserve on a claim,” Atwater said. “But the majority of this right now is costing the honest Floridian tremendous pain.”

 Photo: J. Albert Diaz/Herald Staff, Miami Herald file photo

 

October 10, 2016

Congress more stingy on providing disaster relief than it once was

 

NP-HurricaneMatthewAid-101016-Dan08 MathewNFL NEW PPP

@jamesmartinrose

The final damage tally from Hurricane Matthew across Florida, Georgia and the Carolinas isn't yet known, but it’s certain those states will ask Congress for billions in disaster aid.

President Barack Obama, after speaking with their governors, suggested that he’ll be seeking emergency funds for damage from Matthew and earlier storms when lawmakers convene after the Nov. 8 election, and Gov. Rick Scott and Sen. Marco Rubio said Florida was certain to seek assistance.

“While the state has yet to commence an assessment of damage due to unsafe conditions remaining in many areas, we must be prepared for the long road of recovery ahead,” Rubio wrote Friday in a letter backing up a request from Scott that Obama declare Matthew a “major disaster” for his state, a designation that would allow it to seek more emergency aid from Washington.

For more, read here.

Photo credit: Pedro Portal, El Nuevo Herald

 


Read more here: http://www.miamiherald.com/news/nation-world/national/article106789687.html#storylink=cpy

 

October 11, 2014

For unlucky, legislative fix for sinkhole insurance means no damages fixed, no payout and lost property value

By Jeff Harrington and Dan DeWitt of the Tampa Bay Times

In the heyday of the Great Florida Sinkhole Lottery, Iris and Harry Irizarry would have had all the ingredients for a big cash payout: A sinkhole policy from state-run Citizens Property Insurance Corp.; visible cracking in the walls and floors of the Spring Hill home they bought new in 2003; and a sinkhole confirmed by both an engineer and the Hernando County Property Appraiser's Office.

But the era of easy sinkhole claims is over, slammed shut by a 2011 overhaul of the state insurance law. Based on the new law, the same engineering firm that found the Irizarrys' sinkhole — and recommended that it be filled with grout — deemed that it wouldn't qualify for an insurance claim.

"We pay our insurance but (Citizens) doesn't want to pay to fix the house, and I can't sell my house because (it) has no value," said Iris Irizarry, 64, a retired Head Start director from Brooklyn. "What kind of a law is that?"

In short, it's a law that has done what it was supposed to do: stem a flood of claims that by 2011 were driving up insurance rates and driving down property values in the "sinkhole alley" of Hernando and Pasco counties.

But concerns are surfacing that the sinkhole fix has gone too far: It has limited the availability of sinkhole insurance and allowed insurers to charge prices rivaling the cost of a standard homeowners policy. It has made it far more difficult for homeowners to qualify for a claim. And by leaving homeowners stuck with sinkhole homes they cannot repair, it has created a potential new drag on property values. Story here. 

September 24, 2014

Citizens removes emergency insurance assessment a year early

@JeffMHarrington 

Florida property owners will stop paying a 1 percent emergency assessment on their insurance bills two years earlier than planned under a recommendation approved Wednesday by the board of Citizens Property Insurance.

For the average homeowner, that translates into a total savings of about $40 over two years.

Citizens was allowed to tack the assessment on to Florida property policies after eight storms during the 2004-05 hurricane seasons left the state-run insurer with a deficit of more than $1.7 billion. The assessments, used to pay off a bond, were supposed to last 10 years.

The emergency assessment began at 1.4 percent in 2007 and was reduced to 1 percent in 2011 because of an increase in the number of insured policies. Continued growth has helped Citizens recoup funds even more quickly than anticipated.

Citizens chief financial officer Jennifer Montero told board members at their monthly meeting in Orlando that the company now expects to have enough money by June 2015 to satisfy the bond's balance. The assessments originally were scheduled to be collected through June 2017. Story here. 

September 05, 2014

State agrees with Citizens: inland properties get rate cut, coastal property get another rate increase

State regulators have approved lower rates for most homeowners covered by Citizens Property Insurance, the first widespread rate cut by the state-run insurer in years.

Citizens, which insures those who cannot find coverage in the open market, is the largest property insurer in Florida with more than 933,000 policies as of July 31.

The Florida Office of Insurance Regulation on Friday said the average Citizens' homeowners rate will fall by 3.7 percent, slightly better than the 3.4 percent decrease sought by the insurer in its June filing. Rates will be cut 4.6 percent, on average, for mobile home owners with multi-peril coverage. Nearly all of the rate reduction is for inland properties and those with multi-peril coverages while nearly all coastal accounts for wind-only coverage will get hit with another rate increase.  

Citizens has previously said nearly seven out of 10 policyholders statewide would see lower rates if its filing were approved.

Among bay area counties, Citizens had proposed average rate cuts for most homeowners policies of 8 percent in Hillsborough; 8.9 percent in Pinellas; 6 percent in Pasco; and 9.5 percent in Citrus. Hernando County policyholders faced an average increase of 0.4 percent. A countywide breakdown of approved rates was not immediately available.

Continue reading "State agrees with Citizens: inland properties get rate cut, coastal property get another rate increase" »

September 04, 2014

Thousands more Citizens insurance policyholders could be sent into private market

From the News Service of Florida:

The Florida Office of Insurance Regulation announced Thursday that more than 425,000 customers of the state-backed Citizens Property Insurance Corp. could be shifted in November to 16 private carriers.

But don't count on all of the policies landing in the private market.

The targeted accounts, nearly double the number of policies previously approved this year to be taken out by private firms, are comprised of 425,357 personal-residential and 2,227 commercial-residential polices. However, past takeout efforts have shown that private companies cherry-pick the least-risky policies and that companies often go after many of the same policies.

