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Task Force on Citizens Property Insurance Claims Handling and Resolution


June 28, 2007
Senate Office Building, Room 401
Tallahassee, Florida

Call to Order
The fifth meeting of the Task Force on Citizens Property Insurance Corporation Claims Handling and Resolution (Task Force) was called to order by its Chairman at 9:00 a.m. on June 28, 2007, in Room 401 of the Senate Office Building, Tallahassee, Florida. Roll was called by Vicki A. Twogood. The following members were in attendance: Chairman Robert Milligan, Michael B. Twomey, Sr. (via conference call and arrived later); Senator Mike Fasano; Heather Carruthers; Tim Loftin and Mike Lancashire (via conference call). The Chairman declared a quorum. Representative Julio Robaina arrived within a few minutes after the roll was called.

Legislative Charge and Overview
Chairman Milligan read the excerpt of House Bill 1A, which created the Task Force and established the legislative charge. Chairman Milligan provided a brief overview regarding the activities of the Task Force.

The minutes from the June 4, 2007 meeting in Tallahassee, Florida were read. Chairman Milligan made a motion for the minutes to be approved and allow staff to make clerical changes, if needed. A motion was made to approve the minutes and the motion was seconded.

Citizens: Catastrophic (CAT) Independent Adjuster Training
Mr. Loftin, Senior Vice President of Claims, Citizens Property Insurance Corporation (Citizens) provided the Task Force members with a presentation on their action plan for Catastrophe (CAT) Independent Adjuster (IA) Training which consists of three phases.

Phase One began in February 2007 when Citizens issued Request for Proposals (RFP) for CAT IA firms. Citizens Board approved 45 IA firms in April and signed contracts with the firms in May. The 45 firms have committed to provide over 6,000 adjusters in the event of a catastrophe and could handle 300,000 claims, 25 percent of the IA firms are Florida based companies and the out-of-state adjusters or firms must have non-resident licenses. An assembly was held in Tallahassee on May 22nd and 23rd with 44 of the IA firm principles. They learned about Citizens claims mission, values and expectations for training and claim handling. The principles will train their staff by July 31, 2007. Computer discs were mailed to the IA firms on June 5, 2007, with Citizens policy forms, statutory information, deductible guide, file order expectations and an IA handbook. Citizens Quality Assurance & Training can run concurrent orientation training for up to 150 field adjusters and 60 examiners a day or 2,000 within three weeks.

Adjust Your Own (AYO) training for six AYO companies was completed the week of June 25th. The AYO companies handle 10 percent of Citizens policies. Representative Mike Fasano asked for the names of the AYO companies and the amount they are paid. Tim Loftin can provide the entire list, but to name a few, State Farm, Nationwide, American Strategic, Bankers, Florida Family and they are paid 3.3%. They are authorized to settle up to $100,000. There is no cost for the AYO companies unless an event occurs and they are called in. This would happen if there were 250,000 claims or more. Phase One will be completed by July 31, 2007.

Phase Two consists of additional training programs which are web-based training courses to become available on July 10th and 11th and the Learning Management System (LMS) to be implemented in September of 2007 to allow for distance learning. The web-based training is monitored by the adjusting firm. The independent adjusters pay to attend training and absorb the cost of training their staff. Citizens will work with the Department of Financial Services to seek approval for continued education credits for these training modules. Phase Two will be completed by September 30, 2007.

There are eight factors involved in Citizens’ plan to assure that they prepare an independent workforce to work claims and train adjusters in advance. The factors are: requirements, licensing, standards, service, training on statutes, pricing, training on policy provisions and online training through the LMS. Adjusting firms are required to conduct one company seminar per year providing Citizens training and maintain ongoing training and professional development. The firms must also train adjusters on Citizens’ Claims Tracking System (CTS), policies and procedures and policy coverage forms and endorsements. Field adjusters must have 2 years catastrophe adjusting experience and Quality Assurance and Team Leads both require a minimum of 5 years experience. Every 10 adjusters will have a Team Lead. Mr. Loftin stated the Board approved the use of Xactanalysis and also Xactimate, now in use, has pricing for Monroe County. An adjuster is required to use Xactimate, but must download the updated pricing. Ms. Carruthers asked if a presentation of Xactimate could be given and Mr. Loftin stated they would. Representative Robaina asked if pool enclosures are insured by Citizens. Mr. Loftin confirmed that they are, however, underwriters are considering excluding the structures with an option to buy back the coverage. Mr. Lancashire asked if Citizens has considered adding a percentage increase to Xactimate when a catastrophe occurs because of an increase in cost of materials due to a shortage. This would eliminate the number of supplemental claims. Mr. Loftin confirmed Citizens has the ability to change pricing.

