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.   


June 17, 2013

Citizen's top defender, long-time CFO Sharon Binnun, resigns

A top official at Citizens Property Insurance, chief financial officer Sharon Binnun, resigned Monday, the company president Barry Gilway announced Monday in a note to employees.

Binnun served the company as a steadfast defender of some of Citizen's most controversial policies and faced withering criticism from lawmakers and consumer advocates over those ideas as well as over travel expenses racked up by Citizens executives.

Binnun, who joined the state-run insurance company in six years ago and made $255,000 a year, said in her resignation letter she has accepted a job in the private sector effective July 5. She is credited with helping to transfer 430,000 policies from Citizens to private insurers over the past two years, resulting in an estimated 47 percent decrease in potential assessments on Citizens customers and all Florida policyholders in the event of a catastrophic storm.

Binnin was often the voice of Citizens before the legislature, calmly defending ideas that were later rejected by policy makers as too controversial -- such as a proposal from Citizens to offer loans to companies to take out Citizens policies and to remove caps on rate hikes.

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June 14, 2013

Scott's advisors knew about Citizens' $52 million insurance deal with Heritage

From The Associated Press:

Florida Gov. Rick Scott - and other top state officials - quickly distanced themselves last month from a controversial deal approved by Citizens Property Insurance Corp. to shift thousands of homeowner policies to a start-up insurance company.

But emails show that the Scott administration and other officials knew in advance about the unique deal that calls for Citizens, the state-backed insurance giant, to pay $52 million to Heritage Property Insurance and Casualty to absorb 60,000 policies.

Documents obtained by The Associated Press show that a lobbyist representing Heritage had met with a top Scott aide to discuss the transaction. The Scott administration acknowledged that the meeting happened in late March - roughly two months before the Citizens board approved the deal.

Scott's chief of staff Adam Hollingsworth insisted in a statement that no one in the Scott administration took a position before Citizens approved the transaction, known as a "take-out," on May 22.

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June 10, 2013

Fasano threatens emergency meeting of board over condo insurance charges

Rep. Mike Fasano is threatening legislative action if the director of the Florida Hurricane Catastrophe Fund doesn't back down from a ruling that Fasano says could cost condomium owners throughout the state thousands of dollars in rate hikes.

Fasano is challenging an interpretation of a law by Jack Nicholson, executive director of the CAT fund, and on Monday asked Nicholson to bring the issue before the governor and Cabinet or he will ask legislative leaders to let him call a special meeting of the Joint Administrative Procedures Committee, which Fasano chairs.

Nicholson has said that he believes the CAT fund must disqualify from its coverage any condominium buildings in which units are being rented for more than six months of the year. The state-run reinsurer offers lower cost coverage for residential property than is often available on the free market but, Nicholson believes, state law doesn't consider rental units that are rented for more than six months of the year as residential coverage. 

Fasano, R-New Port Richey, disagreed. In a back and forth last week, Fasano challenged Nicholson and Nicholson responded on Friday. Unsatisfied with the answer, Fasano sent another letter Monday threatening more extreme action. Download Fasano June 10

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June 07, 2013

Cat Fund fight could have huge impact on condo insurance rates

Rep. Mike Fasano and Dr. Jack Nicholson, who runs the state-backed reinsurance organization (the Florida Hurricane Catastrophe Fund), are in a bit of a back-and-forth over what should and shouldn’t constitute a “residential property” for insurance purposes.

It’s a bit wonky, but Fasano says Nicholson’s interpretation of Florida’s statutes could cost condo associations thousands of dollars in rate hikes, if the Cat Fund stops covering their buildings.

According to Fasano (R-New Port Richey), a change to the Cat Fund’s coverage policy would disqualify condominium buildings where units are being rented for more than six months of the year from receiving state-backed reinsurance. 

He said the change could force some condo associations to see their insurance rates double, as private insurers and state-run Citizens Insurance rely on the Cat Fund for low priced back-up insurance. 

Fasano believes Nicholson and the Cat Fund have gone beyond the scope of the Florida Statutes by implementing the restriction on condos that have units rented out for more than half the year.

“Distinguishing between policies for condominium structures and condominium units based on rental criteria also seems to be contrary to Section 718.1256, Florida Statutes,” he wrote in a letter to Nicholson, outlining statutory language that states condos should be classified as residential property. The Cat Fund is required to provide coverage for residential properties.

Nicholson responded Friday, arguing that he was complying with the law because the rented condo units are “transient rental property,” and therefore not considered “residential property” eligible for Cat Fund coverage.

“An exclusion of transient rentals from the term ‘residential property’ is consistent with other statutory provisions,” wrote Nicholson.

