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


December 09, 2015

Citizens nearly under 500,000 insurance policies but worried about 'out-of-control' Miami-Dade water claims


Not many companies celebrate losing customers and watching their business shrink. But that is exactly what Barry Gilway, president of the state-run Citizens Property Insurance Corporation was doing this morning.

At a board of governors meeting for the company in Maitland, Gilway said Citizens is down to 509,000 policies and by the end of the month will likely be under 500,000 policies. The company in 2011 had nearly 1.5 million policies. The result has been a drop in revenue from premiums from $3.2 billion at one point, to under $1 billion expected in 2016.

“We’ve had a pretty extraordinary year,” Gilway said.

Citizens has been under political pressure to reduce its share of Florida’s property insurance market since 2011. Citizens was intended to be an insurer of last resort, but instead became the state’s largest insurance company over time, especially after the historic 2004 hurricane season when four storms hit the state. 

But since 2011, the state has been on an aggressive “depopulation” campaign over the last four years, where the state has tried to push customers out of Citizens toward private companies. But some have questioned the tactics, saying many people were shifted out of Citizens without proper notification. Citizens has reformed some of its policies to give homeowners who don’t want to be pushed out of Citizens, a better opportunity to opt out.

Continue reading "Citizens nearly under 500,000 insurance policies but worried about 'out-of-control' Miami-Dade water claims" »

November 05, 2015

Another 127,000 homeowners targeted for removal from Citizens


Another 127,000 homeowners in Florida can expect to get notices trying to nudge them out of the state-run property insurance company in the coming months as part of an on going effort to “depopulate” Citizens Property Insurance Corporation.

The Florida Office of Insurance Regulations announced on Thursday that they have given the approvals to five companies to offer homeowners private insurance that would remove them from Citizens. Homeowners would be switched if they don’t fill out paperwork to opt-out of the offer and remain in Citizens.

Citizens is already at a near-record low after shedding about 1 million policies in four years. But how the state has pushed homeowners out of Citizens has come with significant backlash, that state officials say they are fixing.

In the past, homeowners were subject to getting letters warning of dramatic assessments if they remained in Citizens, even if that was not completely accurate. Others say the take-out offers were in letters that looked like junk mail, giving homeowners no real opportunity to opt out of switching. And other say after they were switched to new carriers, they got blasted with big premium increases when their policy got renewed – increases that had not been disclosed at the time of their switching over.

Continue reading "Another 127,000 homeowners targeted for removal from Citizens" »

October 05, 2015

Democrats push Gov. Rick Scott to change position on Citizens veto


Homeowners hit with dramatically higher insurance premiums at the hands of new private insurance carriers would be able to return to the state-run Citizens Property Insurance Corp., under a bill proposed by a pair of House Democrats.

But the prospects of the bill (HB 289) already look dim in the Legislature given that four months ago Gov. Rick Scott vetoed the exact same bill because he worried it would lead to more people returning to the state-run insurance company. Scott has applauded the depopulation of Citizens, a process that has shrunk the carrier from holding more than 1.5 million policies in 2012 to under 600,000 now.

Still the Democrats say they are hoping Scott reverses himself on the issue because the measure passed unanimously in both the House and Senate back in April before Scott vetoed it. State Rep. Jose Javier Rodriguez, D-Miami, said Scott has changed his position on other big issues over the years, and hopes this will be another one.

“We’re hoping the governor flip-flops on this issue too,” Rodriguez said.

The new bill, like the one previously vetoed, would allow a person to return to Citizens if a private carrier that agreed to take on a policy charges more than 10 percent higher premiums than originally estimated. They could also return if a private carrier increases the rate more than 10 percent per year during 36 months after the policy is first shifted out of Citizens.

But while the bill is nearly identical, it has one key missing ingredient so far: Republican support. None of the co-sponsors of the House bill that passed in April have signed up to support the bill by Rodriguez and Rep. Dwight Dudley, D-St. Petersburg.