Adjusters that work Citizens claims are required to be licensed with the State of Florida. Citizens standards of file handling are outlined in the 2007 Catastrophe Claims Guide and the contracts with the adjusting firms. Adjusting firms are required to train their adjusters in advance and a training module on Standards and Expectations is implemented at Catastrophe Orientations. Timelines were reviewed for the handling of a claim from the initial contact with the policyholder within 48 hours of report of claim to the 90 day deadline for settlement of the claim. Chairman Milligan stressed the importance of conducting exercises with field adjusters and MERV team training and asked if Citizens has conducted any exercises. Mr. Loftin stated that will be done very soon.

Customer service standards were outlined and consist of image, communication and ethics. Independent adjusters must comply with a dress code and wear Citizens shirts and badges, khaki pants and closed toe shoes. The four “E’s” of customer service were discussed: empathy, expectation, explanation and education. Adjusting firms will be required to train their adjusters in advance regarding applicable Florida Statutes and instruction on basic building codes is provided at orientation. However, adjusters rely on the building departments permitting process since the building department in each area defines the application of the code.

Phase Three was outlined and addresses future enhancements for Citizens specific skills training and adjuster certification programs which will be completed by March 31, 2008.

Public Testimony
Chairman Milligan asked for public testimony and no one asked to be recognized.

Draft First Report - Task Force Discussion
Citizens provided the number of claims open for 2004 and 2005 and they were added to the draft report. Chairman Milligan proposed two changes which were approved by the task force and asked for comments. Mike Twomey asked if the reports that Citizens will provide on or before September 30, 2007, regarding the status of open claims will be a one-time report. Chairman Milligan advised that a baseline data on open claims has been received and the format is slightly different than requested. We will be able to use that baseline to measure Citizens success on closing claims. Mr. Twomey suggested the spreadsheets be provided on a monthly basis and Chairman Milligan agreed. The draft of the first report will be amended to reflect this change and a report and spreadsheets will be submitted at the end of each month with the first one due by July 30th. Citizens also must provide the Task Force with a report from the Internal Auditor by September 30th. Susanne K. Murphy, Executive Vice President of Citizens, advised the Task Force that the feasibility of combining their Personal Lines, Commercial Lines and High Risk Accounts will be reviewed by their financial advisor, bond counsel and attorneys. A determination will be made by the Board of Governors upon completion of the review and an update provided to the Task Force at that time. Senator Fasano stated that agents should play a more active role by informing policyholders of available coverage options prior to policy renewal and of opportunities to reduce premiums, such as mitigation. Agents also should have the capability to track their client’s claims. Mr. Loftin stated Citizens does have an agent hot line that any agent can call to obtain the status of a claim and are currently looking at an enhancement to allow electronic access. Ms. Carruthers suggested that policyholders have access to online claims filing. Mr. Loftin stated they would prefer policyholders call Citizens to report a claim, but are considering future enhancements. The Task Force report was approved as amended. Corrections will be made and the report will be posted on the website.

A conference call meeting will be held on August 1, 2007, and a Task Force meeting on October 5, 2007, in Tallahassee, Florida, to look at claims closures and legislative recommendations.



June 4, 2007

Citizens Claims Center
Senate Office Building, Room 401
Tallahassee, Florida

Call to Order
The second meeting of the Task Force on Citizens Property Insurance Corporation Claims Handling and Resolution (Task Force) was called to order by its Chairman at 9:00 a.m. on June 4, 2007 in Room 401 of the Senate Office Building, Tallahassee, Florida. The following members were in attendance: Michael B. Twomey, Sr.; Mike Lancashire; Senator Mike Fasano; Representative Julio Robaina; Heather Carruthers; Tim Loftin. The Chairman declared a quorum.

Legislative Charge
Chairman Milligan read the excerpt of House Bill 1A, which created the Task Force and established the legislative charge.

The minutes from the May 21, 2007 meeting in Jacksonville, Florida, were read. Chairman Milligan made a motion for the minutes to be approved and allow staff to make clerical changes, if needed. Senator Fasano made a motion to approve the minutes and the motion was seconded by Michael Twomey.

Citizens: Catastrophic (CAT) Claims Process Flow 2004 / 2005
Mr. Loftin, Senior Vice President of Claims, of Citizens Property Insurance Corporation provided the Task Force members with an overview of Citizens claims process for the 2004 and 2005 hurricane seasons. Mr. Loftin reported that the Call Center has the capability to handle over 45,000 calls a day and they have backup by bilingual operators. Mr. Loftin advised that the Claims Center is paperless and all information is entered directly into the Claims Tracking System (CTS) and it is available to all field adjusters. Citizens now utilize Xactimate for claim adjusting. Senator Fasano inquired about the Adjust Your Own Program (AYO). Mr. Loftin advised that Citizens contracts with the companies that write homeowners’ multi-peril and non-hurricane policies to adjust the hurricane claim for these types of policyholders. This allows the homeowners’ claim to be adjusted in a timely manner. AYO companies are only allowed to pay claims in the amount of $100,000 or less, all claims over $100,000 must be reviewed by Citizens prior to payment. Heather Carruthers noted that the process did not address the flow of disputed claims. Mr. Loftin stated that Citizens has a more detailed chart and that it would be made available to the Task Force members. It was noted that several of the 2004/2005 hurricane claims are re-opened. The Chairman asked about this process and whether a release was obtained when the claims are closed. Mr. Loftin noted and Mr. Lancashire confirmed that Claim Releases are not obtained when the first payment is made since there may be a need for supplemental payment, but a Claims Release Form would be obtained to settle a disputed claim. Rep. Robaina inquired about the number of open claims being handled by public adjusters. Mr. Loftin stated 92 percent. The Task Force raised questions regarding public adjusters and attorneys in reference to solicitation, the offer of gifts, and fees for both hurricane claims and daily claims.

