Editorial: Keep close eye on Citizens’ legal deal

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December 23  |  Citizens, News  |   Danielle Szeliga

The Florida Legislature created state-run Citizens Property Insurance Corp. to serve property owners who couldn’t find coverage elsewhere, but also to ensure the vitality of the state’s real estate market. Now a $6.5 million contract with an outside legal firm that developed a one-size-fits-all sinkhole settlement strategy raises questions about whether the company will try to close off avenues of redress for customers. Given the insurer’s recent back-door rate increases and takeout campaign, Citizens customers have reason to be leery, and lawmakers should be watching. • The Citizens board voted 4-1 last week to hire Ackerman, Link & Sartory P.A. of West Palm Beach for three years to handle all its claims litigation — from sinkholes to other property claims. The contract comes as the law firm’s previous $1.5 million contract with Citizens was exhausted as it worked to develop a sinkhole settlement strategy.

Citizens announced the Ackerman strategy earlier this month, saying it was mailing settlement offers to all sinkhole claimants proposing to directly pay contractors to fix the problems — with multiple caveats. Customers would have to drop litigation, absorb legal bills and fees, and accept Citizens’ preferred repair method of putting grout or pressurized cement in the ground. Some homeowners don’t like that procedure, favoring methods such as pinning, or driving steel pins deep into the ground. This conflict came to light most recently in Dunedin when a sinkhole opened up under a Citizens-covered home where cement was being pumped in the ground after the owner finally acquiesced to Citizens’ repair plan.

Yet even before this firm’s prescriptive solution to sinkhole claims has had time to be implemented, Citizens is doubling down, hiring the same firm to develop settlement strategies for other kinds of claims and to eventually train Citizens staff to handle the claims in the same vein.

To be sure, Citizens needs a cost-effective method for dispensing of frivolous or fraudulent claims. And its track record on settling valid claims needs work. But the challenge remains to ensure that in the process, Citizens’ customers don’t see their options unduly proscribed. Citizens may be the insurer of last resort, but that should not mean it has the right to run roughshod over customers who have paid a premium for protection they may now find harder to collect.

Citizens officials say the new strategy will allow them to save as much as $97 million in future legal defense fees, and they claim a statewide, uniform approach to cases is needed.

That may be a good business decision, but it remains to be seen what it means for consumers and their right to the insurance protection they have paid for. If Citizens goes too far, the Legislature should step in.

Source: Tampa Bay Times

As Citizens offers to settle disputed sinkhole claims, critics scoff

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December 13  |  Citizens, Claims, News, Sinkholes  |   Danielle Szeliga

By Michael Van Sickler

About 2,100 customers who have or are planning to sue Citizens Property Insurance over sinkhole claims will soon be getting offers to settle.

The state run company announced Wednesday it is mailing proposals to current and potentially future litigants this week that offer to pay for repairs. But there are strings attached, including a a requirement that customers will no longer be paid to make the necessary repairs. Instead, Citizens will pay the contractor directly.

Dubbed “Grout in the Ground”, the proposal is part of an effort to settle sinkhole claims, as well as avoid future risk. The letter invokes recent sinkhole mishaps in Seffner, Clermont and Dunedin to encourage customers to agree to settle.

“While we recognize that these events are extremely rare occurrences, Citizens’ primary goal is making you and your family safe immediately,” the letter stated.

The settlement offer comes after the Times/Herald reported frustration among customers with the claims process.

If homeowners accept the offer, they must drop their lawsuits against Citizens, agreeing to pay their own legal bills and fees.

“This is an attempt to see if we can settle some of these cases,” said Citizens spokesman Michael Peltier. “It’s been our policy not to write blank checks. This is an expansion on that.”

Sen. Wilton Simpson, R-Trilby, represents parts of Pasco and Hernando that are susceptible to sinkholes. He hailed the settlement offer, which he encouraged in meeting with Citizens officials, as a practical way to reduce litigation costs while providing customers with the coverage they need.

“What we’re trying to do is get the homes properly repaired,” Simpson said. “That’s the primary concern. This is the right way to do it. There’s no downside at all in this plan.”

Simpson said too many customers spent claims money on other expenses or didn’t spend the money at all, making the homes vulnerable for themselves or for those who buy the homes later.

Frequent Citizens critic and former state lawmaker Mike Fasano, who is now the Pasco Tax Collector, said he was happy to hear that the company will require that the money be spent on repairs. Too often, he said, customers would spend the money elsewhere.

