Water Facts, Impacts & Consequences President s Report June 2016
Claim Statistics 2014 2015 2016 YTD (April) FNOL s Non Weather Water as a % of Total FNOL s 33,000 21,400 6,711 53% 57% 55% Average Days to Report FNOL (HO-3) 28.3 30.3 33.0 1
HO-3 Representation at FNOL HO-3 Statewide Represented at FNOL South East Represented at FNOL Rest of State Represented at FNOL Reported Year Y N Y N Y N 2014 32.7% 67.3% 40.3% 59.7% 2.9% 97.1% 2015 46.2% 53.8% 55.2% 44.8% 7.6% 92.4% 2016 35.0% 65.0% 40.3% 59.7% 10.1% 89.9% 2
HO-3 Assignment of Benefits HO-3 Statewide AOB South East AOB Rest of State AOB Reported Year Y N Y N Y N 2014 10.9% 89.1% 13.3% 86.7% 1.4% 98.6% 2015 20.5% 79.5% 23.9% 76.1% 5.6% 94.4% 2016 21.8% 78.2% 24.6% 75.4% 8.6% 91.4% 3
HO-3 Water Frequencies 17.70% 15.70% 13.70% 11.70% 9.70% 7.70% 5.70% 3.70% 1.70% Statewide South East Rest of State 4
HO-3 Severities 14,000 12,000 10,000 8,000 6,000 4,000 Statewide South East Rest of State 5
Average Loss Adjusting Expense HO-3 Water Only $550 $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 Statewide South East Rest of State 6
Average Suits Filed 2014 2015 2016 YTD (April) Average Suits Filed 650 625 826 7
Litigation Statistics 2016 NEW MATTERS 2016 PENDING JANUARY 714 6,851 FEBRUARY 782 6,877 MARCH 1,050 7,209 APRIL 757 7,400 8
Lawsuits by Opposing Counsel TOTAL LAWSUITS - New lawsuits, water lawsuits, and AOB lawsuits from January 1, 2014 through May 31, 2016 Water Lawsuits 2014 2015 2016 Grand Total % of Grand Total Strems Law Firm, P.A. 1,007 589 282 1,878 8% Morgan Law Group, P.A. 507 358 216 1,081 5% Trujillo Vargas Ortiz & Gonzalez, LLP 478 368 157 1,003 4% Militzok & Levy, P.A. 426 331 197 954 4% Marin, Eljaiek & Lopez, PL 444 289 137 870 4% Kenneth R. Duboff, P.A. (Duboff Law Firm) 381 250 177 808 4% Cohen Battisti & Grossman, P.A. 256 245 66 567 3% The Cardenas Law Group, P.A. 285 177 78 540 2% Mineo Salcedo Law Firm, P.A. 242 160 138 540 2% Law Offices of Leo A. Manzanilla, P.A. 354 173 4 531 2% Law Offices of Michael Biberman, P.A. 238 151 1 390 2% Tabares Law, P.A. 127 178 70 375 2% Ligman Martin, P.L. 3 206 100 309 1% The Diener Firm, P.A. 66 117 103 286 1% Law Offices of Marcote & Marcote De Moya, PLLC 67 159 46 272 1% Litigation & Recovery Law Center, PL 132 87 38 257 1% Joseph W. Ligman, P.A. 225 29 254 1% Greenberg, Stone & Urbano, P.A. 139 88 23 250 1% Michael A. Puchades, P.A. 137 62 42 241 1% Other Matters 93 687 334 1,114 5% Grand Total 9,572 8,244 4,485 22,301 100% 3,123 6,540 5,713 2014 2015 2016 9 AOB Lawsuits 1,238 1,066 1,264 2014 2015 2016
Water Lawsuits by Opposing Counsel WATER LAWSUITS 2014 2015 2016 % of Grand Grand Total Total Strems Law Firm, P.A. 768 528 261 1,557 10% Morgan Law Group, P.A. 382 307 140 829 5% Militzok & Levy, P.A. 305 254 144 703 5% Marin, Eljaiek & Lopez, PL 317 229 95 641 4% Trujillo Vargas Ortiz & Gonzalez, LLP 278 259 87 624 4% Kenneth R. Duboff, P.A. (Duboff Law Firm) 273 170 127 570 4% The Cardenas Law Group, P.A. 271 167 72 510 3% Cohen Battisti & Grossman, P.A. 201 201 57 459 3% Mineo Salcedo Law Firm, P.A. 172 120 104 396 3% Law Offices of Leo A. Manzanilla, P.A. 258 123 4 385 3% Tabares Law, P.A. 101 147 65 313 2% Law Offices of Michael Biberman, P.A. 178 127 305 2% Law Offices of Marcote & Marcote De Moya, PLLC 60 140 38 238 2% The Diener Firm, P.A. 48 89 83 220 1% Ligman Martin, P.L. 1 143 71 215 1% Greenberg, Stone & Urbano, P.A. 105 77 20 202 1% Rogatinsky & Matthews, P.A. 92 68 22 182 1% Joseph W. Ligman, P.A. 163 18 181 1% Benjamin Legal Group, P.A. 60 91 29 180 1% Cernitz & Shanbron, P.A. 89 62 25 176 1% Grand Total 6,540 5,713 3,123 15,376 100% 10
AOB Lawsuits by Opposing Counsel AOB LAWSUITS 2014 2015 2016 Grand Total % of Grand Total Cohen Battisti & Grossman, P.A. 252 240 63 555 16% Trujillo Vargas Ortiz & Gonzalez, LLP 105 89 42 236 7% Mineo Salcedo Law Firm, P.A. 57 84 83 224 6% MAS Collections, LLC 27 106 47 180 5% Marin, Eljaiek & Lopez, PL 118 26 30 174 5% Militzok & Levy, P.A. 22 60 52 134 4% The Diener Firm, P.A. 17 46 71 134 4% Consumer Law Office, P.A. 54 15 64 133 4% Law Offices of Michael Biberman, P.A. 55 64 1 120 3% The Cardenas Law Group, P.A. 87 15 6 108 3% The Gilchrist Law Firm P.A. 50 41 91 3% Regueyra & Llerandi P.L 1 21 32 54 2% Malik Law, P.A. 28 14 12 54 2% David Low, P.A. 7 14 31 52 1% Morgan Law Group, P.A. 21 31 52 1% Mario Serralta & Associates 17 28 45 1% Florida Professional Law Group, PLLC 10 27 7 44 1% Perkins Law Offices, P.A. 17 15 9 41 1% Insurance Litigation Group, PA 6 32 38 1% The Hernandez Legal Group 4 13 18 35 1% Grand Total 1,066 1,264 1,238 3,568 100% 11
Additional Initiatives Product Changes Contracted Managed Repair Program Dedicated Non Weather Water Staff 12
Product Change Goals Litigation is the main driver of non-weather claim costs and therefore rate hikes, proved by January AOB white paper Litigation is enabled by late reporting and inflated costs for emergency measures and permanent repairs Policy language changes effective July 1 address these issues without significantly restricting coverage 13
