By Paige St. John, Sarasota Herald-Tribune
March 28, 2011
An unpublished state report card grading property insurers for how they handle claims shows more than 2.2 million Florida homeowners — one-third of the market — are insured by carriers that received the lowest grades.
Among the worst performers was government-run Citizens Property Insurance, the state's largest carrier, which received an "E", the lowest possible mark, for timely payment and customer complaints.
Other poor performers include Universal Property and Casualty, Florida's third-largest insurer.
The system to grade property insurance companies — required by law in 2007 but never completed — was intended to give Florida homeowners a way to compare companies and pressure the worst to improve.
But the bell-curve grading system is now under fire by lawmakers and appears likely to be eliminated before the first report card is even released by government officials.
The Herald-Tribune obtained a copy of a draft version of the report card, which gives carriers grades of "A" through "E," through not "F" because bureaucrats reasoned no carrier could fail and still be allowed to operate.
Consumer advocates argue a report card would be a powerful tool for consumers. But insurers, especially those with low scores, said the grades are unfair.
"It just doesn't tell you the true story," said United Property and Casualty president Don Cronin, who said he was shocked to learn his company got an "E."
Other insurers receiving low grades said they thought the numbers were either wrong or biased because of the kinds of policies they write or the location of the homes they insure.
The best grades, straights A's, went to the twin insurers run by the Florida Farm Bureau. State Farm, Florida's largest private insurer, earned a "B" overall; Allstate Floridian earned a "C."
Because Citizens is Florida's largest carrier, with 1.3 million homes, its size and disproportionate share of high-risk policies would inevitably produce a low score, said Christine Ashburn, legislative affairs director for the state-run carrier.
Ashburn noted that by definition, the report card's bell curve requires that some companies receive the poorest grades. In addition, Ashburn linked low scores to data from 2004 and 2005, when the state-run company was highly criticized for poor response to hurricane claims.
"Citizens has made vast improvements in customer service and claims handling since that time," Ashburn said.
Lawmakers sympathetic to the industry's concerns about the grades said state government has no business judging private business.
"A, B, C, D — those are grades that you would give a fourth-grader," said Rep. Scott Plakon, R-Longwood. "I don't think the state of Florida should treat businesses like fourth-grade children."
In a party-line vote, the House on Thursday approved Plakon's bill to repeal the 2007 law requiring a property insurance report card. A counterpart Senate bill is awaiting committee hearings.
The bill is one of half a dozen insurance industry-supported measures troubling consumer advocates this year.
In a press conference, Sen. Mike Fasano, R-New Port Richey, blasted the 2011 Legislature for producing the "most anti-consumer legislation" of his 17 years at the statehouse.
"Every bill before us has been written by the property and casualty industry," Fasano said.
That is the case for a major bill requiring rate increases and limiting policyholder rights at Citizens. The Herald-Tribune reported Thursday that a consortium of insurance and business lobbyists worked with state regulators to draft the majority of the 51-page bill in private sessions.
If the move to repeal the report card passes as expected, Florida consumers will lose a powerful and easy-to-understand tool, said Bob Hunter, a former Texas insurance commissioner and an insurance consultant for the Consumer Federation of America.
"People need that," he said. "Price and service are the two things people need to look at."
The report card stems from a 2007 legislative effort to address consumer complaints about poor handling of hurricane claims.
Documents reviewed by the Herald-Tribune show that property insurers opposed the idea from the start.
For four years, industry lobbyists raised objections to every yardstick the consumer advocate's office proposed. Industry lobbyists have challenged whether the grades are even legal.
The proposed report card amounted to unlawful disparagement, a Chubb insurance official said in 2009. At minimum, he suggested letter grades be dropped for acronyms, such as "CE" for "clearly exceeds average performance."
Former Insurance Consumer Advocate Sean Shaw, whose office was called upon to create the report card, said insurers threatened to sue if he published the grades. "They hated what we came up with," Shaw said of the insurance industry. "They fought it tooth and nail."
Shaw said his office repeatedly revised how it would calculate its grades at the request of industry representatives.
The office eventually settled on a formula that relied on data already collected by various state agencies that was difficult for consumers to find or access.
Despite industry claims to the contrary, the material was gathered at no added cost to insurers and within the daily functions of the office.
But just before it was completed in December, Shaw said the project was derailed after the Florida Cabinet — which included former Gov. Charlie Crist and former CFO Alex Sink — told him they would reject it.
"This was a good thing for consumers," Shaw said. "Where else are they going to compare apples to apples?"
Jeff Atwater, Florida's current CFO, and Terry Butler, the interim insurance consumer advocate, both agree with the decision to get rid of the grades.
"It's a law that can't be implemented," said Butler. "The way the law is worded is vague, it has no definitions, and the industry would challenge it."
Unlike others in the insurance industry who tried for four years to stall or even stop the consumer report card, Cronin, of United, said he "totally agrees" with the need for a tool that allows consumers to compare insurers. "It's just how it's measured," he said.