Rep. Frank Artiles, R-Miami, said he absolutely agrees that the governor was “mistaken” to veto the previous bill in June, but expects any new bill to come later in the legislative process after more discussion.

“I think it will come back up again,” Artiles said.

The state has been pushing to reduce the size of Citizens as more private insurance companies have returned to Florida’s market. The more policies in Citizens, the greater the financial risk for the entire state. In the event Citizens cannot cover all of its policy owners’ damage, all property owners with insurance can be subject to an assessment to cover costs.

When Scott vetoed the bill in June, he cited the burden Citizens is on all taxpayers when it is too large. He specifically objected to allowing people to return to Citizens.

“This perpetuates reliance on Citizens, which increases the potential for burdensome assessments on Florida families,” Scott said in vetoing the bill.

Some consumers have complained about how Citizens size has been reduced. Many have said notices warning them that they were going to be shifted to a private carrier were unclear and looked like junk mail. Others complain that premium estimates were far lower than what they were charged months later by private insurers once they were out of Citizens and could not return.

September 30, 2015

State-run insurance company continues to shrink policy count, CEO says


The state government’s role as a property insurer is only going to get smaller over the next four months.

Citizens Property Insurance has already passed off 1 million insurance policies to private carriers since 2012, and another surge is coming over the next four month, said Barry Gilway, CEO and president of Citizens.

Gilway told the Citizens board of governors on Wednesday that there will be enormous action in October and November and he foresees a very strong January coming for take-outs - policies offered up to private carriers.

By the end of the year, Gilway predicted tens of thousands of more policies will be in the hands of the private market.

“So we’re still thinking that we’re going to be – by the end of the year – we’ll be in the low 500,000 range,” Gilway said of total policies.

By the end of 2016, Citizens projects it will have 450,000 policies or less.

Continue reading "State-run insurance company continues to shrink policy count, CEO says" »

Citizens aims to be more consumer-friendly in shedding policies


Citizens Property Insurance, already at a near-record low after shedding about 1 million policies in four years, aims to shrink even more.

But this time the state-run insurer of last resort is taking a more consumer-friendly approach.

After enduring a severe backlash for how policies were transferred to private carriers, Citizens' board this morning will consider ways to keep policyholders in mind as it discusses getting rid of another 130,000 policies by the end of 2016.

Gone already are scare letters warning of dramatic assessments if they remain in Citizens, even if not completely accurate. Also critical correspondence looking like junk mail has been changed, and prospective premium hikes from new insurers are being disclosed in advance for the first time. The burden is still on consumers to "opt out" of being sent to another insurance company.

"The opt-out letters were not as clear as they should have been," said Gary Aubuchon, a former state legislator and current Citizens board member. "We are listening to what the consumers are saying."

A key reform begins in October, when letters urging home­owners to switch to private insurers will include cost premium estimates for both the private provider who is seeking to take on the policy and Citizens, information not included in past letters.

More here.

June 02, 2015

Scott vetoes consumer protection for Citizens depopulation, 1st of 2015 session

In his first veto of the year, Gov. Rick Scott rejected Tuesday a bill that sought to make the de-population of Citizens Property Insurance Corporation more consumer-friendly.

The proposal (HB 1087) would have forced Citizens to send multiple "takeout offers" for comparison purposes, rather than one at a time. And it would limit the number of offers that could be sent to two per year.

People who left Citizens and then saw their rates hike more than 10 percent in three years could have returned to Citizens.

Scott wrote in his veto letter that the bill would discourage people from leaving Citizens, and he asserted that depopulation is in the best interests of the state.

"As alternatives to Citizens continue to grow, state policy must continue to reduce dependency on Citizens, as it is designed to be an insurer of last resort and not the insurer of first resort," he wrote. "With the specter of assessments after a catastrophic event, we should encourage more competition that benefits every family."

HB 1087 passed both the House and Senate unanimously.

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


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.