Department of Financial Services: Hurricane Mediation
Elizabeth Teegen, Senior Executive Attorney, Department of Financial Services, provided background regarding the creation of the Hurricane Mediation Program. The Department of Insurance created the mediation program in 1992 after Hurricane Andrew. The Department contracted with the Collins Center for Public Policy, Inc., a non-profit organization, to administer the mediation program. The Collins Center is paid $350 per homeowner mediation and $1,250 for condominium association mediations. As a consequence of the 2004/ 2005 hurricane seasons, more than 21,000 Floridians have requested mediation and 90 percent of those claims have reached partial or full settlements. The courts have ruled the mediation is confidential. This confidentiality fosters open communications and removes barriers to reaching a settlement.

Collins Center for Public Policy, Inc.: Mediation Program
Mark S. Pritchett, Executive Vice President, provided the Task Force with an overview on how the Collins Center administers the Hurricane Mediation Program. Mediation is to bring two or more disputing parties together through a neutral third-party to negotiate an agreement. The results are: settlement, partial settlement or impasse. The Collins Center provides: offices, hiring and training of staff and mediator; scheduling; billing of companies, and payment to mediator, staff and expenses, and provides monthly monitoring reports to the Department. The mediators are carefully chosen and consist mostly of attorneys that are members of the Florida Bar Association with prior extensive experience in mediation. There are four mediation offices geographically located to conveniently serve the largest number of policyholders requesting mediation. The mediation process was explained and who the key participants are involved in this process. Mediation statistics were provided for all storms and broken out separately for the storms of 2005. A total of 22,923 mediation requests were scheduled, 22,141 closed, 88 percent settlement, partial and pre-settlements and 12 percent impasses. An estimated 374 million dollars was paid in settlements. Currently, the four mediation conference sites are open and 347 condominium damage mediation requests are scheduled. The Collins Center contract with the Department of Financial Services will expire in September 2007. However, the Department has requested the contract be extended through hurricane season.

Consumer Advocates Office: Hurricane Mediation Review
Steve Alexander, Actuary, provided an overview and compared the average number of days taken to close the hurricane claims between all companies, including Citizens, claims not including Citizens and Citizens only claims which were reported to the Office of Insurance Regulation. The presentation provided the disposition of mediation cases for 2004 and 2005 and compared Allstate, Poe, State Farm and Citizens. The disposition outlined claims settled prior to mediation, at mediation, partial settlement and impasse. A comparison between Allstate and Citizens on the percentage of claims mediated or currently open as of April 5, 2007 was provided. Senator Mike Fasano asked if statistics on the number of policyholders that went to mediation and were non-renewed by Allstate were available. The statistics are not available, but may be provided at a later date.

Citizens: Appraisal Process- Hurricane Claims Resolution
Curtis Hutchens, Esquire, Assistant General Counsel, reviewed Citizens’ claims mission, reasons for disputes, methods of resolving disputes and what is being done to accelerate resolution.
Mr. Hutchens stated that Citizens is a customer focused organization intended on delivering fast, fair, honest and accurate claims service. Citizens must comply with Senate Bill 2498, which requires they manage claim employees, independent adjusters, and others who handle claims to ensure they carry out the corporation’s duty to its policyholders to handle claims carefully, timely, diligently, and in good faith. This requirement is balanced against their duty to the State of Florida to manage its assets responsibly to minimize its assessment potential. Disputed claims are due to issues regarding coverage, causation, scope, pricing and fees. Methods of dispute resolution are mediation, appraisal and litigation. The figures on the number of pending claims, disputed and non-disputed were provided along with amount paid on total losses on pending claims. There are 1110 claims from 2004 and 2005 that were reported for the first time in 2007. However, 926 of these claims have been closed. Progress in mediation statistics was provided and the goal is to resolve more claim disputes at mediation before they reach appraisal. Steps to achieve the goal were outlined. Statistics on the number of requests for appraisal, claims that went to mediation before appraisal and those that went straight to appraisal were provided for the last twelve months. Also, claims dollars paid and number of claims pending for this time frame was given. Number of claims in litigation was provided, 282 wind/flood and 574 other hurricane lawsuits. Supreme Court will decide the wind/flood issue. Highlights on the strategy to accelerate the resolution of these claims were provided. Possible solutions suggested that may help remedy the situation were discussed by several Task Force members. Research was requested on: statutes of limitations, restrictions on solicitation methods used by public adjusters and attorneys. Senator Fasano asked Citizens to provide the amount spent on outside legal counsel.

