September 21, 2013

As Citizens insurance denies claims, it racks up attorneys' fees

Citizens Property Insurance Co. will be raising its rates for the third time next year and the proceeds will cover more than claims:

They’ll also pay attorneys’ fees — now averaging an estimated $2 million each month — as policyholders battle over getting their claims paid.

Between January 2011 and June 2013, Citizens has spent more than $16 million on lawyers from 177 different law firms who have successfully challenged the state’s largest insurance company on behalf of policyholders. Citizens collects $2.2 billion in annual premiums and has an administrative operating budget of $205 million.

The data was compiled by the state-run insurer at the request of Rep. Frank Artiles, R-Miami, a licensed general contractor and appraiser who has been one of the Legislature’s most vocal critics of Citizens. He and several plaintiffs lawyers estimate that Citizens has spent a comparable amount on defense attorneys’, with total litigation costs exceeding $30 million a year, but the company does not have that data available.

"How can you ask me to increase my premiums when you are wasting away my premiums in litigation?" asked Artiles, who wants the Legislature to force Citizens’ board of directors to keep the company’s legal costs in check. "How can you function as a board when you cannot control your costs?" Story here.

Read more here:

September 18, 2013

Fugate tells Congress: It's up to you to stop rate increases for flood insurance

 Craig FugateCongress must rewrite the federal flood control act  if it wants to spare homeowners from skyrocketing rate increases, the nation’s top disaster official told a Senate committee Wednesday, saying he doesn’t have the authority to stop it.

“Let me put my cards on the table: I need your help,’’ said Craig Fugate, head of the Federal Emergency Management Administration at a hearing of the U.S. Senate Banking, Housing and Urban Affairs Committee on Wednesday.

Fugate said that despite indications that many homeowners could face massive rate increases for their homes in flood prone areas of the nation starting Oct. 1, the Biggert-Waters Flood Insurance Reform Act of 2012 included no provisions for affordability -- and he can't change that.

“Without some additional legislative support, there is no provision for affordability in this bill,’’ he said.

Fugate told the committee that he supported some modification because he has “found very little leeway as to how we can address affordability under the act.”  

“I fully believe we should stop subsidizing risk as we go forward for new construction for second homes…but we need to look at not putting people out of their homes because flood insurance is too expensive.”

The hearing was called by senators who are increasingly alarmed by estimated rate increases for homeowners as a result of the act. With nearly 2 million homeowners covered under the act, Florida may be one of the hardest hit states in the nation. 

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Scott pens letter to Rubio and Nelson urging delay in flood insurance hikes

As the U.S. Senate Banking Committee plans a hearing today on the planned rate hike on flood insurance policies, Gov. Rick Scott is urging Florida's senators to push for a delay and an extension in the federal subsidies.

"In cases where new maps move a property into a flood zone, homeowners may find it impossible to sell their properties to a new owner who will be shocked with the massive premium increases required to secure a mortgage,'' Scott wrote in a letter to U.S. Sen. Bill Nelson and Marco Rubio. "This unfair consequence could devastate parts of Florida's real estate market, stymie Florida's economic recovery, and diminish the state's tax base."

Under the Biggert-Waters Flood Insurance Reform Act of 2012, flood insurance rates will rise about 20 percent annually beginning Oct. 1 for homes in older, flood-zone areas that have previously enjoyed subsidized rate. The rate increases will continue until their premiums reflect the full market risk.

The rate increases are intended to keep the national flood insurance program from spiraling into insolvency by phasing out lower, subsidized rates for older properties in flood zones.

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September 11, 2013

Report: Thousands of Citizens policies held by out-of-staters homeowners

When Citizens Property Insurance sends out its monthly customer bills, only 31 percent of them go to the same house that is insured.

The rest go to other mailboxes in Florida — and around the globe, according to data analyzed by the American Consumer Institute of Citizen Research.

