Citizens' Task Force Focuses on Closing Claims

This task force was created by the insurance reform bill passed in January, and includes Bob Milligan, Florida's insurance consumer advocate, who held several meetings around the state to hear from homeowners on how Citizens is working to resolve open claims from the eight storms that hit the state in 2004 and 2005. That does not include other claims that have resulted from small events such as wind gusts and fire.

At a recent meeting of the task force, members heard an earful from both angry policyholders still waiting for Citizens to pay their claims, as well as from legislators who recognize the changes the company has made in the past three years to be more responsive to consumer needs.

"We are happy for any help we can get," said Citizens spokesman Rocky Scott, perfectly reflecting the company's accepting attitude toward the state scrutiny. Citizens is now the state's largest carrier, covering three million Floridians. To date, the insurer has 418,689 high-risk accounts, 878,338 personal-residential accounts, 10,111 commercial wind-only policies, and 292 in certain inland commercial wind-only accounts. "We're not the Citizens we were in 2004," said Scott, referring to new leadership and new strategies to win over doubters.

Claim Processing and Money Are Key

The task force found that Citizens has made significant efforts to strengthen its capacity to handle catastrophic events, particularly by adding staff and contracting with more adjusters. Just as important, Citizens was also able to show policyholders and state lawmakers in June that it has strengthened its balance sheet by closing on two financial transactions. These will provide nearly $2 billion in liquidity for it to pay claims for its personal- and commercial-lines accounts. The financings were a $1 billion line of credit through several banks including Citigroup and JP Morgan, and a $950 million taxable auction-rate bond issue, priced at 5.20 percent, with banks led by Citigroup. Citizens CFO Sharon Binnun said the state-backed insurer now has more than $9 billion available to pay claims after a storm.

Sen. Mike Fasano (R-New Port Richey), vice chairman of the task force, heaped praise on Citizens for putting added resources and energy behind claim processing. "I am quite pleased with the progress they are making toward trying to resolve claims," he said. "Citizens is finally beginning to act like Florida's largest insurance carrier and the fourth largest in the country."

At the task force's first meeting in Tallahassee, Fasano heard that nearly all claims filed after the hurricane seasons of 2004 and 2005 have been closed. Most of the claims that remain open were only filed in the past year. That point is echoed by Milligan. "I can't say they have failed to close claims as much as they have gotten a lot of new ones and have had a lot reopen," said Milligan.

Many of the changes Citizens enacted sound simple, such as implementing electronic filing and tracking information via fax instead of regular mail, Fasano said. "If you asked me two years ago what I thought of Citizens, I would have a quite different answer," he said. "But in the past eight-to-10 months, Citizens has done an outstanding job. I am very impressed."

Citizens, as of the end of May, had 3,510 claims from 2004 and 2005 hurricanes still pending with 2,723 of them in dispute over total damages exceeding $120 million. They include 986 cases in court, a number that encompasses many Panhandle residents suing Citizens for full payment on homes destroyed by wind and flood in Hurricane Ivan. Under the terms of the insurer, the National Flood Insurance Program is expected to pay the flooding portions. The program, however, is optional, which is why policyholders are suing the insurer to pay all the costs of repairs.

About 1,100 claims from the 2004-2005 hurricane seasons were filed for the first time in 2007. Of those, 926 have been closed, Citizens reported to the task force. To put these numbers in perspective, Citizens paid out $5.1 billion on 303,495 claims in 2004-and 2005. Citizens has closed 98.8 percent of its claims from those two years and 83 percent of claims reported in 2007.

Much of that success is due to Citizens taking a hands-on approach to monitor claims. In 2004, when Citizens only had two full-time positions on its catastrophe claim staff, the insurer now has 61 positions and authorization to hire 14 more. The company has contracts with 45 independent adjusting firms that commit 6,000 adjusters.

The task force found that most of the open claims from the 2004 and 2005 hurricane seasons tend to be the result of work preformed by out-of-state and independent adjusters. In some cases, the out-of-state adjusters had no prior training regarding Citizens' personal-lines products or the wind-only policies, the Florida building codes, county codes, and Florida's unique construction techniques.