Merlin Law Group: Litigation Issues
William “Chip” Merlin, Jr., Esquire provided the Task Force with a policyholder perspective of Citizens claims culture from Hurricane Charley to Hurricane Wilma. Upper claims management sets tone for culture and ethics of an organization. If customer oriented, it will be found in the goals, plans and ethical demands enforced by the management. The goal is to adjust claims promptly and pay undisputed amount immediately. The plan to achieve the goal was outlined and ethics discussed. The goal, plan and ethics are central and basic claims management themes recognized by the Chartered Property & Casualty Underwriters Society. Mr. Merlin advised that if any of these three themes are missing from Citizens claims culture, any new plan or points made by the Task Force will fail. An outline of Citizens historic problems was discussed along with possible solutions. Better claims practices were outlined which included a field re-inspection program by highly technical in-house adjusters, under or overpayment issues to be addressed by senior claims management and field adjusters in place with significant payment authority. A paperless claims system was recommended and the need for integrated technology, such as, satellite phones, mobile claims stations and on site payment centers for catastrophic adjusting. Mr. Merlin recommends adjusters not paid based on a percentage of the claim amount and will provide input on changes needed to public adjuster statutes. Also, cautioned against legislative changes to limit claim filing time.

Florida Association of Public Insurance Adjusters (F.A.P.I.A.)
Mr. Mark Boardman, Past President, provided a brief history of the F.A.P.I.A. which was formed after Hurricane Andrew. Mr. Boardman introduced Mr. Raymond Altieri, First Past President, who defined “public adjuster” for the Task Force and advised what education and licensing requirements are necessary. The role of the public adjuster was outlined, as well. Chairman Milligan asked for recommendations from F.A.P.I.A. on how to improve the public adjusting business. Mr. Altieri advised that a model bill for public adjusters was passed last year through the National Association of Insurance Commissioners (N.A.I.C.) which would help the Task Force identify possible changes needed in Florida law. The total number of licensed public adjusters in Florida as of May 14, 2007 was 2,133. F.A.P.I.A. membership as of April 1, 2007 was 410. F.A.P.I.A. members handled thousands of claims. A comparison in the number of resident and non-resident, public and independent adjusters on August 14, 2004 and May 14, 2007 was given. Recommendations were outlined to improve the public adjusting profession and to improve Citizens’ response to policyholders. Chairman Milligan asked for clarification of the 10 percent cap on public adjuster commissions if the adjuster solicits a contract after an Emergency Rule is lifted. Citizens’ claims experience was reviewed which identified the reasons problems occurred on claims. A comparison of six claims that went to appraisal was given that shows Citizens first settlement offer, public adjuster’s offer and actual settlement amounts. Mediation, appraisal and filing suit were discussed as avenues to resolve policyholder claims. Citizens can only be sued for breach of contract and non-contractual damages can not be collected. As of December 31, 2004, Citizens received 6,860 complaints related to hurricane claims. A table showing a breakdown of complaints by hurricane was provided. Mr. Boardman made several recommendations on what steps Citizens can take to improve their claim process.

Department of Financial Services:
2004/2005 Hurricane Issues and Recommendations

Mr. Tom Terfinko, Assistant Director, Division of Consumer Services, reviewed a chart showing the number of service requests received from Citizens policyholders for each hurricane in 2004 and 2005. A comparison of the number of service requests received for Citizens and three other large companies was given for each hurricane. The reasons for the service requests were listed in four categories: delay, denial, disputed and miscellaneous. Also, a comparison of the number of service requests received for Citizens and three other large companies was provided for hurricane and non-hurricane issues for all reasons from January 1, 2007 to May 21, 2007. Chairman Milligan requested a list of the number of service requests for 2004, 2005 and 2007, including the origin of the request (insured, attorney, adjuster, etc.). This will be provided at a later date. Mr. Terfinko recommends all claim status information be current and made available to Citizens call center employees and adjusting staff. Claim activities such as due dates for professional reports should be required and deadlines shared with callers. Suggested utilization of industry best practices to determine loss estimates and claim payment amounts to eliminate disparity between adjuster and contractor estimates on roof damage. Benefits denied could be identified through improved communication with the policyholder to eliminate lack of understanding of policy limitations.