But Fasano questioned the chosen method of repair: grouting. He said grouting is more expensive than other methods, such as pinning.

“This will cost Citizens a fortune,” Fasano said. “Grouting is expensive. Companies will pour cement just to meet the total cost of the claim. They’ll grout until the cows come home in some cases.”

Lawyers like Dan Fritz, who represent homeowners against Citizens, say the latest offer was an insincere one.

“Citizens is the only insurance company in Florida that is forcing homeowners to put ‘grout in the ground’, which is what they were doing in Dunedin when the collapse occurred,” said Fritz, general counsel at Sinkhole Public Adjusting, LLC in New Port Richey. “Citizens has a strategy which appears to disregard their customer’s best interests.  We saw Citizens send out a similar letter after the Seffner tragedy, so it doesn’t look like a serious offer.”

According to the three-page letter, cash will no longer be paid to those with homes in need of underground repairs. Instead, those homeowners who have identified sinkholes must hire certified contractors to bolster the homes with grouting. Citizens will pay for those expenses. If the grouting doesn’t stave off sinkhole damage, Citizens will pay for additional repairs deemed necessary by Geohazards Inc., a Gainesville contractor hired by Citizens.

Once Geohazards identifies the necessary repairs to stabilize or repair their homes have been completed, Citizens would pay for a “neutral” evaluator to determine if further repairs are necessary if the engineer hired by the homeowners recommends more work.

The neutral evaluator, or contractor, would have geotechnical expertise to determine if further repairs are necessary. A key part of Wednesday’s settlement is that homeowners would agree to abide by the recommendation from Citizen’s neutral evaluator. Citizens would pay for all repairs the evaluator recommends.

Customers won’t be required to pay any out-of-pocket expenses for the repairs, the letter states.

Still, there’s some wiggle room for Citizens.

The letter states that if homeowners accept the offer, and the neutral evaluator agrees with the homeowner’s engineer’s method of repair, Citizens would pay the “reasonable cost” of the report and investigation by the homeowner’s engineer, along with any “reasonable” attorneys’ fees.

“Understand that Citizens is committed to working with you to put this litigation behind us and to put the ‘grout in the ground’ necessary to protect your property,” the letter stated. “We hope you are as well.”

To avoid customers handling the money, Citizens would pay the contractor directly. Homeowners would provide Citizens with any invoices for the grouting and repairs as the work is performed.

Citizens will monitor the work done by the homeowner’s contractor to make sure it is “appropriate and consistent with the engineer’s recommendations.”

Upon completion of the grouting, Citizens will inspect the home and determine if the repairs caused any additional damage to the home. If it does, Citizens would pay.

Source: Tampa Bay Times

Six insurers eyeing 151,000 Citizens policies

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December 5  |  Citizens, News  |   Danielle Szeliga

State regulators have approved six property insurers to remove up to 151,000 policies from state-run Citizens Property Insurance Corp. in February.

The so-called takeouts are part of a continuing plan to reduce Citizens’ future catastrophe-related risk, such as hurricanes.

“We’re trying to return Citizens to its original role of being the insurer of last resort,” spokesman Michael Peltier said Wednesday.

Florida’s Office of Insurance Regulation last month approved First Community Insurance Co. to take out as many as 51,249 Citizens policies, while Safepoint Insurance Co. may remove up to 40,000 policies.

Elements Property Insurance Co. and Heritage Property Casualty Insurance Co. each have been approved for up to 20,000 policies. Southern Fidelity Insurance Co. and Southern Fidelity Property & Casualty can remove 10,000 each.

Private insurers have taken out more than 312,000 Citizens policies this year. As of last week, Citizens had just more than 1 million policies statewide and expects to fall below 1 million early next year.

President Barry Gilway has said the goal is to trim Citizens down to about 800,000 policies.

Currently, Broward County is home to 104,379 Citizens policies. Palm Beach County has 62,614.

Homeowners fight Citizens over sinkhole repairs, compensation

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December 3  |  Citizens, News, Sinkholes  |   Danielle Szeliga

To Fred and Emilie Moutran, there’s no dispute that the cracks in the walls of their Spring Hill home were caused by the shifting ground of a sinkhole deep below the surface. The floor under the chimney has dropped 3 inches. A gash runs across their mantel. A crack extends the length of a hallway, and the ceiling over the garage has shifted so much that the Moutrans fear it will collapse. “We hear cracking and popping at night, sometimes all night long, and we’re starting to get very concerned,” said Fred Moutran, 31, who lives in the home with his 64-year-old mother, Emilie.

