(The Center Square) —The Florida Auditor General recently released an audit report on the state-owned Citizens Property Insurance Corporation and made several recommendations to improve customer service while ensuring it remains fiscally buoyant.
The insurer covers dwellings, structures, personal property, rentals and additional living expenses. Citizens have established underwriting guidelines for each line of business for agents to use when preparing and reviewing insurance applications. These agents must submit all accurate and complete applications in compliance with the requirements.
Under state law, structures with a replacement cost of more than $700,000 cannot be insured by Citizens if the Office of Insurance Regulation determines the county where the structure is sited as having enough competition from private insurers. In counties that are determined to not have enough competition, coverage limits bump up to $1 million.
According to the report, 3.33 million non-commercial policies were issued or renewed between January 2021 and August 2023, and 1,820 of those policies exceeded statutory thresholds.
Most new or renewed policies that exceeded the threshold were homeowner policies with 1,222 exceeding the statutory limits. Next were HW-2 policies at 213. These policies are the wind-only versions of the homeowner’s policy.
The AG recommended Citizens management enhance its automated and underwriting process controls. In response to the audit findings, Citizens claimed that between February 2023 and August 2023, the automatic non-renewal workflow was inadvertently disabled. Citizens further stated that the error contributed to issuing policies exceeding the thresholds.
Citizens are further responsible for ensuring enough resources are available to pay no less than the probable maximum loss associated with a one-in-100-year storm. According to the report, as of September 2023, the cost estimates for a single one-in-100-year storm for personal lines accounts, commercial lines accounts and coastal accounts were $8.3 billion, $8.5 billion and $1.2 billion, respectively.
The AG recommended that the Legislature consider revisiting statutory rate limits to allow Citizens to collect projected reinsurance costs to cover one-in-100-year storms and minimize the need for potential surcharges on Citizens’ policyholders.
It was further recommended that Citizens’ management work with the Legislature to facilitate a more diverse range of policies and exposure to the private market, maximize insurer participation and ultimately lower costs for policyholders.