Citizens to revamp reinspection program

Herald/TimesTallahassee BureauSeptember 8, 2012 

TALLAHASSEE -- The board of directors of Citizens Property Insurance Corp. opted Friday to reform its unpopular reinspection program, hire an external auditing firm and overhaul its customer relations program.

The board also approved a controversial new $350 million low-interest loan program aimed at drawing private insurers to take over some of its more than 1.4 million policies.

The changes to the reinspection program were in response to complaints from scores of property owners and a series of stories jointly published by the Miami Herald and Tampa Bay Times. The newspapers documented how hundreds of thousands of Floridians saw premiums soar as the state-run insurer intensified its plans to raise rates through reinspections and reduce coverage.

Property owners who lost insurance discounts during the aggressive home reinspection program now have new options to dispute the premium hikes. They will have a year to request a second inspection, free-of-charge. Those who lost insurance discounts because an inspector could not get into their attics to verify the strength of their roofs can also receive a new inspection.

So far, more than 257,000 properties have been inspected this year, with three out of four seeing premium hikes after an inspection. On average, homeowners who have lost discounts have seen premiums increase by about $800.

The other decision by the Citizens governing board to offer low-interest loans to private insurers has also drawn criticism.

Under the new "surplus note" program, Citizens would take capital from its record $6.2 billion reserves and lend it -- under favorable terms -- to private insurers who agree to take over policies and keep them for 10 years.

The 20-year loans require interest-only payments during the first three years and are forgivable, in part, if hurricanes hit the state. Citizens acknowledges that the interest rate of about 1.6 percent "does not approximate the true market rate" for similar loans and that Citizens could be left unpaid if an insurer goes belly up after receiving a loan.

Critics, including several state lawmakers, called it a "sweetheart deal" for insurance companies and "corporate welfare" funded by the premiums collected from Citizens' customers over the past several years. With no hurricanes hitting the state since 2005, Citizens has saved up a massive treasure chest of $6.2 billion, money that private insurers find attractive.

"I sat here and listened to the board today give out one of the biggest bailouts. Corporate welfare, I call it," fumed Sen. Mike Fasano (R-New Port Richey), blasting Citizens for quickly approving the controversial plan without legislative input.

Looking to repair its battered public image, the board also announced Friday that it is clamping down on excessive travel spending by its corporate executives.

In a related move, Gov. Rick Scott summoned the state's Chief Inspector General to pore through Citizens' travel expenses for possible waste, fraud or abuse, said Citizens President Barry Gilway.

"Whenever taxpayer money is involved, we need to make sure we're holding our government accountable," Scott said in a statement. "The recent reports about Citizens' spending concern me and I am now asking the Inspector General to look into it."

Said Gilway: "We've taken quite a bashing in the press. It is time to take a hard look at what (policies) we have in place today."

Effective immediately, said Gilway, Citizens executives will not be allowed to travel free of the strict spending caps that govern most employees at the company and other state-run agencies. He said the new executive travel policy caps in-state hotel stays at $150 a night, limits meal allowances to $60 a day, and ties international travel costs to pre-determined federal rates.

The new rules would prohibit some of the expenditures reported by the Herald/Times series. Among them:

n A $2,031 weekend hotel stay by Chief Financial Officer Sharon Binnun at a $600-a-night "gold" suite in Bermuda in April.

n A $75.80 dinner for Citizens' general counsel, Dan Sumner, who dined at Tampa's famous Bern's Steak House in May.

n An $889 dinner-and-wine tab for three Citizens executives and their spouses dining in London last year.

Citizens, which was created by the Legislature 10 years ago to be the insurer of last resort, has more than 1.4 million policyholders.

Gilway said he would also look at reforming the company's policy on corporate credit cards. Nearly 250 employees at Citizens have corporate cards -- a fifth of the workforce -- spending hundreds of thousands of dollars monthly. On several occasions, these cards have been used for personal expenses, the Herald/Times found in its review of three years of travel receipts.

The Chief Inspector General will be looking at many of those same documents to determine if there is fraud or abuse of power.

Citizens executives have routinely spent beyond the state's legal limits on travel and meal expenses. While Citizens' leaders have said travel costs represent a minuscule line-item within a $2 billion budget, many consumer advocates have pointed out that the executive splurging comes at a time when hard-pressed Floridians are paying higher rates for less coverage.

"Citizens executivesclearly don't see the hypocrisy of asking policyholders to pay more while relaxing in four-star hotels and eating at exclusive restaurants," said Sean Shaw, founder of Policyholders of Florida. "Hopefully this investigation will change the culture of indifference rampant at Citizens."

While the new rules might force executives to stay in midrange hotel rooms rather than posh suites from now on, there was some good news Friday for Citizens execs.

Gilway coupled the travel spending crackdown with $2.1 million in new raises for company employees. For high-level employees such as Binnun, whose annual salary is $224,000, the raise could amount to as much as $13,000.

"We're still well below the (private) market oncompensation," said Gilway.

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