Product Change Specifics Citizens is implementing policy contract changes related to emergency measures and permanent repairs to ensure that the use of emergency services is reasonable, that Citizens has the opportunity to assess the damage before nonemergency permanent repairs are made, and that permanent repairs properly address the cause of the loss. There may be no coverage for permanent repairs that begin before one of the following occurs: 72 hours after the loss is reported to Citizens Loss is inspected by Citizens Verbal or written approval is provided by Citizens Clarification of access to repair and collapse language to discourage non-covered and excessive repairs Covers the access required to replace only the part or portion of the system that caused the loss, regardless of the condition of the entire system. Collapse coverage language has been revised to state that abrupt collapse of plumbing and other similar systems, from age, deterioration or maintenance, is not covered. 14
Product Change Impact Changes apply to the following policies: Citizens Homeowners 3 Special Form (CIT HO-3) Citizens Homeowners 6 Unit-Owners Form (CIT HO-6) Dwelling Property 3 Special Form (CIT DP-3) Direct effect on projected loss costs will be considered in 2017 recommended rate filings Long-term hope is that litigation abates, reversing loss trends and stabilizing rates 15
Product Changes Industry Impact Private Insurers are adopting Citizens new language 27 insurers have submitted 58 filings under various companies Some carriers are modifying Citizens language with limited success Private Insurer Filings Pending 27 Approved 19 Withdrawn 7 Disapproved 5 Total 58 Insurer Groups with Approved Filings American Traditions / Modern USA Federated National Florida Peninsula Homeowner s Choice Prepared Insurance Safepoint Insurance Southern Oak United Insurance Weston 16
2017 Rates - Overview Multi-Peril Personal Lines: Tri-County sees continued near 10% hikes due solely to Water losses Multi-Peril Personal Lines: Rest of State sees a mixed bag of hikes and reductions by county, versus all reductions last year, again due to rising water losses Wind-Only: Historical rate inadequacy drives continued hikes around the state, but reinsurance costs less of a factor and good news for Condo owners in some areas 17
Water Loss Impact Changes the Rate Map 2016 Multi-Peril HO-3 Changes 2017 Multi-Peril HO-3 Changes 18
Skyrocketing Cost Trends Muddles the Glide Path and Threatens Statewide Rate Stability NOTES: 1) Figure above shows the average loss and loss adjustment expense (LAE) cost per policy due to all other perils (AOP) excluding sinkhole and wind perils for Homeowners policies 2) South East Counties include Palm Beach, Broward, and Miami-Dade counties 19
Wind-Only: Historical Inadequacy Drives Rate Hikes, but Reinsurance Affordability Shortens Glide Path 20
Threats to Financial Strength Cost Trends and Glide Path Threaten Financial Strength as Citizens Fails to Build Reserves Citizens now spends $1.046 for every $1 of premium statewide. In Miami-Dade county, Citizens spends $1.217 for every $1 of premium. 21
Threats to Financial Strength Statewide 2014 2015 22
Threats to Financial Strength Miami-Dade 2014 2015 23
Call Citizens First 24
Call Citizens First Under the overarching message theme of Call Citizens First, which encourages to policyholders and agents to make Citizens their first call when they have a potential claim, Citizens is using traditional and social media, agent trainings and direct mail pieces to educate all audiences about: o Policy language changes o New project launches o Rate impacts o Fraud awareness. Landing pages for the campaign appear on both the public and agent websites to provide a one-stop shop for Call Citizens First materials. A media kit was developed at the launch of the Call Citizens First campaign for stakeholders and media outlets. Additional media kits are in development which will feature campaign messaging. Direct-mail postcards were sent to Miami-Dade HO-3 policyholders with a Call Citizens First magnet as a reminder of the Citizens claims reporting procedure. Based on agent feedback, the response has been overwhelmingly positive. 25
Product Change Communications 26
Product Change Communications A summary of Changes to Policy Language that Impact Claim Payments and Coverage was published on www.citizensfla.com, along with links to the approved water-loss filings. The policyholder letter outlining policy contract language changes will: Clarify policyholder responsibilities following a loss related to emergency and permanent repairs Encourage policyholders to provide prompt notice of loss so Citizens can inspect damage before permanent repairs are made Delineate between reasonable emergency measures and permanent repairs by setting allowances prior to Citizens inspection or approval Facilitate prompt claims handling services Provide contact information (Claims hotline, CCC phone number, adjuster details) as a resource for questions and assistance. Starting in July, a direct-mail postcard will be sent to affected policies reminding them about the policy language changes and advising them to review their policy or contact their agent for more information. 27