They also lacked experience in adjusting damages caused by hurricane-force winds. In addition, since most of the out-of-state adjusters were temporarily assigned to Florida, there was limited coordination for reassigning the claim files and there was no main computer system to capture the claim information. This led to lost claim files, additional inspections, and delays so that policyholders' frustrations increased along with out-of-pocket expenses and often further damage to the property.

Fasano does have concerns with Citizens' practice of hiring adjusters from insurance companies that are cutting back on their business in Florida, especially Allstate. They are paid a percentage of every claim they settle on Citizens' behalf.

Others are also airing concerns with Citizens. Cliff Long, Pensacola outreach coordinator for the Division of Consumer Services in the Department of Financial Services, testified that there are lingering communication issues. They include trouble reaching a live person by phone and finding a Citizens staffer who was intimately involved with their specific claim. As a result, consumers also have trouble getting real-time status of their claims.

To its credit, Citizens officials said that they now require all employees to take customer service training and hired an internal consumer advocate. In time for the 2007 hurricane season, Citizens has enhanced its web site, www.citizensfla.com, to include a contact list for all departments and a forum for consumer feedback.

State officials say they like what they see so far from Citizens, though the real test will come from the next big storm. "It is essential that we operate Citizens like a business and improve customer service for Citizens' policyholders," said Alex Sink, the state's chief financial officer.

Task Force Reviews Operations

The Citizens task force was created by House Bill 1A during the 2007 special session of the Florida Legislature. The task force is composed of four members, with one appointment each by the governor, chief financial officer, president of the senate, and speaker of the house. In addition there are three ex-officio voting members: the insurance commissioner, insurance consumer advocate, and the executive director of Citizens.

In addition to Fasano and Milligan, the other members of the Task Force on Citizens Property Insurance Claim Handling and Resolution are: Michael B. Twomey, Sr., a Tallahassee attorney; Mike Lancashire, vice president of claims at The Main Street America Group in Jacksonville; Rep. Julio Robaina, D-Miami; Heather Carruthers of Fair Insurance Rates in Monroe County in Key West; and Tim Loftin, senior vice president of claims at Citizens.

The task force met its first goal of delivering an interim report to Gov. Charlie Crist by July 2007. It also will need to deliver a final report by July 2008. The task force is additionally charged with evaluating Citizens' procedures on claim handling, claim resolution, and customer service.

The Florida Insurance Council members don't like to compete against Citizens, which due to a major push by Governor Charlie Crist has become a competitive force in the market instead of an insurer of last resort. As a result, the health of Citizens affects the entire industry because of its sheer size.

Florida Insurance Council spokesman Sam Miller credited Citizens new leadership for seeking public input by holding their own hearings around the state with policyholders. The company has added more employees and technology to improve its work. Citizens has also tapped some of the expertise from the private insurance industry by hiring top managers from Nationwide and other insurers. "Citizens has made enormous strides in claim handling," said Miller. "They handled 2005 better than 2004, and the tornadoes in 2006 were handled even better. They are hiring competent and experienced mangers who are familiar with the industry."

One suggestion Citizens has made is to limit the time homeowners have to challenge disputed claims. The state-run insurer said some lawyers and freelance adjusters have tried to persuade homeowners to open up disputes so they could pocket large fees. The 2004 hurricane season turned Florida into a magnet for public adjusters, private contractors who settle claims on behalf of the homeowner instead of working for an insurance company. The number of registered public adjusters in the state rose from 400 to more than 2,500, said Raymond Altieri, former president of the Florida Association of Public Adjusters.

Facing criticism for thousands of 2004 and 2005 hurricane claims still open, Citizens seeks to rein in the lawyers and freelance adjusters it alleges are whipping up disputes in order to pocket large fees. "We have created a spawning ground for this stuff to go on," said Rep. Julio Robaina (R-Miami), who told stories of public adjusters offering wide-screen televisions to homeowners who hire them to challenge their insurers. In return, those adjusters collect fees of up to 40 percent of the insurance claim check. Citizens testified that the average cost to settle a claim is $10,000.

The task force has asked Citizens to report back to it in July and September on how it is faring on closing its remaining claims. To learn more about the task force and to read its initial report, go to www.taskforceoncitizensclaimshandling.org.