Citizens: Consumer Services Department
Mr. Steve Bitar, Assistant Director, Agent & Consumer Services, reviewed Citizens’ Policyholder Declaration of Rights and additional customer service training, which are mandatory for all employees, as well as claims training is required of all independent adjusters. Major initiatives for Citizens are the creation of Consumer Services Committee on Citizens Board of Governors, enhancement of the Consumer Services Department and creation of an Internal Consumer Advocate. Enhancements of the Consumer Services Department include a customer correspondence team to acknowledge and handle all written correspondence from consumers and the customer care call center as an added level of support for policyholders beyond the current dedicated customer service staff. Current and future enhancements of the policyholder page on Citizens website were reviewed. Quarterly Policyholder Forums are scheduled as an open forum for Citizens policyholders. The first forum was held in Ft. Lauderdale on May 15, 2007, and the next is scheduled for the Tampa area in July. The complaint handling system proposed 2008 enhancement was reviewed. Chairman Milligan asked for comments on problems experienced with post underwriting of commercial applications. Mr. Bitar advised they are focusing on agent education to resolve this issue. Ms. Carruthers asked how consumers will know to call or contact Citizens if internet access is not available. Mr. Bitar advised they are working on plans to advertise contact methods, phone number or post office box and non-complicated prompts when called. Representative Robaina asked what information will be provided in regard to premium payment plan options. Mr. Bitar advised they will be offering payment plan options soon (quarterly, semi-annual, etc.) for residential and commercial residential policies and will update policyholders webpage when available.

Citizens: Internal Controls - Procurement Process
Susanne K. Murphy, Executive Vice President, reviewed Citizens procurement policy and rules which were adopted by Citizens Board of Governors October through December 2006. Citizens is exempt from state procurement laws. The purpose and outline of objectives was discussed along with compliance of procurement requirements in accordance with Section 627.351(6) (e), Florida Statutes. Information on procurement methods, contract management, consent agendas, controls and competitive solicitation was provided. Exceptions to competitive solicitation and Citizens rule is exempt from competitive solicitation was reviewed. Emergency procurement, exemptions and procurement goals was also discussed. Ms. Carruthers asked when procuring services of adjusting firms for mediation, how are they selected and what criteria must they meet? Ms. Murphy advised a request for proposal must be submitted and to qualify they must have education and experience based on expertise.

Citizens: External Auditor
Ms. Beth Brennels, External Auditor, Carr, Riggs & Ingram, advised the Task Force that Citizens created the Office of the Internal Auditor in 2005. In 2006, the Legislature enacted a statutory provision requiring Citizens to formally establish the Office of Internal Auditor. Finally, in 2007, the Legislature charged the Task Force on Citizens Property Insurance Claims Handling and Resolution to monitor the implementation of the Office of Internal Auditor. A comprehensive report will be sent to the Task Force in regard to the Office of the Internal Auditor at a later date on the activities of that office. Ms. Brennels advised that the results of the 2006 Citizens audit indicate no material weaknesses or deficiencies. Ms. Brennels stated Citizens is a good company and is impressed with the Board of Directors and management. Citizens is a good steward of the company’s money. Chairman Milligan asked for an extensive review of procedures and controls.

Public Testimony
Chairman Milligan asked for public testimony and no one asked to be recognized.

Task Force Discussion
Chairman Milligan advised that all those asked to provide additional information will be contacted by e-mail. The Task Force members approved the draft of the June 13, 2007 agenda. Completed and signed release forms are required by Nova Southeastern University as authorization to record the public hearings. A draft of the Task Force Report will be provided prior to the June 28, 2007 meeting. The final report is due July 1, 2007.



May 21, 2007
Citizens Claims Center
8301 Cypress Plaza Drive, Suite 108
Jacksonville, Florida 33256

The first meeting of the Task Force on Citizens Property Insurance Corporation Claims Handling and Resolution (Task Force) was held on May 21, 2007 at 9:00 a.m. in Suite 108 of the Citizens Claims Center, 8301 Cypress Plaza Drive, Jacksonville, Florida.

Welcome and Introductions
Bob Milligan, Insurance Consumer Advocate and Task Force member, introduced the other members of the Task Force: Governor Charlie Crist’s appointee, Michael B. Twomey, Sr. Attorney; Chief Financial Officer Alex Sink’s appointee, Mike Lancashire, CPCU, AIC, Vice President of Claims, The Main Street America Group (Jacksonville); Senate President Ken Pruitt’s appointee, Senator Mike Fasano – District 11 (New Port Richey); House Speaker Marco Rubio’s appointee: Representative Julio Robaina – District 117 (Miami); Insurance Commissioner Kevin McCarty’s appointee: Heather Carruthers, Fair Insurance Rates in Monroe County (FIRM) (Key West) ; and Citizens Executive Director Scott Wallace’s appointee: Tim Loftin, CPCU, AIC, Senior Vice President of Claims, Citizens Property Insurance Corporation (Jacksonville).

Legislative Charge
Bob Milligan read the excerpt of House Bill 1A, which created the Task Force and established the legislative charge.

Bob Milligan opened the floor for nominations for the Chairman of the Task Force position. Tim Loftin nominated Bob Milligan and the motion was seconded by Representative Robaina. The members voted unanimously for Bob Milligan. Chairman Milligan made a motion that Senator Fasano be the Vice Chairman of the Task Force and the Senator accepted. Representative Robaina moved to close the voting and the motion was seconded by Mike Lancashire.

