Florida’s state-backed property insurer has begun submitting renewal policies through its online clearinghouse to private carriers, but agents believe the process still needs refinement.
Citizens Property Insurance Corp. in September started to funnel all HO-3 residential multi-peril policies that have renewal dates on or after November 1 through the clearinghouse, which gives private insurers first chance to bid on the policies.
Citizens President Barry Gilway touted the potential of the clearinghouse to give some of the 668,000 current Citizens residential homeowners an opportunity to secure private market coverage.
“Many customers will benefit from more comprehensive coverage, lower pricing and a vastly reduced assessment risk in the event of a major storm,” said Gilway.
Six private insurers are participating in the renewal clearinghouse: Florida Peninsula Insurance Co., Federated National Insurance Co., and First Community Insurance Co. (part of the Bankers Insurance Group.) Also participating are Heritage Property and Casualty, Tower Hill Signature Insurance Co. and Southern Oak Insurance Co.
Policyholders who receive an offer of coverage from one or more of these private insurers will no longer be eligible for Citizens coverage if the insurer offers comparable coverage with premiums less than or equal to their current policies.
These policyholders will be able to return to Citizens during the first three years if the private insurer increases its rates beyond Citizens “glide path,” which restricts increases to no more than 10 percent per year.
These policyholders are also shielded from paying Citizens surcharges in the event the insurer suffers major catastrophic losses.
As Citizens begins rolling out the renewal portion of the clearinghouse, agents are saying that the requirements remain ambiguous.
Florida Association of Insurance Agents President Jeff Grady also says that the renewal process represents a substantial amount of work that must be accomplished within tight timelines. “This is a lot of work for agents and the process needs to be refined,” said Grady. “Procedurally, Citizens is really, really stretching timelines and there are a lot of moving parts.”
Number one on agents’ list of concerns is that agents only have seven days to contact the homeowner about a clearinghouse offer and ascertain whether they are eligible for coverage. Central to that process is determining whether the premium being offered is equal or less than the Citizens premium.
Comparable Coverage
Then there is the question of what constitutes comparable coverage.
By law, there are six main data points to determine whether an offer of coverage is comparable to Citizens coverage. First is so-called Coverage A, which determines how much an insurer decides each property must be insured for. Next to consider is the hurricane deductible, ordinance and law coverage, mitigation credits and whether claims are replacement cost or actual cash value. Finally the comparison must weigh any other coverage as determined by Citizens.
That leaves open gray areas surrounding sinkhole coverage and water damage. Most policies include Citizens coverage for catastrophic ground collapse. But Citizens also offers a broader optional sinkhole coverage that few private insurers offer especially in the high-sinkhole risk areas of Hillsborough, Pasco and Hernando counties.
Michael Peltier, Citizens spokesperson, said that the sinkhole coverage, which is optional by Citizens, must be taken into account by private insurers.
“If the customer is seeking sinkhole coverage or has it on an existing Citizens policy, the insurer making an offer of coverage must also provide the customer an opportunity to obtain sinkhole coverage in order for the offer to be deemed comparable,” said Peltier.
One other concern is that within the first three years, the policyholder is eligible to return to Citizens if the private insurer increases its rate by more than 10 percent.
But given that Citizens rates are scheduled to drop by a statewide average 3.7 percent next year, it is conceivable that a Citizens policy assumed by a private insurer may be eligible for Citizens coverage even though the private insurer made no rate change. In such a case, the policy will return as a new Citizens policy and the whole process would have to start all over again.
“The impact of a rate reduction on this portion of the clearinghouse statue has not been contemplated, so we don’t have an answer at this time,” said Peltier.
One thing that is being watched is how the clearinghouse renewal program might affect the take-out process under which private insurers may assume large numbers of Citizens policies.
Grady said the clearinghouse offers private carriers a more assured path to removing policies.
“I think carriers will find this a more target-rich environment,” said Grady. “Compared to take-outs, a carrier is likely to have far fewer rejections.”
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