Since the start of the year, regulators have approved 894,156 policies for takeout, including the policies announced Thursday. As of Aug. 30, 124,995 had been removed. (Note: Policyholders who refuse the take out to remain with Citizens may get hit with a rate incurease, and for those who agree to the take-out, there there is no guarantee that the rate the customer gets the first year with the takeout will match the rate in subsequent years.) 

Citizens had 933,807 policies as of July 31.The agency in February went under the 1 million policy mark for the first time since August 2006.

Citizens President and Chief Executive Officer Barry Gilway has said he expects the number of Citizens policies to reach about 850,000 later this year, with the number flattening out around 650,000 policies before the end of 2017.

In addition to the just-announced November takeouts, Southern Oak Insurance Company will have a chance to receive up to 10,000 policies on Sept. 16, while six companies are lined up to acquire as many as 91,499 policies, mostly inland personal-lines accounts, in October.

June 25, 2014

Citizens board agrees to lower rates for most, raises for condo owners and coast

For the first time in four years, Citizens Property Insurance wants to lower rates for nearly 70 percent of its customers while everyone else – mostly South Florida condominium owners and homeowners in coastal areas -- will see another year of increases.

The rate changes were recommended Wednesday at the quarterly meeting of Citizens’ Board of Governors and now must go before the Office of Insurance Regulation for final approval.

Base rates vary greatly from policy to policy but, in Miami-Dade County, Citizens is proposing average rate cuts of about 4.3 percent for homeowners with multi-peril policies. Similar policies in Broward will see rates drop an average of 7.3 percent and homeowners in Monroe County will see rates rise 2.6 percent.

For condominium owners in South Florida, however, the rate hikes will continue with average increases of 6.4 percent in Miami Dade, 3.2 percent in Broward and 1.4 percent in Monroe County.  Download 2015 RATES county by county

Continue reading "Citizens board agrees to lower rates for most, raises for condo owners and coast" »

June 04, 2014

Citizen's inspector general opens investigation into ethics issues

Bruce MeeksCitizens Inspector General Bruce Meeks said Wednesday he has launched an investigation into the way the state-run insurer handles employees who leave the agency to go to work for companies that receive contracts.

Citizens CEO Barry Gilway and board chairman Chris Gardner asked Meeks on Monday to conduct an independent investigation in the wake of a report by the Miami Herald/Tampa Bay Times on the recent exodus of executives who have left the state-run insurance company to work for vendors. Meeks reports to the governor and Cabinet.

"Chairman Chris Garner and CEO Barry Gilway have requested that I conduct a review of issues related to Citizens’ post-employment policies and requirements,,'' Meeks told the Herald/Times.  "I have informed them of my agreement to undertake this charge, and am in the process of project preparation and planning."

State law prohibits employees who are responsible for a contract from leaving a state agency to work for a company that holds that contract. Citizens applies the law only to senior executives and members of the board of directors, and says there is no ethical breach when an employee with oversight of a company contract takes a job at that company but handles other matters.

The Herald/Times found that in recent years at least three senior executives at Citizens  who were in charge of multimillion-dollar contracts awarded to private companies went to work months later for those companies.

Dan Krassner, director of the non-profit government watchdog institute Integrity Florida, also on Monday called for Meeks to investigate the ethics practices at Citizens, but he also urged the inspector general to investigate whether the contracts cited in the Herald/Times story “provided the best deals for the public.”


Read more here: http://www.miamiherald.com/2014/06/02/4154141/inspector-general-is-asked-to.html#storylink=cpy

 

June 02, 2014

Investigation sought into exodus of Citizens executives to vendors with contracts

Responding to a report by the Herald/Times on the exodus of executives that leave Citizens Property Insurance to work for companies that receive contracts, the head of a public watchdog group as well as the two top executives at Citizens called for an investigation on Monday.

Dan Krassner, head of Integrity Florida, called on the newly-appointed inspector general of Citizens  to conduct the investigation "into the numerous examples of a revolving door between Citizens Property Insurance Corporation and the organization’s vendors."  Download Close the Citizens Insurance Revolving Door – Investigation Needed June 2, 2014

Krassner's request to Bruce Meeks was followed by a similar request by Citizens CEO Barry Gilway and chairman of the board Chris Gardner. Gilway said the review was needed to "to ensure Citizens is operating in a transparent and ethical manner."  Download Citizens investigation ethic

Here's the Herald/Times report. 

June 01, 2014

Exodus of Citizens executives to companies with contracts raises questions

In the past three years, at least three senior executives at Citizens Property Insurance who were in charge of multimillion-dollar contracts awarded to private companies went to work months later for those same companies.

Florida’s ethics laws ban state employees from going to work for a company for two years if their duties for the state job involved a contract related to that company. But Citizens, the state-run insurer of last resort, reads the statute more narrowly. Its executives say no one has done anything wrong.

Critics, however, say the situation is evidence of a revolving-door mentality at the public company that handles millions of dollars in contracts each year, and add that it raises serious questions about the fiscal management of the company, whose claims will be paid by taxpayers if Citizens runs out of money after a storm.

“Every dollar you don’t spend is a dollar that goes to pay somebody’s claim,” said Sean Shaw, the former Florida Insurance Consumer Advocate from 2008-10. “They should have a moral compass that says, ‘This is taxpayer money. We are going to be as careful as we should with our own pocketbook.’ ”

The head of the Florida Senate Banking and Insurance Committee, Sen. David Simmons, is calling for the ethics law to be tightened relating to Citizens’ contracts and has ordered Senate staff members to draft legislation to do that.

Continue reading "Exodus of Citizens executives to companies with contracts raises questions" »