After two engineering firms concluded the damage was caused by sinkhole activity, the job of repairing their home and stabilizing the ground fell to Citizens Property Insurance, the state-run company. For three years, the family has been trying to get Citizens to make the repairs. But the insurance company has sent them a check for $21,000 to cover cosmetic repairs, not the fixes to the foundation that will shore up their home.

“They want to force us to make the repairs their way,” the son said. “We paid for a service, with the understanding it would be there when needed, not three years later.”

The Moutrans aren’t the only family accusing Citizens of denying repairs and delaying their case. An estimated 1,800 homeowners have filed lawsuits against the company challenging their sinkhole claims. Citizens acknowledges that most of the disputes involve disagreements over the method of repair.

Citizens has agreed to pay for additional repairs at the Moutrans’ home, for example, but at a price the family considers “grossly inadequate” because it would leave them with a house that will continue to deteriorate. But they know the delay is risky.

The Moutrans watched in horror as a Dunedin family lost its home just weeks ago after a dispute with Citizens over the method to use for repairing their home. That family finally agreed to allow Citizens to dictate the terms of the foundation repair. But two days into the project, the home collapsed into an 80-foot hole.

Michael Peltier, Citizens’ spokesman, said that when there is a dispute over how to make the repairs, the company hires an engineer “who has made estimates on what it will cost to repair, but sometimes homeowners will find their own engineer who may have a difference of opinion. That seems to be where most of the legal challenges and litigation arise from.”

• • •

Last month, Citizens proposed a controversial repair program that would remove home­owners from the repair equation and steer money directly to vendors.

Sen. Wilton Simpson, R-Trilby, filed legislation that would create a similar program. Under the proposals, repairs must be completed by contractors approved by Citizens and homeowners would not be allowed to be paid for the repairs. Contractors would also be required to finish the repairs at fixed prices, regardless of the damage cost, and insurers would have to offer multiple levels of deductibles and explain excluded coverage.

To the lawyers and consumer advocates representing homeowners against Citizens, these proposals create an inflexible system that attempts to limit the insurance company’s liability at the expense of homeowners.

“This has the potential to affect everybody in Florida because this is a practice run,” said Dan Fritz, general counsel at Sinkhole Public Adjusting LLC in New Port Richey. “If a hurricane hits and they can get an enforced repair program in place, they can contract with vendors at a cut rate. That would not be in the best interest of consumers.”

John Thompson, a Brooksville resident who fought Citizens over the repairs to his own home four years ago, worries that forcing families to sign a contract for repairs using their methods gives contractors the incentive to skimp on a job in order to make a profit.

“I would never pick a company that’s on a preferred vendor list,” he said. “Whose interests are they looking out for?”

Legislators have been trying to tamp down Citizens’ sinkhole liability in recent years as costs have continued to soar beyond what the company receives in revenue.

In 2011, lawmakers passed SB 408. It allowed Citizens to charge customers extra for sinkhole coverage, uncapped rates for sinkhole premiums, and removed noncatastrophic sinkhole losses from its basic home­owners’ insurance policies. In the first year of the program, sinkhole claims dropped nearly 60 percent. But, in 2012, the company paid out $169 million more in sinkhole claims than it earned in sinkhole premiums.

The Moutrans are like thousands of homeowners who live in a region known as “Sinkhole Alley” in the Tampa Bay area. Geologists say that sinkholes are common in Hillsborough, Pinellas, Hernando and Pasco because the limestone bed, which is close to the surface, can dissolve and collapse over time.

There are few solutions to the problem, but the most common method of repair recommended by engineers is “compaction grouting.” That involves injecting pressurized concrete into the ground around and below a home. The concrete is intended to fill potential voids and cracks and stabilize loose soil. In theory, the concrete hardens over time, preventing the home from sinking further.

But the process is far from perfect. There is no telling where the concrete actually goes when it’s injected into the ground, and engineers even warn that it can sometimes make things worse, such as when it sinks into the aquifer.

Thompson, who has started his own consumer advocacy group, Good Foundation Florida, watched that happen to a neighbor’s home. As pressurized concrete was being poured under his house, it rose from the ground blocks away, he said.