More than 19,000 bills go to people who live in Canada, nearly 27,000 go to New Yorkers, almost 12,000 go to folks in New Jersey and hundreds more go to England, Germany and France.

From Singapore and China, to South Africa and Luxembourg, Florida’s state-run insurance company is providing subsidized insurance coverage to 22,775 property owners who reside abroad. Another 176,465 policies go to homeowners with primary addresses in other states, the study found. Story here. 

At least 1 million of the nearly 1.3 million monthly bills for homeowners policies stay in Florida, but that includes an estimated 500,000 policies that go to addresses different from the property that is insured.

As Florida grapples with how to lower the cost of homeowners insurance along its hurricane alley, the out-of-state subsidies are a luxury it cannot afford, said Steve Pociask, president of the Washington, D.C.-based think tank that reviewed Citizens’ billing lists.

“It all comes down to affordability,’’ he said. “People who live here and have their primary homes insured here are teachers, police, service workers and they are being stung by higher prices. while 27,000 people who have their bills sent to New York are getting subsidized insurance. Why do we want to subsidize these folks?’’

The inequities are enough to prompt Sen. David Simmons, the chairman of the Senate Banking and Insurance Committee to draft legislation to require that out-of-state policyholders whose second homes or vacation are insured by Citizens no longer receive subsidized rates.

Continue reading "Report: Thousands of Citizens policies held by out-of-staters homeowners" »

September 09, 2013

Regulators approve 6.3 percent average hike for Citizens policyholders

Homeowners who have policies with Citizens Property Insurance Corp. will see their premiums rise an average of 6.3 percent next year, the fifth consecutive increase in rates from the state-run insurer.

The average premium increase approved Monday by the Florida Office of Insurance Regulation comes on the heels of a 10.8 percent hike approved last year, but is less than the 7.9 percent sought by Citizens as part of its aggressive attempt to shed policies.

Homeowners with standard “multi-peril” lines will pay an additional $111 on average --  4.4 percent higher than current average rates -- when their policy renews next year. Those with wind-only residential policies will pay an average increase of $265 more, or 10.5 percent, and businesses with commercial lines coverage will see a 10 percent hike.

Since 2009, rates have risen 43 percent for Citizens’ standard homeowners policies and officials say the company’s rates are still below market. 

"We are grateful to OIR for its diligence in reviewing Citizens' 2014 rates and pleased that it has agreed with our overall approach," said Citizens President and CEO Barry Gilway in a statement. "The agency’s action will allow Citizens to continue providing quality service to our 1.2 million policyholders while reducing the risk of assessments on all Floridians." 

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Rollins resigns from Citizens board to explore returning to the company

John RollinsJohn Rollins, an insurance analytics guru who was appointed to Citizens Board of directors by Gov. Rick Scott two years ago, submitted his resignation from the board today in a letter to the governor.

Rollins, 43, told the Herald/Times that he resigned to avoid any ethical breaches as he considers returning to Citizens as part of the company's reorganization. Rollins, president of Rollins Analytics Inc. in High Springs, served as chairman of the board's Actuarial and Underwriting Subcommittee. He previously served as director of corporate analytics at Citizens Property Insurance Corporation from 2006 to 2007.

"I've accomplished a lot and the board has accomplished a lot,'' Rollins said in an interview. "There is a reorganization of the company and it's possible I would have a place in that reorganization. It's also possible there may be opportunities in the private insurance market."

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As Citizens sheds policies, customers face new headaches

In the next month, almost 400,000 people whose homes are covered by the state-run Citizens Property Insurance Corp. will get a letter in the mail from another insurance company taking over their homeowners’ insurance coverage by Nov. 5.

Policyholders will have two options:

Say no, and remain with Citizens, taking a chance that their options will become even more limited beginning in January, when a $44.9 million clearinghouse comes online to allow insurance agents in the private market to handpick Citizens policies.