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June 06, 2013

Sen. President Gaetz joins long list of Republicans questioning $52M deal for Scott contributor

Senate President Don Gaetz is calling for special hearings on the $52 million special deal between Citizens Property Insurance and a politically connected upstart insurance company, the latest sign of legislative angst with the state-run insurer.

Last month, Citizens agreed to transfer $52 million to Heritage Property and Casualty, a nine-month old insurance company that has spent hundreds of thousands of dollars on lobbying and political donations to top Republicans, including Gov. Rick Scott.

“The Florida Senate believes the facts and circumstances surrounding the Heritage transaction need thorough investigation so the people of Florida are assured that it and transactions like it are in the best interest of Floridians,” Gaetz, R-Niceville, said in a statement. “As such, as soon as Committee meetings begin this fall, the Senate Banking and Insurance Committee will conduct hearings to investigate and propose ]solutions to the concerns raised by this transaction and any others that might result from Citizens’ attempts to reduce its liabilities.”

Gaetz joins a long list of top Republican lawmakers questioning the $52 million cash transfer from Citizens to a private insurer. House Speaker Will Weatherford, R-Wesley Chapel, said he was “highly concerned” about the deal and would call on a House committee to provide more oversight for Citizens. Gov. Rick Scott’s chief of staff called the board at Citizens “tone-deaf” when it comes to earning public confidence (Heritage donated $100,000 to Scott’s reelection in March, as the $52 million deal was being crafted, but Scott’s office denies pay-to-play). Chief Financial Officer Jeff Atwater also criticized the hastily approved 3-2 vote by the Citizens board to support the unique deal. Scott refused to answer questions this week about whether he supported the deal for his political contributor or not. 

Sen. Mike Fasano, R-New Port Richey, has called the deal “corporate welfare” and Rep. Frank Artiles, R-Miami, called it a “get rich” funding scheme. Critics say the deal allows Heritage to retroactively cherry pick policies that have made no claims, thus privatizing profits and socializing losses. They also pointed to a long list of insurance violations at companies run by Heritage's president, Richard Widdicombe

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June 04, 2013

Does Gov. Scott support special $52 million deal for his donor? He won't say.

Last month, Gov. Rick Scott went line-by-line through the state’s $74.5 billion budget, striking down more than $350 million in spending items—everything from $10,000 for a water project in Miami Gardens to $50 million for a state bike trail. 

Scott said he spent a long time reviewing every item in the 400-plus-page budget to protect taxpayer money by making sure that all line items in the budget were a smart use of state funds. 

But when it comes to a unique $52 million transfer of cash from the state-run insurance company to a nine-month-old startup private insurer, Scott is not willing to say whether he supports the unprecedented deal or not. The recipient of the special deal, Heritage Property and Casualty Insurance, gave Scott's reelection campaign $110,000 in March as it was negotiating the deal. Scott’s office said the governor did not influence state-run Citizens Property Insurance to act on behalf of his political contributor, but his spokespeople have also avoided saying whether Scott supports the deal itself. 

Here’s an excerpt from a press conference today, in which Scott avoids answering a reporter’s question about whether he supports the deal. 

Reporter: A couple weeks ago, Citizens did a $52 million deal with a nine-month-old insurance company. We know how you feel about Citizens but you haven’t really said specifically how you feel about this unique and new type of deal. Do you support that type of economic activity at Citizens, are you against that specific deal?

Scott: First off, I want to try to do anything I can to try to reduce taxes in our state. As you know, my first year in office we reduced property taxes by over $200 million, so I think that’s a real positive. What Citizens is doing is, Citizens needs to make sure they downsize. They should be the insurance company of last resort. I’ll do anything I can to make sure they keep doing that. As you know I (appoint) two of eight board members and I don’t appoint the chairman. I want them to make sure they constantly look at how do we get them out of the business of being the insurance company of first resort. I want them to be the insurance company of last resort. That’s what  they’re set up to do and that’s what they need to do. 

Reporter: But, specifically. A couple weeks ago you went line-by-line and looked at budget issues and vetoed things were $100,000. This is a $52 million deal, and you’re the CEO of the state. Should you not look at this deal, specifically, and say, ‘I’m for this deal,’ or ‘I’m against this deal,’ or ‘I have issues with this deal,’ as others have?

Scott: Citizens has a board. I appoint two board members. I don’t appoint the chairman. My expectation is that they go through, and any program like that, they review it. And do the right thing.

There is a difference between the state budget and the state-run insurer:  Scott has unique line-item authority over the budget, while his control of the state-run property insurer is a bit more indirect. He appoints two members to the eight member board and can give Citizens directives as the head of the Florida Cabinet. He’s done so in the past. He also sits on the the Financial Services Commission, which oversees the Office of Insurance Regulation. OIR approved the special deal with Heritage, despite a long list of insurance violations at companies run by Heritage's president.