Government in the Sunshine
Elizabeth Teegen, Executive Senior Attorney, Division of Legal Services of the Department of Financial Services, reviewed the “Government-in-the-Sunshine Act” and the “Public Records Act” with members of the Task Force. She noted that the Task Force is an advisory body to state government and is subject to both Acts. She informed Task Force members that the “Government-in-the-Sunshine Act” required all meetings of the committee to be open to the public, publicly noticed in advance and documented by minutes. She observed that “meetings” was a broadly-defined term and included any communications between two or more committee members about Task Force business, including phone conversations and e-mail communications. Ms. Teegen informed Task Force members that they could meet in private as long as they did not discuss committee business. She also reviewed the “Public Records Act” that requires all records, including e-mails, regarding committee business to be made available for public inspection and copying. Task Force members were advised to contact the Commission on Ethics, if there were issues that needed further clarification.

Comments by Citizens’ Chairman of the Board
Bruce Douglas, Chairman of the Board of Governors for Citizens Property Insurance Corporation (Citizens) welcomed the Task Force members to the Citizens Claims Center and expressed his support of this legislative charge. Mr. Douglas gave a brief background of Citizens and that it was created to go out of business. In 2004, Citizens was depopulating and it was not prepared for the 2004 hurricane season. At that time, they had little or no claims organization other than handling regular claims and most claim handling had to be outsourced. In March 2005, Citizens realized that it must build an organization internally and outsource to qualified organizations to handle claims. The 2004 – 2005 period is not representative of Citizens today. Mr. Douglas emphasized Citizens dedication to providing “Great Service” to its policyholders.

Policyholders Declaration of Rights
The History of Citizens

Susanne Murphy, Executive Vice President, Citizens Property Insurance Corp.(Citizens) provided the Task Force with a copy of Citizens’ Policyholders Declaration of Rights and gave an overview of the creation of Citizens. In 1972, the Florida Windstorm Underwriting Association (FWUA) was created to provide wind-only coverage to the coastal regions. The Florida Residential Property and Casualty Joint Underwriting Association (FRPCJUA) was created in December 1992 following Hurricane Andrew for Floridians who were unable to find homeowners insurance. In 2002, Citizens was created in the merger of the state’s two insurers of last resort. This merger has allowed Citizens to become exempt from all federal taxes, resulting in millions of dollars in annual savings to the state. Citizens is governed by a Board of eight members, who are appointed by the Governor, Chief Financial Officer, President of the Florida Senate, and the Speaker of the Florida House of Representatives. Ms. Murphy provided an overview of the staffing at the five locations located in Jacksonville, Tampa and Tallahassee. Citizens has three accounts: Personal Lines Account (PLA); Commercial Lines Account (CLA) which are multi-peril policies and High-Risk Account (HRA), which are wind-only policies. Ms. Murphy provided information regarding Citizens’ policy count by year and account, risk exposure of the HRA by county, the number of policies in force, and the exposure of the other accounts (PLA /CLA) for the top 10 counties. One chart showed policy growth in the sinkhole areas. This issue may be addressed by new legislation. Information was provided regarding Citizens’ probable maximum loss and financial resources. In addition, Ms. Murphy provided an overview of the Citizens’ code of ethics, vision, mission and values.

Rep. Robaina questioned the need for the three accounts: Personal Lines Account (PLA); Commercial Lines Accounts (CLA) which are multi-peril policies; and High-Risk Account (HRA), which are wind-only policies. Ms. Murphy advised that a report had been prepared for the Legislature in February 2007 that examined the pros and cons; currently the Board has this issue under review. If changes are recommended, they may be considered in 2008. Mr. Douglas stated that one issue would be if the bond insurers and the grading agencies would allow the accounts to be combined. Mr. Douglas advised Rep. Robaina that Citizens would be prepared to address this issue in August 2007, which is when Citizens’ financial advisor, bond counsel and attorneys are expected to complete their review.

Senator Fasano noted that Citizens has 810 employees and questioned the number of contracts with vendors of independent adjusters. Mr. Douglas stated that Citizens has contracted with 45 vendors for claims adjusting, which represents 6000 claims adjusters. Mr. Douglas noted that in 2004 Citizens had less than 300 claims adjusters.

Chairman Milligan asked Mr. Douglas about reinsurance with the private sector. Mr. Douglas stated that in 2006 the Board weighed the cost in relationship to the coverage and decided that it was not a good investment. The Board will meet on May 24, 2007 to decide on reinsurance for 2007. There was further discussion regarding the CAT Fund and the commercial-commercial accounts.

Chairman Milligan, Mr. Douglas and Rep. Robaina discussed the changes in the insurance homeowners market between 2002 to 2007; the high level of dependence on the cost of reinsurance by depopulation companies; the effects of the new CAT Fund; and the possibility of a Coastal Catastrophe Fund (17 states).

