Citizens Claims Committee Meeting Report: April 3

 

The Citizens Property Insurance Corporation (“Citizens”) Claims Committee (“Committee”) met via teleconference on March 31, 2009.  To view the meeting agenda, click here.

The following recently-filled key Citizens staff positions were announced:

• Jay Adams, Director of Catastrophe Operations
• Eric Ordway, Director of Vendor Relations

A Working Group (“Group”) has been formed by Citizens staff members Paul Palumbo and Yong Gilroy to address non-catastrophe losses.  Initially, the Group is focusing on water-related claims and will later address fire and sinkhole claims

Water claims, which are most frequently caused by plumbing leakage or breaks, have been a significant contributor to Citizens’ overall non-catastrophe loss results since Citizens was formed in 2002. These claims account for approximately 55 percent of reported non-catastrophe personal multi-peril claims each year. 

An analysis of 2008 figures showed non-catastrophe water claims in Florida were concentrated in Miami-Dade and Broward counties.  Between 2006 and 2008, water losses in Miami-Dade County accounted for five times that of other Florida counties.

Given the complexity of issues, the Group set these preliminary goals:

• Identify the primary drivers of the increased water loss costs;
• Report ongoing monitoring and loss-control activities;
• Recommend proposals to improve loss results;
• Develop long-term analytical tools;
• Develop implementation timelines for proposed loss control activities and analytical tools; and
• Compare Citizens’ loss results to industry data sources.

A Committee member noted that sinkhole losses also were high between 2006 and 2008, although they did not increase as dramatically as water claims.  Members of the Group agreed it will address sinkhole claims in a subsequent meeting.

Group members said that in identifying loss control factors regarding water-related losses, time was the most critical factor in mitigating damage to insured property.

The Group reported that the Citizens Claims department is developing an “early response” program for water claims, with an expedited time frame for inspection by Citizens field adjusters and water mitigation with preferred vendors.

Mr. Palumbo advised that Citizens’ Special Investigations Unit, which investigates suspect water losses, is working to increase its current staff.

In his review of Citizens’ Underwriting and Product Development goals, Mr. Palumbo reported that Citizens’ Underwriting department is developing a comprehensive inspection and loss-control proposal for both personal and commercial lines policies that will assist in:

• Ensuring Citizens policyholders have the proper amount of coverage
• Developing appropriate loss control techniques
• Proper policy underwriting and claims adjustment

In addition to enhanced inspection capabilities, Citizens Underwriting department is developing the ability to use claims verification services to validate applicants’ prior loss information, thus improving Citizens’ ability to identify fraud.

Mr. Palumbo said that Citizens’ Product Development department has several policy language clarifications and form changes that will be delivered to the Actuarial and Underwriting Committee for consideration.  The proposed modifications include:

• Introducing a flooring sub-limit for any covered loss;
• Strengthening the appraisal process through policy form clarification;
• Clarifying policy language related to plumbing repairs;
• Implementing a water loss sub-limit or deductible for risks with defined characteristics; and
• Monitoring water losses to determine the effectiveness of recent policy form language clarifications.

Mr. Palumbo said Citizens’ Actuarial department is developing a program that utilizes mapping capabilities to identify clusters of water claim activity and track those clusters over time to look for trends.

The Group will continue to narrow down what is driving water losses, in order to determine what pricing differentials to implement.

Regarding Citizens’ potential rate changes set to become effective on January 1, 2010, Mr. Palumbo said the Group’s analysis will be considered in determining rate structure, which will be split into perils.   One of these perils will be non-catastrophe water losses.

Mr. Palumbo said a summary of the Group’s report would be prepared for the June 26, 2009 Citizens Board of Governors Meeting.

No date was set for the Committee’s next meeting.

With business completed, the Committee adjourned.

 

Should you have any questions or comments, please contact Colodny Fass.

 

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