Many homeowners want Citizens to also pay for a process known as underpinning, essentially driving steel piers into the dense and load-bearing limestone, like putting a beach house on stilts. Citizens’ engineers often resist that approach, which is often less costly, arguing that the underpinnings alone don’t keep the soil in place.

Homeowners have the option of calling on a neutral third party to assess the claim any time during the dispute, but the recommendations are not binding.

• • •

The Moutrans hired a neutral evaluator, who recommended the foundation be fixed at a cost that exceeded the policy limits by $30,000. State law requires that an insurer provide the appropriate repairs even if they exceed the policy. But, in the Moutrans’ case, Citizens refused to accept the recommendation.

Thompson thinks the disputes have emerged because, before 2011 legislation, some homeowners were paid for sinkhole claims but didn’t use the money to fix their house. Now, legislators, Gov. Rick Scott, Chief Financial Officer Jeff Atwater and top officials at Citizens have concluded that homeowners who file a sinkhole claim are presumed to have fraudulent intent unless proved otherwise, he said.

“I concede some of these claims shouldn’t have been paid in the past, but they’re trying to compensate now for the mistakes of the past, and that’s hurting people,” Thompson said.

The Moutran family is caught in that trap, he said. “It’s the classic case of not doing the right thing. Citizens hides behind the statute when it’s convenient for them, instead of doing what’s right.”

Meanwhile, the ordeal has taken a toll on the Moutran family.

After years of battling with Citizens, Emilie’s husband and Fred’s father, Frederick C. Moutran, died of a heart attack on Dec. 1, 2012. He was 64.

The anxiety has since crippled Emilie, sending her into the hospital and forcing her to quit work as a newspaper carrier for the Tampa Bay Times. The mounting medical bills forced the family to get behind on their mortgage. They are now in foreclosure.

“We are running out of options,” Fred Moutran said. “It seems to me like they’re trying to force us to sue, so they can just wait us out and see that we’re kicked out of the house.”

Peltier of Citizens disputes that that is the goal. He encouraged the Moutrans to cash the $21,000 check and sign a contract to have their home stabilized.

“When a stabilization contract is submitted, the work begins,” he said. “Once it is completed, the engineer goes back in to see if additional cosmetic repairs need to be made, as it is not uncommon for the stabilization process to cause some cosmetic damage. We pay for any additional work that needs to be done.”

Emilie Moutran doesn’t understand why the company wouldn’t simply agree to pay for the repairs the engineers recommend.

“They spend millions of dollars to fight people rather than pay them the lousy $20,000 to $30,000 they owe them,” she said. “It’s mind-boggling.”

She spends her time trying to sort through her belongings and prepare for the uncertain future. “I don’t know what I’m going to do, to tell you the truth,” she said. “I’m at my wit’s end.”

Calm hurricane season over, but rocky waters ahead for Florida insurance scene

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December 2  |  Citizens, Florida, News  |   Danielle Szeliga

Saturday marks the last day of one of the mildest hurricane seasons on record, both in terms of named storms and legislative action on property insurance issues. The calm seas, though, belie an undercurrent of turbulence for homeowners.

Many homes in coastal areas face skyrocketing flood insurance premiums starting next year, and some are having trouble selling their homes because of federal legislation tagging next year’s National Flood Insurance Program rate increases to home sales and other title transfers.

State lawmakers have pledged to find a state-based alternative to the NFIP if private companies don’t step in to offer cheaper flood coverage. There are signs private companies are looking into the market, and the Office of Insurance Regulation has set out guidelines for writing the new business and promised to fast-track review of new filings. The process, though, is likely to take longer than affected homeowners would need to avoid rate shock next year.

In addition to the new flood issue, lawmakers are likely to contend with state entities designed to stabilize the market: Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund, or Cat Fund.

Citizens marked the eighth straight year without major hurricane damage in the state, and with $6.8 billion in surplus the 11-year-old company is in its best-ever financial shape. But the company has moved to that position by pushing customers into the private market, drawing the ire of critics who say the new companies aren’t as financially stable.

Citizens’ total policies have dropped by 312,550 this year, down to 1,062,191. The company remains the largest property insurer in the state, however, covering $330.8 billion worth of property.

“Mother Nature has been kind and again spared Florida from a major storm. Here at Citizens, we have been busy taking advantage of that good fortune by continuing to reduce our exposure and policy count,” Citizens president and CEO Barry Gilway said.

Legislative action related to Citizens may hinge on the progress of the clearinghouse, designed to come online Jan. 2 and designed to shop new and renewal Citizens customers in the private market.