Senator Fasano noted that a high percentage of seniors who do not have mortgages are going without coverage due to high premiums and the private sector dropping policies. Mr. Douglas acknowledged that it will be a couple of years for the industry to stabilize.

Rep. Robaina inquired about cherry picking and “pup” companies. Mr. Douglas suggested that companies need to give the legislation a chance. It may need to be improved where there may be weaknesses, but it appears that there is progress. Ms. Carruthers noted that this is not a Florida only issue – it is becoming a national epidemic.

Ms. Carruthers questioned whether the PML projections regarding the HRA accounts included the projections for the inland counties that will now be available. Susanne Murphy indicated that it did not. Mr. Douglas explained that Citizens has over four hundred billion in exposure, but that it is spread over the entire state.

Overview of Claims
Tim Loftin, Senior V.P. of Claims, Citizens Property Insurance Corp. (Citizens) provided an overview of the Claims Operations. Mr. Loftin stated that Jacksonville is Citizens’ Operations Center and by having an office in Tampa provides an element of business continuity planning and for the handling of consumers. Mr. Loftin reiterated that Citizens is committed to its policyholders. Mr. Loftin had several members of his staff provide the Task Force with an overview of the operations of the CAT Claims Center.

Catastrophe Operations Manager
Rick Larson, Director of Catastrophe Operations, provided an overview of the 2007 Strategic Initiatives. In 2004, Citizens’ CAT Claims Team consisted of 2 staff members and 1230 independent adjusters and temp staff. Currently, the CAT Claims Team consists of 61 staff members (with authorization to hire up to 75 employees in 2007) and 303 independent adjusters and temp staff. In 2004, Citizens did not have the capability to track claims. Currently, Citizens utilizes a Claims Tracking System (CTS) and is prepared to have its staff directly supervise its catastrophe response in future events. Citizens has contracted with 45 Independent Adjusting firms that have committed 6000 adjusters, if needed. Citizens has 6 Mobile Emergency Response Vehicles (MERVs), which are equipped with satellite communications. In 2004/2005, Citizens handled 303,495 claims and paid $5.1 billion. Currently, there are 3,478 pending claims for the 2004/2005 hurricane seasons.

Senator Fasano asked if there is a Director of Agency Services and what is the role of the insurance agent in a catastrophic event or with any type of claim. Mr. Larson advised that in 2004, Citizens was not prepared to assist its agents inquiries. Today, Citizens’ website offers both education and bulletins on emerging issues to its agents. The issue of agent training will be addressed at a future meeting. Rep. Robaina also expressed concern in this area. Susanne Murphy stated that Citizens has 8500 appointed agents. There was additional conversation regarding Citizens ability to provide quotes directly to consumers.

Chairman Milligan asked about the training of the independent adjusters. Mr. Larson stated that in 2005 Citizens provided training in the hotel rooms at night. Chairman Milligan stated that it appeared that Citizens is relying on post-event training. Mr. Larson acknowledged that it is true and explained that training is minimal because the training would be specific to the event. Ms. Carruthers asked about education regarding the Citizens’ policy and construction specific to geographic areas. Mr. Larson stated that the Independent Adjusting firms provide education and experience of their adjusters.

Chairman Milligan asked about communications after the storm. Mr. Larson stated that they have satellite communications in the MERVs.

Senator Fasano asked where are the 61 CAT adjusters located geographically? Mr. Larson stated that they are located in Jacksonville and they are developing a field operation to task those adjusters to survey impacted areas.

Ms. Carruthers inquired about the inspections and photos of the properties and how is it determined if it is old damage or new damage to the home. Mr. Larson advised that that would be an issue to the Underwriting Department. Ms. Carruthers stated that with the emphasis on mitigation and enforcement of the Florida Building Codes will education in these areas become a priority? Mr. Steelman stated that this will be a focus during orientation, which is usually one or two days. Ms. Carruthers asked about the cost to settle a disputed claim. Rick Vaughn, Claim Dispute Manager, advised that it cost on the average $2,500 to $3,000 to hire an appraiser. The cost of the umpire is split with the policyholder, so it costs Citizens another $2,500 to $3,000 for the umpire. Mr. Vaughn stated that the $6,000 is in addition to the cost of the staff resources and independent adjuster. Therefore, the average cost would be $10,000.

Daily Claims
Ray Walton, Director of Daily Claims, highlighted how Citizens is continually improving its daily claims response. Citizens established a Specialized Claims Unit to ensure uniformity, consistency and expertise on subject matters. Citizens has improved recognition of fraudulent claims activity; set quality assurance and services standard; and reduced reliance upon outsourced claims handling. Mr. Walton provided statistics on daily claims for 2004, 2005 and 2006 and charts which indicate that there has been significant improvement in the number of days to close a claim. Mr. Walton stated that in 2004 there were 27 employees and today there are 103 employees in the Daily Claims Unit, and that this would be considered understaffed in the private sector. Mr. Walton stated that is a recent consumer survey, consumer indicated that claims handled by Citizens adjusters that the results met consumer’s expectations.

