Florida insurance agents will soon be able to access a new online clearinghouse platform designed to make it easier to steer policyholders away from the still-growing, state-created Citizens Property Insurance Corp.
The $35.7 million investment, approved by the Citizens Board of Governors at a special meeting Friday, could ultimately result in as much as $130 billion in new-business risk avoidance, officials said. The 10-year contract with Applied Systems Inc. was seen as a boost for Citizens’ depopulation plan as the carrier soars toward an expected 1.7 million policies in force this year.
“Through the proposed contract, Citizens is positioned to implement a new platform with broad private market carrier reach that enables agents, consumers, and policyholders to find adequate coverage more easily in the private market,” reads a summary of the plan, provided ahead of the board meeting.
The new system is known as Citizens Eligibility Reimagined.
“This solicitation was heavily negotiated by a team of Citizens professionals…” Citizens’ chief operating officer, Kelly Booten, said at the virtual meeting. “We had input from agents and carriers and also from Governor (Nelson) Telemaco.”
Telemaco, appointed in 2021, has been an executive at a number of insurers, including Sompo International, Allianz Risk Transfer and AIG.
The board approved the contract with no dissenting votes. The agreement with Applied is for five years, with renewal options for each of the five years after that. Illinois-based Applied Systems, in which Google owns a minority stake, calls itself a technology company that specializes in software systems for insurance agencies. The new platform will build upon Applied’s existing rating product that is used in independent insurance agencies and by some carriers, according to Citizens’ information.
The current web-based platform, through Bolt Services, cost the state-created property insurer about $25 million, significantly less than initially expected when the platform was launced in 2013, officials said. That Bolt contract expires in August. Until the Applied system is up and running, Citizens will provide an interim platform for agents to use, Booten said.
The Bolt interface was not bad but did have occasional hiccups, one user said.
“Certain things could be better. But once you worked through the initial glitches, it worked pretty well, I thought,” said Brian Chapman, owner of one of the largest insurance agency groups in southwest Florida.
Bolt, a rival to Applied and a major provider of digital services to the p/c industry, submitted a bid to provide a new platform, but lost out to Applied. Bolt then objected to Citizens’ intention to negotiate the contract with Applied, but lost its appeal this year before a judge at the Florida Division of Administrative Hearings.
Details about the new clearinghouse system were not explained at the board meeting Friday. But in general, it will work something like a comparison tool, allowing agents to quickly see other carriers that are available and if a quote is in the ballpark of Citizens’ premium and coverage for new and renewal business, a Citizens spokesman said.
Florida law bars policyholders from remaining with Citizens if a market carrier offers similar coverage that is equal in price or no more than 20% higher than Citizens’ premiums. A statute approved in 2013 also requires Citizens to maintain the policyholder eligibility clearinghouse system to help facilitate market coverage.
“In order to confirm eligibility with the corporation and to enhance access of new applicants for coverage and existing policyholders of the corporation to offers of coverage from authorized insurers, the corporation shall establish a program for personal residential risks in order to facilitate the diversion of ineligible applicants and existing policyholders from the corporation into the voluntary insurance market,” Statute 627.3518 reads.
Chapman noted that most independent agents already have access to the information without using a computer interface – through contacts and contracts with carriers. Some national carriers require their agents to go through the Citizens clearinghouse when providing quotes, and it’s possible that those agents will see more benefit from the new platform.
Citizens has ballooned in recent years as other carriers have dropped out of the turbulent Florida market, through insolvencies or business decisions, or have raised premiums sharply. Citizens’ rate increases, unlike those of private carriers, have been limited by law to no more than about 12% per year, making it the most affordable coverage in many parts of the state.
Chapman argued that the best way to depopulate Citizens is to give recent legislative reforms time to have an impact on litigation costs. That will allow market carriers a chance to reduce losses, limit further rate increases and offer rates that are competitive with Citizens.
“You can spend $40 million or $80 million for a new clearinghouse platform, but it doesn’t matter until you fix the real root of the illness,” he said. “And the only solution for that is time, with the reforms that were passed.”
As the 2022 and 2023 legislation, which ended one-way attorney fees assignment-of-benefit agreements, has an effect, Citizens will naturally shrink in size as the primary market recovers, as it has in previous years, Chapman and others in the industry have said.
Also at the Friday meeting, the Citizens Board approved a $66 million, 10-year contract with Guidewire Software Inc. to provide and implement Citizens’ operating system that’s used for underwriting, claims and billing. The carrier first contracted with Guidewire in 2011, and has spent $115 million on the business software since then, according to information provided at the meeting.
The contract price is based in part on Citizens’ written premium. Board Chairman Carlos Beruff raised questions Friday about the need for such a large contract if Citizens is expected to see its policies and written premium reduced in coming years.
“This is a big contract for a lot of money, and we have a lot of these,” Beruff said. If Citizens “is supposed to be the smallest company in the state of Florida, then we have to make sure we address these correctly.”
Booten said the Citizens staff will examine benchmarks on the new system and keep the board informed with ample lead time if changes need to be made.
Photo: The board meeting Friday, courtesy of The Florida Channel.
Topics Florida
Was this article valuable?
Here are more articles you may enjoy.
Inflation, Catastrophe Losses Lead P&C Underwriting Loss in 2023 
Kellogg’s ‘Woke’ Workplace Diversity Programs Are Illegal, Group Claims 
No Duty to Defend Doesn’t Mean No Duty to Indemnify, Federal Appeals Court Finds 
Liberty Mutual Posts Q2 Loss of $585M Driven By Catastrophes 