But lawmakers who have been pushing for Citizens rates to rise faster — they have a 10 percent cap on annual rate hikes, except for noncatastrophic sinkhole coverage — will continue to push for changes to the Cat Fund as well, despite the state reinsurance fund’s healthier financial outlook after the string of weak storm seasons.

After two straight years when its reserves and borrowing capacity wouldn’t have been enough to cover its liabilities, the new estimates show the Cat Fund has $12 billion in reserve and could borrow at least $6 billion — about $1 billion more than its maximum $17 billion coverage limit.

Still, free market advocates want more state reinsurance to be pushed into the private market. Lawmakers have resisted such changes in recent years, fearing the more expensive private reinsurance would push insurance rates higher.

“Now that the Cat Fund is at its healthiest, the time is right to shift some of that risk to the private market, so the Cat Fund is never again in a position where it is selling fake coverage,” Christian Camara, director of R Street Florida, a free market think tank, said last month when the latest Cat Fund estimate was released.

Citizens changes tack, will cover homes with prior sinkhole claims

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November 22  |  Citizens, News  |   Danielle Szeliga

Citizens Property Insurance Corp., along with two Pasco County lawmakers, announced Wednesday changes in its underwriting rules to cover residences with previous sinkhole claims.

The changes, which have been in effect since Oct. 31, allow state-run Citizens to cover homes with prior sinkhole claims — provided the damage has been repaired in line with recommendations from approved engineers, and the homeowner has the documentation and photos to prove it.

Citizens’ basic homeowners policies cover “catastrophic ground cover collapse” — when your house is completely swallowed by a sinkhole. For additional sinkhole coverage for cracks in the foundation or the cave-in of secondary structures, customers must pay extra. As part of the new changes, homeowners with documents showing partial sinkhole fixes or fixes done against the recommendation of engineers can be covered by Citizens, but without the additional sinkhole coverage.

Rep. Amanda Murphy, D-New Port Richey, said the changes already are helping homeowners sell their homes.

“We’ll take any little step that we can get because so many people have been stuck on the sidelines,” Murphy said.

Lawmakers have been trying to address Citizens’ sinkhole claims in recent years, passing SB 408 in 2011, which allowed Citizens to drop non-catastrophic sinkhole losses from its basic policies and made the additional sinkhole coverage not subject to the 10 percent cap on annual rate increases. Yet Citizens still paid out $163 million more in sinkhole claims in 2012 than it earned in sinkhole premiums.

Many of those claims have come from four Tampa Bay-area counties known as “Sinkhole Alley”: Hillsborough, Pinellas, Hernando and Pasco. Citizens officials don’t know how many new sinkhole policies will result as a consequence of the new underwriting guidelines, but the company had 120,114 policies with sinkhole coverage and 114,157 policies without sinkhole coverage in force as of June 30.

Sen. Wilton Simpson, R-Trilby, said the new changes mean homeowners won’t have to rely on out-of-state or even unregulated foreign insurers for sinkhole coverage.

“In the past, we’ve seen Floridians having to go outside of the U.S. in order to make certain they are protecting their homes and family’s well-being. The changes today mean expanded choices for consumers here at home, and they mean some stability for the real estate market. This stability for the market is crucial to helping home values increase and getting the state’s slow economic recovery moving faster,” Simpson wrote in an email.

Simpson also filed SB 416 this week, which would require Citizens sinkhole claims to pay for actual repairs conducted by approved, qualifying firms and require all insurance companies to offer multiple levels of deductibles with offsetting discounts and to divulge coverage denials.

The consumer advocacy group Florida Association for Insurance Reform, which actually supports a lawsuit against Citizens over its wind mitigation reinspection program, praised Citizens and state regulators for approving the new sinkhole changes.

“Citizens did an outstanding job in responding to stakeholder concerns and moving swiftly to respond. We congratulate both Citizens and the Florida Office of Insurance Regulation for their good work,” said Jay Neal, president and CEO of FAIR.

Homeowners Choice Takes More Than 34,000 Policies From Florida Citizens

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November 8  |  Citizens, Homeowners Choice, News  |   Danielle Szeliga

Homeowners Choice Property & Casualty Insurance Company, Inc., a wholly-owned insurance subsidiary of HCI Group, Inc. has assumed more than 34,000 homeowners’ policies from Citizens Property Insurance Corporation, Florida’s state-operated insurance company.

