Citizens Insurance says it denies half of all claims because it covers riskiest policies

Ron Hurtibise, South Florida Sun-SentinelSouth Florida Sun Sentinel

The high percentage of Citizens Property Insurance Corp. policies within Florida’s riskiest coastal regions is a major reason the company denies payment for half of all claims submitted compared to private-market insurers, a Citizens executive told the company’s Claims Committee on Thursday.

Jay Adams, Citizens’ chief insurance officer, spent several minutes responding to a news article from earlier this week based on findings by Weiss Ratings, a Palm Beach Gardens-based financial analysis firm.

The news article, which appeared in nearly all of Florida’s largest newspapers, reported Weiss’ findings that Citizens denied nearly 17,000 claims, or 50.4% of all claims submitted in 2023. The story reported that Weiss obtained its Citizens data from the company’s own annual report.

Weiss compared that data with percentages compiled for other Florida insurers and concluded that Citizens’ denial rate was higher than those of Florida-based subsidiaries State Farm or Allstate, which closed about 46% of claims without payment during the same period.

Although he called the finding “very factual,” Adams said the reason stems from Citizens’ creation as the “insurer of last resort.”

“We are writing the most risky policies in the state. We are the ones that are writing the coastal homes. We are the ones that are writing the wind-only coverage.” Deductibles for the “all-other-perils” portions of the policies are “probably” higher than other insurers, he said, and would result in a higher percentage of non-hurricane claims not reaching the deductible.

The story backed up Weiss’ findings by citing another news story, by an independent news source called NOTUS, highlighting that Citizens closed 77% of claims from this year’s Hurricane Debby without payment.

But it did not mention that a spreadsheet posted on Weiss Ratings’ website states that American Bankers Insurance Company of Florida had a no-payment rate in 2023 even higher than Citizens’ — 51.2% of 93,814 closed claims.

Weiss Ratings’ founder, Martin D. Weiss, was quoted calling Citizens’ high denial rates “unforgivable” and calling for “a thorough investigation.”

But Adams did not defend Citizens’ claims handling practices in 2023, the source of the report’s data and a year that saw just one minor hurricane, Idalia, strike the Panhandle. He focused his comments on how the state-owned company adjusted claims after this year’s storms, which resulted in heavy damage from storm surge not covered by property insurers.

Adams said he voiced concerns during the September meeting of Citizens’ Board of Governors that the company would be closing a large number of claims without making payments. And those predictions have come true, though not all claims from this year’s three storms have been closed.

After Hurricane Debby, 74% of claims were closed without payment, Adams said. Hurricane Helene resulted in 68.5% of claims closed with no payment, while 44% of Hurricane Milton claims were closed with no payment.

Data obtained from Citizens after the meeting showed that the company received 3,033 claims from Debby, 14,267 claims from Helene and 54,643 after Milton.

Adams provided several reasons Citizens customers might receive no payment for their claims:

— Some homeowners whose policies were transferred through the company’s depopulation process might have mistakenly filed claims with Citizens when actually they should have filed the claim with their new company.

— Citizens’ hurricane deductibles are “probably more substantial” — 2% to 10% — than those of other companies.

— While property insurance does not pay for flooding damage from storm surge, the National Flood Insurance Program, the nation’s primary flood insurance provider, requires homeowners to submit claims with their property insurers and obtain written denials of coverage before considering flood claims. On Jan. 1, Citizens began requiring all policies insuring properties valued at $600,000 or more to purchase flood insurance.

Scott Thomas, a Claims Committee member, pointed out that deductibles accrue throughout individual calendar years. That means if damage that does not reach a deductible in one storm, it counts toward that deductible for claims filed after a second or third storm. That’s one of the reasons insurers encourage storm victims to file claims, even if they know it won’t meet their deductible.

A Weiss spokesperson responded to Adams’ remarks by pointing out that he did not break down reasons for claims denials from this year’s storms.

“We based our analysis on Citizens’ own annual report, which is available on their website,” the spokesperson said. “We believe it’s important to analyze the claims data and it appears that Citizens does not currently understand precisely why each claim was denied for this season’s storms.

“We would hope that Citizens would do the necessary analysis rather than focus on headlines they don’t like.”

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at [email protected].