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Citizens Property Insurance Corporation Operational Audit January 1, 2004, Through October 20, 2005, And Selected Action

Citizens Property Insurance Corporation Operational Audit January 1, 2004, Through October 20, 2005, And Selected Actions Taken Through December 7, 2005 Audit Scope Infrastructure. Policy eligibility determinations and depopulation. Accessibility of policyholder information.

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Citizens Property Insurance Corporation Operational Audit January 1, 2004, Through October 20, 2005, And Selected Action

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  1. Citizens Property Insurance Corporation Operational Audit January 1, 2004, Through October 20, 2005, And Selected Actions Taken Through December 7, 2005 Florida AG Report No. 2006-096

  2. Audit Scope • Infrastructure. • Policy eligibility determinations and depopulation. • Accessibility of policyholder information. • Customer service. • Claims handling. • Premiums. • Financing options. Florida AG Report No. 2006-096

  3. Research. Internet sources. State statute. Media. NAIC. Interviews. State regulators. Citizens’ staff. Other “last resort” insurers. Agents. Industry experts. State bond experts. Surveys. Agents. Policyholders. Analytics. Complaint files. Claims data. Policyholder data. Financing options. Internal control evaluation. Transaction and file tests. Specialist contract. Audit Methodology Florida AG Report No. 2006-096

  4. Infrastructure • Evaluation of controls. • Verification of credentials. • Background investigations. • Standards of conduct. • Procurement policies and procedures. • Travel policy. Florida AG Report No. 2006-096

  5. Policy Eligibility Determinations and Depopulation • Eligibility determinations. • Statutory amendments. • Monitoring of agents. • Market Assistance Plan. • Take-out bonuses. • Long-term monitoring. Florida AG Report No. 2006-096

  6. Table 4 Agents Electronic Access to Policyholder Information As of October 2005 Catastrophe Claims ePAS eWind Trackin g System System CSC System System Personal Lines High - Risk Commercial Accounts Accounts Accounts All Accounts Rating and Quotes Yes Yes No Applications and Renewals Yes No No Policy Status Yes Yes No NonCat Claims Filing & Status Yes No Catastrophe Claims Filing & Status No Policyholder Information Florida AG Report No. 2006-096

  7. Customer Service • Customers were dissatisfied with claims handling. • Consolidated complaint unit is to be established. Florida AG Report No. 2006-096

  8. Claims Handling • Monitoring of claims processing. • Claims tracking system. • Monitoring of contracted adjusters. • Reinspections. • Adjust-your-own firms. Florida AG Report No. 2006-096

  9. Claims Handling(Continued) • Undated file documents. • Untimely processing of claims. • Fees. • Insurance-to-value analyses. • Case reserves. Florida AG Report No. 2006-096

  10. Premiums • Rates were set based on average rates of top 20 and top 5 insurers, as applicable. • Actuarial studies were not available to demonstrate actuarial soundness of rates. Florida AG Report No. 2006-096

  11. Financing Options • Potential enhancements: • 1999A bonds - Eliminate negative cost-of-carry. • Assess actuarially sound premiums, reduce catastrophe loss adjustment expenses, and competitively select service providers. Florida AG Report No. 2006-096

  12. Audit Results • Legislative committee presentations. • Briefing of legislative leadership’s staff. • Timely corrective actions by management. • Statutory changes. Florida AG Report No. 2006-096

  13. Hillman Brannon Buxbaum, Loggia & Associates Scott Copeland Cindy Fernald Aaron Franz Carl Gabrini Don Hancock Chuck Janes Christine Knight Rich Moreira Richard Munson Sandra Myers Angela Phillips Shelly Posey Don Reeder Eric Seldomridge Chris Stanisci Lisa Strickland Yueh-Lin Sullivan Peter Tan Matt Tracy L.R. Weathermon Allen Weiner, Audit Team Leader Linda Woodward Gail Wright Audit TeamWilliam O. Monroe, CPAAuditor General Florida AG Report No. 2006-096

  14. Contact Information Don Hancock, CPA Deputy Auditor General State Government Audits 487-9037 donhancock@aud.state.fl.us Florida Auditor General Web Site: http://www.state.fl.us/audgen Florida AG Report No. 2006-096

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