There is much to report and to opine about with respect to Citizens new Clearinghouse. Two issues of note are its cost, a 10-year deal with Bolt Solutions projected around $45 million (See NOTE #1 below), and the flood of potential takeouts as carriers fight over low hanging fruit prior to the shaking of the entire tree.
Keep in mind, its sporty price tag drops when/if Clearinghouse transactions are less than the projected 8000 per day. But, neither does it include indirect costs necessary for managing and overseeing the arrangement or the cost savings that might result if Citizens is able to reduce staff and contract work if/when policy count materially declines–see the Clearinghouse Action Item presented to the Citizens board by Chief Insurance Officer, Yong Gilroy.
Merely announcing the Clearinghouse has generated probably the greatest influx of approved takeout offers in Citizens history–393,732 policies by ten carriers in just three months, barring opt outs. That, along with non-renewing those the Clearinghouse determines have offers priced less than Citizens while denying entry to those with a price less than 15% higher than Citizens is, indeed, a big deal. (See NOTE #2 below)
After all, it’s always been Citizens front door, not its back door, making it one of America’s largest insurers. Removed policies persistently “churned” back in; usually after an insolvency, a rate increase, a non-renewal or coverage reduction, or maybe when someone’s mind simply changed. (See NOTE #3 below)
In a 2012 blog on the problem of churning I wrote:
“Despite massive, record level, policy removals, Citizens policy count is essentially the same as it was when depopulation began; indeed, it’s higher and still climbing!!”
By slightly closing its’ front door, the Clearinghouse reduces the number of “churned” policies. Heck, along with almost 400k potential takeouts and another storm free season, the Clearinghouse could contribute to Citizens reaching the FRPCJUA’s previous low of 60,000 personal residential multi-peril policies by year end 2014. Again…a big deal!
None the less, historical context may take the edge off any celebration for those who realize the same result could’ve been achieved by denying access to those with an approved private market offer (you know, the way it was before Charlie Crist mucked it up) and/or by simply charging a non-competitive rate to Citizens policyholders and applicants.
You know, the way it is in Louisiana.
The Louisiana Citizens avoided spending $45 million and creating a new and permanent bureaucracy by simply charging a rate 10% higher than private carriers.
A Clearinghouse that forces shoppers to do their own shopping–what a novel idea!
Don’t get me wrong–I understand the politics and I’m glad we’ve got a Clearinghouse. I also believe Citizens is on the right path to implementing it.
I just find it difficult to celebrate creating a forty five million dollar permanent bureaucracy to solve a problem that shouldn’t have been allowed to exist in the first place.
NOTE #1: By unanimous vote, Citizens board approved a contract with Bolt Solutions Inc., a Farmington, Connecticut based company with offices in Sarasota. The company will provide the software platform linking private insurers with consumers seeking to renew policies or purchase new coverage with Citizens. Established in 2001, Bolt provides online insurance placement to small businesses and consumers in 50 states and similar clearinghouse services to major national carriers. Under the terms of the deal, the 10-year agreement may not exceed $44.9 million and includes an initial five-year contract period and a five-year renewal option.
NOTE #2: Under the new law, existing Citizens policyholders may not renew their policy after January 1, 2014 if they receive a comparable private-market offer with a premium that is equal to or less than their Citizens renewal premium. New customers receiving a private market offer for comparable coverage that is within 15% of Citizens’ quote will also be ineligible.
NOTE #3: Citizens has done a good job of removing policies over the years but, due to statutory constraints, particularly those pushed by Charlie Crist in 2007, it has not been very successful keeping policies out. See my May 30, 2012 post titled Citizens Depopulation & Churning which reports the following: 1,501,794 policies have been “taken out” since 2003–that’s more than Citizen’s current number of policies. Not included in this number were the nearly 900,000 “taken out” during the mid-90?s from Citizens predecessor the FRPCJUA. That means the total taken out (as of May 2012) exceeds 2.4 million; more than Citizens total policy count at any time in its history and more than double the present 1.2 million policies.
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