Or say yes, accepting the coverage from the so-called “takeout” company, one of 10 smaller carriers. Unlike Citizens, those companies have the right to raise insurance premiums by unlimited amounts when the policies come up for renewal.

It’s all part of the aggressive and controversial push by Gov. Rick Scott and the Florida Legislature to shed Citizens Property Insurance of its 1.2 million state-subsidized policies. Under current law, if Citizens falls short of the cash it needs to pay its claims after a massive storm, policyholders of other lines of insurance and state taxpayers will be assessed fees to foot the bill.

But as Citizens shifts policies to the private market, the bottom line for homeowners is that costs will rise. Private companies don’t face the same rate caps as those imposed on Citizens, and they don’t benefit from the taxpayer-backed system. Story here.

A breakout of the targeted number of policies by local county here:

Continue reading "As Citizens sheds policies, customers face new headaches" »

August 22, 2013

Citizens agrees to $21 million contract to create prop insurance clearinghouse

Citizens Property Insurance board on Thursday agreed to sign a $21.7 million five-year contract with a company that will create a clearinghouse for homeowners to compare property insurance policies offered in the private market. 

The Florida Legislature ordered the state-run insurance company to set up the clearinghouse, including an online component, by Jan. 1, 2014, to help homeowners kicked out of Citizens to do a better job of comparison shopping. 

The legislation required that Citizens policyholders are not eligible to renew their policies if a comparable private-market policy is within 15 percent of the Citizens renewal premium.

Six companies submitted bids to create the clearinghouse and, at the recommendation of Citizens staff, the board agreed during a conference call that the bid should go to a software company called Bolt. (We’re still trying to get more information on them.) They expect the site to be responsible for an estimated 8,000 transactions a day, said Citizens Chief Insurance Officer Yong Gilroy.

The software will not only give consumer the opportunity to compare policies and prices, but will also help them verify whether the private policies are within the 15 percent threshold.

Barry Gilway, Citizens CEO, predicted that the clearinghouse, along with the company’s aggressive push to “depopulate” by providing incentives to companies to take over Citizens policies, will result in a “record-breaking depopulation process. That means, he said, an estimated reduction of 550,000 policies into the private sector over the next two years.

August 07, 2013

Atwater wants answer: why aren't property insurance rates dropping?

Property insurance imageIn a letter to Florida Insurance Commissioner Kevin McCarty, Chief Financial Officer Jeff Atwater asks why it is that as re-insurance costs for property insurers are dropping, they are not lowering premiums for Florida customers. 

He doesn't ask McCarty to do anything about it. He doesn't suggest he is going to do anything about it, but he is raising the point. Here's his letter:  Download 8.7.2013 Letter to Commissioner McCarty

June 25, 2013

Investigation into former Citizens employees raises questions about ethics lapses

Two former Citizens Property executives, who left the state-run insurance company for violating conflict of interest rules, were developing an online software company with their supervisor and receiving hefty pay raises, documents show.

Edward B. Baldwin and Christopher H. Dunn, both high-level executives at Citizens, resigned under fire on May 17 after an internal audit found they formed Silvershore Partners last November with their then-boss, Eric J. Ordway, and used Citizens computers to access a web site for the company during work hours.

Ordway, 48, left the company in December after starting ProfileGorilla, an online software company that specializes in helping businesses track sales, payroll, contracts and other management issues. An investigation into whether or not Ordway and partners used proprietary data from Citizens for private gain is still underway, Citizens auditors told a meeting of the audit committee of the Board of Directors on Tuesday in Miami. Download Conflict investigation

“The forensic audit is focusing on computer software to see if Citizens data was downloaded and removed,’’ said Michael Peltier, a Citizens spokesman.

But the controversy also has raised questions about how much Yong Gilroy, Citizens chief insurance officer, knew about Ordway’s relationship with the employees he supervised. Gilroy has ties to each of the four officers at Silvershore Partners. More here.