Gallagher: Citizens Should Reduce Third-Party Adjusters; Begin Take-Out Incentives

February 10, 2005

Citizens Property Insurance Co. should reduce third-party adjusters and institute a take-out incentive program, according to suggestions made by Florida CFO Tom Gallagher in a letter to Peter M. Dunbar, Citizens Task Force chairman.

“First, we need to reduce the need for Citizens to use third-party adjusters,” Gallagher suggested. “As evidenced by the number of storm victims still waiting for help more than four months after the storms hit, the current system is not working and many Floridians are suffering as a result.”

Gallagher suggested reducing the need for adjusting services with quota-share. He explained that insurance companies that don’t write windstorm coverage; but write the underlying coverage should take a small percentage of wind risk through a quota-sharing arrangement. Putting this in place would allow Citizens to tap into the adjusting force already in place with private insurers.

“Second, we want to attract new capital to Florida’s homeowners market but we want it to be a long-term investment,” Gallagher said. “Currently, Citizens offers incentives to insurers who take out policies for three years. The problem is that companies earn the full bonus amount — $100 per policy — even if the policy is not written for the full three-year period.

“I recommend that we consider a take-out incentive program that ensures companies only earn a bonus when they take out policies, specifically homeowners policies that include windstorm coverage for a minimum of five years.”

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