As the Florida property market fights what has so far been a losing battle against attorneys and unlicensed contractor firms over water loss claims and assignment of benefits (AOB), Citizens Property Insurance Corp., Florida’s property insurer of last resort, has put out an urgent call to its agents to assist the company in tackling the increasing abuse.
In a call with the state-run insurer’s Market Accountability Advisory Committee (MAAC) earlier this week, Carl Rockman, head of Agency Management for Citizens, said the company has taken “a hard look” at its agencies claim reporting time, defined as the day the claim occurred versus the day when the claim is first reported to the carrier.
In doing so, Citizens identified a small percentage of agencies that Rockman called “a little out of pattern” from the average reporting time of most Citizens’ agencies.
Rockman told the MAAC that it has been tracking agency claims data across the board, and according to internal data from 2016, 154 agencies reported claims more than 10 days after an incident occurred during the last six months. That number is actually relatively low considering the 4,977 Florida agencies currently contracted with Citizens.
However, geographically, the majority of those 154 agencies are located in the Tri-County area of Miami-Dade, Broward and Palm Beach, where the abuse has been the most rampant. The average number of days it takes an agency in this area to report a claim from the date of loss is also longer than agencies in other parts of the state. Of the 154 agencies reporting claims more than 10 days after the date of loss, those in the Tri-County area took about 14 days on average compared with 12 days for agencies outside of the Tri-County area.
Citizens data also found smaller agencies generally had more reporting delays.
“The sooner the insurance company is involved in that process the better job they can do… this strategy is all about that,” said Rockman.
The timing of when a water damage claim is reported is crucial, Citizens says, and was the reason the company launched its “Call Citizens First” initiative last year. The carrier has found a strong correlation between the average number of days it takes for a claim to be reported and the likelihood of a lawsuit being filed against the insurer. Barry Gilway, CEO and executive director of Citizens, said in February that the average water damage claim is received by the company 50 days after the date of loss, and 76 percent of water loss claims in 2016 were submitted to the company in the form of a lawsuit.
In other words, Citizens is sued before it has inspected or adjusted most water damage claims. The cost of water damage claims has almost doubled in five years – with the average cost last year being $19,600.
“I agree 100 percent with pushing the ‘Call Citizens First’ strategy, but we have got to get the insureds reporting these claims coming through the agent or by calling Citizens first,” Gilway said at the MAAC meeting. “Either way, we’ve got to have them report through that mechanism before they tie themselves up with an attorney or a public adjuster who is going to bring forth litigation.”
The insurer is hoping that with the help of its agents, it can stem this growing problem that it blames for a $27.1 million net loss in 2016, its first loss since 2005.
Its new strategy is to work with and educate the agencies that are not already following strict claims procedures, including focusing on agency manager engagement or best practices like point of sale customer education; transferring policyholders directly to Citizens when a loss is reported through the PolicyCenter; and using Citizens branding on an agent website for claims service.
Rockman said the company has “strong evidence” that 54 percent of the time, claims that do not go into litigation came from customers that contacted their agents first.
“Our job is to make sure our agent community understands the importance of that moment of truth and getting that claim to Citizens as quickly as possible,” Rockman said.
Rockman said its Citizens Field Agency Management team will be working with the identified agencies to find out why these claims are not being reported right away, noting that many may not be aware of the claim reporting timeframe. It will also work on educating the agencies about what others with better than average reporting times are doing, and recommend the agencies adopt those practices.
“It’s just raising the agency’s level of awareness around how important it is to report claims if they are reported [first] to the agency,” Rockman said. “But more importantly, to inform their customer and reinforce the message what our call Citizens first campaign calls for – to make sure they are calling Citizens if they have a need for any type of claims service.”
Rockman acknowledged that in some cases an agent may be notified by their customer of an incident, but opt not to file a claim because of the cost of the deductible or for other reasons. He said Citizens has heard from its agents about these situations but urges them to still get the carrier involved in the conversation.
“What we really want to make sure is that the agency owner and everybody in the agency understands one thing – that they are contractually obligated to report a claim to Citizens if a claim is reported to them…no ambiguity, no gray area,” Rockman said. “If a customer informs you they have a loss or claim – you must report it, it’s very simple.”
Steve Bitar, chief of Underwriting and Agency Services, said overall, it typically isn’t agents reporting the offending claims – 62 percent are reported by attorneys or public adjusters. But Citizens is hoping to work together with the agent community to have a positive impact on these trends.
“We are really trying to tackle it on many prongs, if you will, so we can see what the experience is,” Bitar said. “Maybe it is nothing more than an education opportunity… so we’ll be committed to bringing back our results as we embark on this path.”
Dave Newell is chair of the Citizens’ MAAC Committee and Education director for the Florida Association of Insurance Agents (FAIA) and the Citizens liaison for the FAIA. He attended the committee meeting and said the message to agents is not that they are not doing their job, but that there is still a long way to go for the industry to educate consumers about this abuse.
He said the biggest takeaway for agents should be to get out in front to explain the claims process to clients and how an AOB can impact a claim.
So far, he said, the industry and agents have been behind compared to the other side of the equation – contractors and attorneys – who have been visible and vocal with homeowners for several years now.
“There has been a longstanding communication from those saying ‘you shouldn’t talk to an agent or company, you should talk to us first because we can help you through this process better,'” Newell said. “I think the industry is now rebounding that.”
He said FAIA’s agents have become more active in warning their communities about this abuse, from sending notifications to clients, to speaking at community meetings, to face-to-face meetings with their state legislators.
“That is where the disconnect and separation has been and that is starting to narrow. But it is such a wide band right now that it’s very tough to shorten in a short period of time,” he said.
The Florida Legislature is currently looking at several bills meant to address the issue, but Citizens’ Gilway said only one – Senate Bill 1038 – really tackles the heart of the problem, which the industry agrees is Florida’s one-way attorney fee statute. The bill has yet to move out of committees since March 7.
Newell said regardless of what happens in the legislature, agents play an important role in the situation.
“We always promote the agent as being a trusted advisor, and I think in order to do that they have to be more proactive with clients. If they do that and talk about some of the concerns or pitfalls to an AOB claim, a client would certainly think twice in the situation.” he said. “I think the agent is in a little better position than what some would say is the big bad insurance company.”
But, he added, the industry still needs to continue putting out a consistent message to consumers.
“We have to have a continuation of getting out and talking about this problem… and how claims are adjusted with or without an AOB,” he said. “I think the industry is doing a good job now, but there has to be some forward thinking on this path.”
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