Citizens wants to shrink customers by as much as half

sfrater@bradenton.comFebruary 27, 2013 

BRADENTON -- Citizens Insurance senior executives are out on a tour to promote their latest effort to make the insurance company smaller, more efficient and once again the insurer of last resort.

With more than 1.3 million insurance policies, the company has grown bigger than was ever intended.

CEO Barry Gilway met Tuesday with the Bradenton Herald to outline his vision for a dramatically leaner, more efficient and less scandal-prone organization that will hold fewer policies.

To get there, Gilway plans, in part, to reduce vendor contracting and tighten internal controls.

Already under way is a $400,000 "top-to-bottom" audit, designed to root out any hint of fraud by blue-chip auditor KPMG, and a separate HR "examination," by consulting firm Accretive Solutions. Three in-house forensic financial auditors have also been hired, he says.

But his biggest cost savings hinges on legislation he hopes to get passed this year. The legislation is designed to create a Citizens-run database "clearing house" to better match homeowners with a list of five or six similarly priced private insurers from which they can choose coverage.

Gilway has support for the legislation from State Rep. Bryan Nelson, R-Apopka, chair of the House Insurance and Banking subcommittee and an insurance agent himself.

The clearinghouse is designed to help Florida residents find affordable private coverage, rather than forcing them out of Citizens by cutting coverage to the minimum or supplementing private insurance costs -- tactics that have been tried in the past.

If Citizens is allowed to create its database and every insurance agent in the state can access it, homeowners will be able to easily compare prices and select the level of coverage they want. Homeowners now go to insurance agents who look at just a few policies, and if homeowners can't find a policy or find coverage that is affordable, they automatically turn to Citizens.

While admitting that "some homeowners, including those who live in 15-year-old trailers, as well as those in more expensive and flood-prone barrier islands and coastal areas" need Citizens as an insurer of last resort, Nelson agrees that reducing the number of policies is vital. He also said that "out-of-state homeowner" insurance policies may be another area where Citizens can shed policies and risk.

"With 23 percent of the state's homes covered by Citizens, in the event of another hurricane, we'll have the remaining 77 percent of taxpayers paying for their claims," Nelson said in a phone interview Tuesday with the Herald.

Citizens executives emphasized they are working to unload a significant number of its 1.3 million policies since they represent a potential financial exposure of almost $420 billion. To reduce that risk, Florida law requires that the Citizens Board of Governors create programs to help return Citizens policies to the private market and reduce the risk of ad

ditional assessments for all Floridians.

The insurer isn't just dealing with ways to save taxpayers money on claims, it is also looking for ways to restore a reputation for being efficient and effective with taxpayers' money, its lead executives say.

Because he was stung by recent criticism over his own expense account, in which he stayed in hotel rooms above the company's rate cap, purchased alcohol with a Citizens' credit card and was late in submitting expense forms, Gilway conceded that he's "made mistakes" and that running private sector financial companies, as he had been doing throughout his professional career, was vastly different from heading the publicly owned Citizens, "where one is subject to much tighter analysis of how you spend money."

Nelson said although Gilway's "lost some credibility and is politically naive, he's growing up fast and is making progress."

As part of an effort to increase transparency, Gilway said Citizens will unveil a Web database this week which details about 400 episodes of Citizens employee wrongdoing or "demonstrating lack of judgment going back as far as 2008."

While no names will be posted on the database, episodes including sexual harassment, online gambling at the workplace and on Citizen-owned computers, dancing on bars, "and other inappropriate activity or use of Citizen-issued employee credit cards," will be detailed and their resolutions reported.

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