The policies assumable under the state’s “take-out” program are designed to reduce the state’s risk exposure by encouraging private insurance companies to assume policies from Citizens. Under the take-out rules, affected policyholders are entitled to opt out within 30 days after the assumption and return to Citizens.

“This assumption increases our annualized gross premiums to approximately $400 million,” said Scott Wallace, president of Homeowners Choice. “These policies meet our strict underwriting guidelines and should further strengthen our long-term growth prospects.”

Homeowners Choice CEO: Flood Insurance, Citizens’ Takeouts Are Growth Avenues

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November 7  |  Citizens, Homeowners Choice, News  |   Danielle Szeliga

TAMPA, Fla. – Homeowners Choice’s move to enter Florida’s flood insurance market and a new takeout of homeowners’ policies from Citizens Property Insurance Corp. are among the potential growth avenues seen by HCI Group Inc. executives.

While the company has progressed in the past four years, it still has just 4% of the market in one line of business in one state, HCI Chairman and Chief Executive Officer Paresh Patel said during the company’s third-quarter earnings call. However there are many paths for future growth, including a move to enter the state’s flood insurance market, he said.

Patel said the company, which posted third-quarter netincome of $13.37 million, up from $2.82 million, is entering the state flood insurance market to offer an insurance alternative for its existing policyholders who are likely to see enormous rate hikes in the National Flood Insurance Program. Premiums are expected to skyrocket in some coastal areas because the Biggert-Waters Flood Insurance Reform and Modernization Act of 2012 included scheduled annual rate increases for a five-year period that began on Oct. 1.

Legislation was proposed in late October that would delay increases to NFIP rates until two years after the Federal Emergency Management Agency conducts an affordability study and makes recommendations to Congress (Best’s News Service, Oct. 29, 2013)

HCI Group spent weeks analyzing the data before making a decision to enter the flood insurance market, Patel said. He said the company’s gross margin, coupled with solid underwriting discipline, allowed the company to move into the market. “But the big thing that we found was that how the NFIP views this world is different to how we look at it,” he said. “They look at it in terms of subsidized and non-subsidized, which are nice labels; we look at it in terms of adequate premium and inadequate premium.” Patel said while the flood insurance market may not assist the bottom line greatly, it is viewed as a tool that will retain the current customer base, while possibly attracting new customers. “So, we’re doing this as much to differentiate ourselves from the rest of the industry as opposed to it being a widely profitable line.”

When its underwriting company, Homeowners Choice Property & Casualty Insurance Co. Inc., said in October it had sought approval from the Office of Insurance Regulation to sell flood insurance, Homeowners Choice issued a statement that said the flood endorsement would carry a price tag similar to what Florida residents had been paying for NFIP insurance before the Oct. 1 hikes.

“That being said, we will enter this market cautiously and with a strict focus on underwriting guidelines and calculated risk management,” he said.

Currently, a typical HCI Group homeowners flood insurance policyholder pays between $2,200 and $2,500, although the range for those not in a floodplain to those who are in high-risk flood plains can run from between $200 to $6,000, he said. NFIP hikes in the floodplains push prices up to $8,000 or higher in some areas, he said. HCI can charge the original NFIP price for several reasons, Patel said. “Unlike the federal government, we are not insuring everybody. We are insuring a select group of people, so that gives us a slightly different edge,” he said. HCI also seeks to issue flood insurance as an endorsement to existing policies as opposed to selling brand new policies, which should result in efficiency. “Clearly, we are not looking to do this across 100% of our book because not 100% of our book is affected, nor would we get 100% penetration,” he said.

Patel said another avenue for growth is the 34,000 new policies the insurer announced it has assumed from Citizens Property Insurance Corp., the property insurer of last resort. “This assumption increases our annualized gross premiums to approximately $400 million,” Homeowners Choice President Scott Wallace said in a written statement. “These policies meet our strict underwriting guidelines and should further strengthen our long-term prospects.”

Patel said the policies HCI has taken from Citizens were those the company deemed best to take instead of trying to hit a target number that results in inappropriate risk. “So we continue to wait for the opportunities when they come to us and they do come to us,” he said. “The flood insurance thing might be a whole different area if it plays out correctly; it’s early days yet, but we shall see how it plays out.”

Shares of Homeowners Choice (NYSE: HCI) were trading at $42.44 the afternoon of Nov. 6, down 2.55% from the previous close.