One of Scott’s appointees to the board made the motion to support the Heritage deal, and voted for it in a narrow 3-2 vote. Scott’s other appointee was not present. If Scott opposed the deal, he could have asked his appointee not to carry it and it would have failed.

Scott’s office has not addressed this issue, only saying, in a statement from the governor’s chief of staff: “Any assertion that our office influenced the Heritage risk transfer decision by the Citizens Board today is outrageous.”

Scott's chief of staff also called the board “tone-deaf in earning public confidence” after it approved the deal.

Prior to the $52 million deal being approved, Scott’s office tried to downplay it, calling it “not special.”

Also, the day before the “tone-deaf” charge, the governor’s office was much less aggressive, stating: “We expect [the board] to approve or disapprove of this risk transfer based solely on its merits.”

Scott has since said that he believes the board should give at least seven days notice before meetings (the Heritage deal was approved in a hastily scheduled vote, shortly after it was unveiled.). His office also said Scott will not return the $110,000 in donations from Heritage. 

Scott’s non-answer on whether he supports the deal itself is not out of character for the first-term governor.

Scott often does not answer questions directly, regularly pivoting to well-rehearsed talking points that are often repeated in several interviews with different news outlets. In many cases, the CEO-turned-governor opts to defer to less powerful officials on major issues. Here’s a blogpost we did last year documenting Scott’s deferential stance on several issues. 

On property insurance, Scott is in a difficult place, politically. The business community and insurance companies—many of whom are major political contributors and Scott’s most steadfast supporters—want higher rates to help boost profits and sustainability.

Meanwhile, homeowners—many of whom vote based on pocketbook issues—have seen hundreds of millions of dollars in insurance premium increases since Scott took office. Scott’s predecessor, Charlie Crist, called a special session and worked to freeze property insurance rates. He earned the ire of the business community and major insurers said Crist forced them to flee the state. But homeowners saved millions of dollars and, since there have been no hurricanes in seven years, the financial calamity of an undercapitalized insurance market has not materialized. 

Given the political realities (and the fact that Crist could challenge Scott in 2014),  Scott has steered clear of taking a strong a position on property insurance. He worked to kill insurance rate hikes in a  Citizens bill moving through the Legislature this year, but also has tasked Citizens with shrinking rapidly. At Citizens, the "depopulation" mandate means raising rates and using cash from the company's $6.4 billion surplus to incentivize private insurers.

Board members at Citizens have said that the message they’re getting from state lawmakers is “schizophrenic.”


May 30, 2013

Largest private insurer in Florida fined $1.3 million for long list of violations, abuses

The state’s largest private property insurance company has been violating state law, mistreating customers and shifting profits to affiliates for years, according to an order released Thursday by the Office of Insurance Regulation.

Universal Property and Casualty Insurance Company has been fined $1.3 million for a laundry list of violations ranging from mismanaging its money to wrongfully denying insurance claims to failing to maintain appropriate records. Many of the violations are repeat offenses for the company, since regulators flagged the much of the misconduct in 2005.

The fine, if it holds, would be one of the largest ever levied against a property insurer.

Fort Lauderdale-based Universal has more than 542,000 policyholders, and is 15 times as large as it was in 2004. During that rapid growth span, regulators say, it built up a habit of breaking insurance rules and using questionable financial practices. Universal officials did not respond to requests for comment Thursday.

The company was blasted last year by the Insurance Consumer Advocate, Robin Westcott, for it’s practice of “post claim underwriting.” After homeowners filed insurance claims, the company scrutinizes the initial policyholder application, to see if any mistakes had been made. If the homeowner failed to report a credit issue on the initial application, Universal denies the claim and cancels the policy.

“This practice is reprehensible and should cease immediately,” said Westcott last month, urging the Office of Insurance Regulation to investigate.

OIR found that Universal was indeed cancelling policies after policyholders made claims, leaving homeowners who thought they had insurance with huge repair bills and no coverage.

"For far too long, this company unjustly denied claims and forced consumers into financially devastating situations," said Chief Financial Officer Jeff Atwater, in a statement.

The company also made several other violations, cited in the 19-page OIR order (which is subject to challenge by Universal before it becomes final). They include:

--          Canceling policies without justification (a “repeat violation” from a 2005 order)

--          Requiring homeowners to produce multiple “notarized proof of loss” documents after making a claim.

--          Not keeping a copy of consumer complaints, as required by regulators and Florida statutes

--          Several money-management issues, some of which are detailed below.

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