Senator Fasano inquired about the implementation of the Neutral Evaluation Program with regards to sinkhole claims. Mr. Walton stated that he was not familiar with the program. Chairman Milligan advised that staff would research this issue and provide an update of the implementation of the Program. Rep. Robaina inquired about subrogation against developer or contractor. Mr. Walton explained that to go after the tort feasor for the negligence, it is very difficult to prove because in the situation of sinkholes.

Mr. Twomey inquired about claims reports and how they compare with the private market. Mr. Walton stated that the Office of Insurance Regulation will have the stats on claims and the Department of Financial Services will have the stats on complaints. The Chairman asked staff to research this issue.

Claims Field Operations
Jeff Lambert, Director of Claims Field Operations, stated that adding field operations statewide is a continuing evolution of the organization in an effort to response quickly and assist damages. The field organization has people positioned around Florida to respond quickly when needed. There are 2 functioning areas: daily (non-catastrophic) losses and being a resource in event of catastrophe. Citizens identified 18 areas where it will staff individuals in the field. They are positioned based on policy count of PLA multi-line product and represent about 35,000 to 45,000 policies for each area you see a flag. Citizens’ vision is to have 21 employees, two units of nine with a supervisor for each. Currently, there are 5 employees and are actively recruiting to fill these by end of the year. The goal is to handle 60% of volume on daily side – about 2000 claims a month. On the CAT side, this unit will redeploy resources as necessary if needed during catastrophe.

Mr. Lancashire asked of recruiting for these field adjusters is difficult. Mr. Lambert acknowledged that it is difficult to find adjusters with multi-peril background.

Special Investigations Unit
Joe Theobald, Manager of Special Investigations Unit, stated that false and inflated insurance claims cost billions of dollars. Estimated fraud costs households $950 a year. Most recent studies show as many as 1 in 10 claims contain fraud or misrepresentation. Citizens recognize legal obligation to resist insurance fraud. SIU unit is specialized team of investigators – a dedicated resource to claims dept. to assist in identification and investigation of suspect claims. Prior to 2005, there wasn’t a dedicated staff. In late 2005, an SIU was in staff to oversee investigations by outsourced vendors and some investigations in house. In 2006, Citizens continued to improve identification of suspect claims. They have authorization to hire 9 investigators for a total of 10. This will allow balance of reliance on outside vendors. Citizens is developing fraud recognition and training tools for adjusters and furnishing adjusters with fraud indicator sheets. Any adjuster working on behalf of a Citizens claim can access SIU from any computer with web access, send an SIU referral and have it assigned within 48 hours. Citizens is a member of National Insurance Crime Bureau and Coalition Against Insurance Fraud. The Department of Financial Services, Division of Insurance Fraud (DIF) has taken action and arrested 13 referrals. Citizens has referred over 217 cases to DIF, more than double what was sent in 2005.

Senator Fasano asked whether the fraud was from consumers or adjusters.
Mr. Theobald stated claims fraud is driven mostly by customers, unscrupulous public adjusters and a few contractors. Citizens does track the number of cases in which a public adjuster is involved in cases referred to SIU – 20% to 30%.

Claims Programs
Bill Hughes, Director of Claims Programs, the goal to enhance customer satisfaction, reduce claim cycle times, achieve efficiencies in claims operations, improving loss cost and expenses. Future considerations are: Exact Analysis – a rollup of loss cost analytics providing more consistency for industry pricing and estimate comparisons; a central repository for estimate data from many sources; adding additional call centers for large cat events; develop resources for temporary roofing and board up services; contractor program for low severity losses; and water mitigation.

Rep. Robaina inquired about mold coverage. Mr. Hughes responded that the key to mold is to dry out the area as soon as possible. Currently, there are no programs for mold mitigation.

Quality Assurance and Claims Training
Bill Steelman, Director of Quality Assurance and Claims Training, stated that quality assurance reviews every aspect of the process including: claims that have been opened a long time; litigated files; closed files; target inspections to certain adjusters in a certain area; re-inspection program to ensure the quality of a particular adjuster firms; identify additional training needs, such as, tile roofing; and provides pertaining for adjuster on the wind-only policy; and ensures that every adjuster is licensed and qualified to adjust claims. Recently, a consumer satisfaction survey was conducted.

Public Testimony
Chairman Milligan asked for public testimony and no one asked to be recognized.

Task Force Discussion
Chairman Milligan reviewed the proposed meeting schedule and tentative agenda for the June 4, 2007 meeting in Tallahassee, Florida. The Task Force members approved the meeting schedule and agenda. Chairman Milligan encouraged all members to attend the public hearings scheduled on June 13, 2007 in Pensacola and June 19, 2007 in Ft. Lauderdale.