Simmons takes aim at out-of-state Citizens customers

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November 7  |  Citizens, News  |   Danielle Szeliga

Sen. David Simmons, chairman of the Senate Banking and Insurance Committee, wants customers of state-run Citizens Property Insurance Corp. who don’t live in Florida to pay rates on par with those of private companies.

“It seems that its incumbent upon us … to drill down into this, to find out how we can identify these individuals — identify accurately — are they individuals who … are outside of the state of Florida and how we can then go ahead and cause them to be paying rate parity,” said Simmons, an Altamonte Springs Republican.

Lawmakers froze the rates for Citizens, designed to insure properties unwanted by private carriers, in 2007 and instituted a 10 percent cap on annual rate hikes two years later. Private companies, which were granted large rate hikes in the aftermath of the busy 2004 and 2005 hurricane seasons, have complained Citizens rates were artificially held down, leaving them at an unfair disadvantage.

John Rollins, Citizens’ chief risk officer, acknowledged to the committee that exact numbers on nonresidents are difficult to determine, but noted that 16 percent of its 1.2 million policies have out-of-state mailing addresses. Because most of those are closer to the coast, those policies receive a lower rate when compared with similar private policies in those areas.

Sen. Alan Hays, R-Umatilla, suggested filing two different rate requests with the Office of Insurance Regulation — one for Florida residents and one for nonresidents. Such a provision would be difficult — if not impossible — to get through the Legislature and could pose constitutional problems.

Sen. Nancy Detert, R-Venice, reminded the committee that nonresidents already pay a higher property tax rate than Florida residents with a homestead exemption.

“Aren’t these out-of-town, out-of-state, out-of-country people already paying a higher price because of the fact that it’s a vacation home or a second home, so that would automatically raise their price?” Detert said.

Simmons, though, insisted nonresidents wouldn’t be treated unfairly with higher Citizens rates than Florida residents.

“We wouldn’t be discriminating against them. In fact, we would just be simply asking that they pay their fair share,” he said.

Fla. Regulator Approves Five Companies to Take Up to 53,000 Policies From Citizens

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October 31  |  Citizens, News  |   Danielle Szeliga

TALLAHASSEE, Fla. – Florida Insurance Commissioner Kevin McCarty recently signed orders for five Florida-domiciled homeowners insurance companies to take up to 53,000 policies combined from Citizens Property Insurance Corp., according to state records.

The companies will be taking policies beginning in January primarily from Citizens’ personal lines account, with a smaller number from the coastal account. Although the companies are approved to take up to 53,000 total policies, the final number will likely be lower as Citizens’ policyholders are allowed to reject the assumption and remain with state’s insurer of last resort.

These companies had their take-out plans approved Oct. 25: Southern Oak Insurance Co., 10,000 policies; Avatar Property & Casualty Insurance Co., 2,500 policies; Elements Property Insurance Co., 10,000 policies; Heritage Property & Casualty Insurance Co., 20,000 policies; and Safe Harbor Insurance Co., 10,592 policies.

Among the companies taking policies from Citizens is one of Florida’s newest homeowners insurers, Elements, which is run by former Citizens president, Bob Ricker, and was licensed in Florida in late September (Best’s News Service, Oct. 18, 2013). Taking policies away from Citizens is part of its depopulation program that aims to transfer policies to private market carriers. Companies that want to take policies away from Citizens apply to the Florida Office of Insurance Regulation and undergo a financial review.

This is the third consecutive month in which Citizens will see companies plucking policies off its books. Private insurers have notified about 206,000 Citizens policyholders that their policies have been identified to leave Citizens. That figure is about half of the initially approved 394,000. Citizens’ officials also have said up to 200,000 takeouts are expected in December.

Citizens has been operating under a mandate for the past few years to reduce its size. It’s the largest writer of homeowners insurance in Florida and in 2012 had 19.53% of the market, according to BestLink, A.M. Best Co. Citizens in January will see a new program come online that is designed to slow the influx of new business to Citizens and shop Citizens current book to the private market when policies come up for renewal. The program, known in Florida as the consumer clearinghouse, starts Jan. 1 and was the product of reform signed into law earlier this year.

The top five writers of homeowners multiperil in Florida in 2012 were Citizens Property Insurance Corp., with 19.53% market share; State Farm Group, with 8.68%; Universal Insurance Holdings Group, with 8.42%; Tower Hill with 6.62%; and USAA Group, with 4.78%, according to BestLink.

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