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Sha'Ron James

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Citizens Insurance: Limit "weaponized" water claims to 10k under plan

News Article

March 16, 2016

Palm Beach Post

State-run insurer Citizens didn’t win in the legislature, but it set out on Wednesday to make its own splash in a water fight that one official said had become “weaponized.”

The Citizens Property Insurance Corp. board approved moves designed to encourage customers to choose “managed repair” — contractors approved by the company — when they buy policies. Such encouragement could include a $10,000 limit on water-damage claims like a plumbing leak if customers do not agree, and a policy discount if they do.

Parts of the proposal are subject to approval by state regulators, but it marks the latest salvo against what Citizens chief risk officer John Rollins called the “weaponized” assignment of insurance benefits to third parties, such as clean-up contractors.

Insurers say bad actors are jacking up costs for everybody, though contractors and attorneys say it’s really an attempt to restrict consumer representation and pay less than full and fair amounts for damage.

Efforts to restrict such arrangements have mostly come up dry in the courts or in legislative sessions like the one that ended last week. Citizens CEO Barry Gilway on Wednesday blamed the trial bar.

“Their lobby was stronger than our lobby,” Gilway said. “That literally is the bottom line.”

Despite 10 years without a hurricane, Citizens has blamed abusive water-damage claims for rate increases in South Florida, including Palm Beach County, and warned 10 percent hikes may be looming for years to come.

The total cost of water claims at Citizens has fallen about 20 percent since 2013 and a comparable amount of optional offshore reinsurance spending has also crimped the budget, The Palm Beach Post found. But company officials say the water claims are having a huge proportional impact on rates at a company whose customer count has rapidly fallen to less than 500,000 customers from near 1.5 million.

That shrinkage may be slowing down, other records available Wednesday showed. Customers have accepted fewer than half of state-approved offers by mail to switch to private companies in 2016.

The acceptance rate fell to 46 percent in January and 45 percent in February, down from 51 percent in December.

In the first two months of 2016, regulators approved more than 205,000 potential offers, though insurers actually made about 68,000 and customers accepted less than 32,000.

A bill that passed last week will allow customers to see all offers from private insurers along with a projected premium, not just one at a time. It has been sent to Gov. Rick Scott, who vetoed a different package of Citizens consumer protections last year.

This year’s final bill did not include provisions the Senate considered to let customers come back to Citizens within 36 months at a renewal rate if private companies fail to abide by certain conditions, such as not raising rates more than 10 percent above an initial estimate.