Industry Stakeholder and Partner Communications 28
Industry Stakeholder and Partner Communications Newsletter articles featuring the Call Citizens First campaign and related information are being published in coordination with agent associations and industry stakeholder groups. o Recent policy contract language changes, which go into effect for all HO-3, HO-6 and DP-3 policies July 1, were highlighted in monthly newsletter and industry stakeholder emails that reached approximately 107,500 readers. As a follow up to in-person briefings with legislative and cabinet staff in early May, an informational webinar on the recent policy contract language changes was held for legislative offices in June. This cost-effective outreach allows Citizens to provide legislators and staff with timely program updates and pertinent information affecting their constituents. 29
Agent Communications 30
Agent Communications Agents participate in increasing awareness of Call Citizens First by distributing printed educational brochures that outline the claims reporting process and explain what customers can expect once a claim has been filed. Agents can provide new and renewal policyholders with a copy of an identification card at the point of sale for use until the policyholder receives their personalized card with their declarations packet. o Starting in September, all personal lines policyholders who request an agent of record change receive an updated policyholder ID card in with their updated declarations page. Agents will receive additional information at agency conventions over the summer through onsite trainings and the Citizens booth on the exhibition floor. 31
Press Materials 32
Press Materials Through opinion editorials, press releases and media interviews, Citizens continues to inform stakeholders about recent policy contract language changes, explains the impact of continued water losses and increased assignment of benefits abuse on rates. In support of its 2017 annual rate filing, Citizens will publish a press release and media kit in the News section of www.citizensfla.com. The kit will include a breakdown of rate indications by territory and county, FAQs and an updated Where does my premium dollar go? infographic. For the first time, Citizens has partnered with Florida Public Broadcasting Stations to inform Floridians about current weather conditions and precautions. This partnership has the potential to reach 99 percent of Floridians during hurricane season to promote storm readiness and remind our policyholders to call Citizens first if they have a potential claim. 33
Fraud Awareness 34
Fraud Awareness Citizens is continuing efforts to educate all audiences about the how fraud and assignment of benefits abuse affects rates and causes delays in claims resolution through brochures, infographics and opinion editorials. Empowering customers to understand insurance fraud is a serious crime. Fraudulent claims hurt policyholders who must shoulder the burden of higher rates. Florida law requires that losses within a particular geographic territory be paid by policyholders within that territory. Everyone plays a part in stopping fraud. Citizens has a responsibility to policyholders, agents, employees and all Floridians to fight property insurance fraud. By providing practical advice and tips on identifying fraud, Citizens rallies support behind the mission. 35
Solutions for Consideration Prevent financial inducements relating to insurance claims strict limitation or ban on referral fees Restrictions on solicitation No insurance-no pay (Demand proof of workers comp and auto insurance) Licensing/regulation of water restoration/remediation contractors Enforce prohibition against unlicensed public adjusting Possible AOB legislative solutions: Limitation of assignment to payment, not policy rights Limitation on scope of AOB to actual work performed Limitation on dollar amount of assignment Prohibiting use of liens to enforce improper AOBs Agreement of mortgagee to assignment Subject assignee to same responsibilities as insured Must contain estimate (range) Right of rescission Contractor must inform insurance companies within specified period (3 days?) Clear disclosure of policyholder rights 36
Solutions for Consideration Continued AOB Void If: Cancellation fee included Exceed scope of estimate Divests policyholder of rights Inhibits communication between insurance companies and the insured Extend adjustment authority Policy form changes that support right/ability of company to adjust claim Expand insurance agents role in claim reporting Policyholder EDUCATION on AOB terms, risks and insurance policy terms Improved Insurance company claims management practices (managed repair) Limit access by third party vendors to one-way attorney fee statute 37