Citizens delaying managed repair program rollout until 2017
By: Ron Hurtibise, Sun Sentiel
Citizens Property Insurance Corp.'s Board of Governors approved hefty rate increases for 2017 on Wednesday while its president said the company plans to make its customers an offer they can't refuse.
In its effort to limit costs of water damage claims that it blames for the rate increases, Citizens has been planning a managed repair program that would require participating customers to choose from pre-approved repair contractors.
The state-run "insurer of last resort" originally planned to roll out the program this August. Customers would be asked to voluntarily agree to participate in exchange for some incentive, such as a discount off their premium or claim deductible.
But at the company's Board of Governors meeting on Wednesday, president and CEO Barry Gilway announced that the program will instead begin sometime in the first quarter of 2017 and will take a different form than originally envisioned.
The revised plans are for "a very, very customer-centric program" and will be fashioned in a manner that "makes it almost impossible for a customer to say no," Gilway said.
In March, the board approved opening negotiations with Contractor Connection, a repair management service owned by Atlanta-based Crawford & Co. Those negotiations are continuing, Citizens spokesman Michael Peltier said, and Citizens also has sought advice on best practices from three private insurance companies that use the managed repair model, including People's Trust Insurance, headquartered in Deerfield Beach.
Gilway last fall said participation would be voluntary at first but probably would have to be mandatory to achieve sought-after cost reductions.
But Gilway's meetings with private insurers on the subject convinced him "that Citizens had to take a closer look at how to create a managed repair program that would be successful by emphasizing customers' service and satisfaction," Peltier said. Details have yet to be worked out, but the meetings convinced Gilway "that a mandatory program was not the way to go."
A handful of insurers in Florida, including Florida Peninsula and Heritage Property & Casualty, use managed repair programs. Critics say the programs limit customers' choice of contractors and pressure participating contractors to cut corners to keep repair costs low.
Meanwhile, Citizens' governing board on Wednesday voted unanimously to approve a 6.8-percent average statewide rate increase for all personal property lines.
For multiperil coverage — the most common type of coverage that combines hurricane coverage with all other risks — customers in Broward, Palm Beach and Miami-Dade counties would see average increases ranging from 8.9 percent to 9.1 percent.
The state Office of Insurance Regulation has final say on the increase and will hold a public hearing, probably in August, Peltier said.
Citizens officials blame the need for the rate hikes on increased costs of non-weather-related water loss claims and related lawsuits, particularly in the tri-county area. Water damage repair companies are enticing customers to sign over rights to collect benefits of their insurance policies, submitting inflated claims, and filing lawsuits if Citizens denies the claims or fails to pay the full invoice, Citizens says.
"This is a crisis," Gilway said. "It's a crisis not only for Citizens. It's a crisis for the entire industry."
Average cost per loss in the tri-county area has increased from $1,119 in 2012 to $2,696 this year as a result, Gilway said.
In addition to planning the managed repair program, the company has taken steps to reduce claims abuses, including policy revisions limiting emergency repairs to $3,000 or 1 percent of coverage without prior approval, and barring permanent repairs until 72 hours after Citizens has had an opportunity to inspect damage. Repair coverage is now limited to only the damaged part of a system, such as the ruptured section of a drain pipe, and the company is paying only for tear-out and replacement of the section of a wall or floor needed to directly access the damage.
Too often, the company says, repair companies are notifying insurers of claims only after replacing entire drainage systems, floors and even full kitchens
The same revisions have been approved by state regulators for 19 private insurers and are pending for 27 others, Gilway said.
Also, the company has developed a public relations campaign to encourage customers to "Call Citizens First" after an emergency.
The company has 464,725 personal lines policies, according to Citizens documents. Nearly half — 227,929 — are in the tri-county area.