Sun Sentinel House Keys Blog: Citizens plans more home inspections to reduce insurance discounts

Oct 21, 2010

Citizens Plans More Home Inspections to Reduce Insurance Discounts

A Citizens Property Insurance committee meets today to discuss inspections it plans to do next year to see if policyholders’ hurricane-proofing discounts are too high.

Questions have been raised about the three companies it hired to manage the inspections. One came out of bankruptcy earlier this year, an affiliate of the second was dropped by another state agency for quality problems and the third is not based in Florida.

State-backed Citizens asked for bids earlier this year after a lawsuit and questions from state leaders about a no-bid contract it had originally approved for Inspection Depot of Jacksonville.

Eleven contractors applied in the new, competitive round and Citizens employees recommended three, including Inspection Depot. Its board approved them by a 4 to 2 vote.

Citizens will spend up to $10.5 million for the management services and up to $60 million more for people to do the inspections. Anyone who meets the qualifications will be hired to be an inspector but some inspectors said they didn’t apply this year because the application process created by Inspection Depot was daunting and expensive.

All property insurance policyholders in Florida pay fees to cover Citizens’ deficits from the 2005 hurricane season.

Citizens board peppered its staff with questions at an Aug. 26 meeting before approving the new managers. “The audit committee did the financial due diligence on all these companies?” asked board member Carol Everhart, a vice president of BB&T in Tampa. Everhart, who was voted against approving the companies, also asked how much weight Citizens’ staff gave the companies for their financial health and noted that one of the companies is not based in Florida: Mueller Services in Buffalo, New York.

Citizens General Counsel Dan Sumner said a financial review was done but did not disclose that Fort Lauderdale-based Quality Built, LLC, came out of bankruptcy earlier this year.

Citizens Spokeswoman Christine Turner Ashburn said a Citizens committee that recommended the three companies evaluated their financial condition.

Quality Built Chairman Gary Elzweig said the reorganization helped turn it around from being in debt to being profitable. “It could have failed and it didn’t. it came out stronger,” he said. The company has more than 100 clients including major private insurers such as Zurich, Lexington and Arch Insurance, it notes in its proposal to Citizens.

Inspection Depot Project Manager Keith Turville said the only fee for inspectors now is an all-inclusive $500 application fee for training, background checks and other things. He said the length of the application “is crucial as it sets the stage for the quality we are expecting from the inspector network.”

An affiliated company of Inspection Depot, AmeriPro was hired by the Department of Financial Services to do home inspections from April to October 2007, at which point the company was non-renewed after a quality assurance audit. DFS re-hired Inspection Depot briefly in 2009.

We may hear back from Michael Rowan, the CEO and founder and only registered officer of both Inspection Depot and AmeriPro Inspection Corp., later today.

Citizens officials plan to discuss the progress of inspections done this year and problems it plans to address for the program next year at an actuarial committee meeting today.

So far, 3,926 inspections, or 9 percent of the 42,206 inspections that have been assigned, have been completed. Another 816 assignments could not be completed because of trouble scheduling the inspections.

Citizens reports the inspections done so far should result in the insurer removing incorrect discounts that add up to $3.7 million more in premiums.

Citizens officials say lessons learned to date include the fact that “substantial allocation of Citizens resources is needed to implement the program and manage performance” and the inspections so far have “provided invaluable information” that will be used to create a blue print for inspections next year.

Next year, Citizens says it will require “quality assurance controls” and a dispute resolution process to address policyholders’ complaints. Citizens may not get started with re-inspections next year until March or April. “Will not go live until we ‘have it right,'” wrote Citizens employees.

Find this article at: