Florida-based Citizens Property Insurance Corp. has struggled with a number of problems, including policies with coverage above the legal limit, failure to submit enough renewals to the clearinghouse and failure to strengthen computer security measures, according to a state audit report.

The Florida State Audit Office’s triennial report also agreed with Citizens’ and other insurers’ leadership that the carrier really needs to raise its premiums to an actuarially reasonable level.

“To minimize the need for potential surcharges on Citizens’ policyholders and emergency levies on levied insureds, we recommend that lawmakers reconsider statutory limits on insurance premiums and, in particular, allow Citizens to cover the projected cost of reinsurance from premiums” to cover the likely maximum loss over 100 years, the auditors said.

Citizens management subsequently stated that the company had taken or was taking steps to address most of the red flags identified in the report.

Here’s a look at some of the audit highlights:

Above the coverage limit. State law caps the replacement cost of Citizens’ homeowners insurance policies at less than $700,000 in most parts of the state and less than $1 million in counties where there is little or no competition from other insurers. But the audit found that Citizens allowed coverage overages on a small portion of policies — 1,820 of 3.3 million policies written in 2021, 2022 and 2023 — that were as high as $906,500 on more than 200 homes with wind-only policies.

Citizens management blamed computer problems and a staff oversight. The insurer’s computer system was designed to automatically alert staff when readings got too high, but sometime in 2023, that alert feature was inadvertently disabled during a system update. Some policies were also missed while no-cancellation orders were in effect after a hurricane.

New procedures have been introduced and the problem has been resolved, said Citizens spokesman Michael Peltier. Policies that exceeded the limit have not been renewed or will soon be.

Underutilized clearinghouse. Citizens’ Clearinghouse is intended to be a place where insurance agents and carriers can easily find new insurance applications and upcoming renewals. But in recent years, only six private insurance companies have participated in the clearinghouse, the audit found. Legislative action may be needed to ensure better use of the site.

Peltier said participation has increased this year as the Florida market has improved thanks to legal reforms that have curbed excessive damages claims.

However, the audit also found that about a quarter of the 2.7 million new and renewed policies over a three-year period were never sent to the clearinghouse anyway, meaning they were not offered on the primary market. This was partly a conscious decision by Citizens, the audit said.

“According to Citizens management, underwriting actions and system maintenance issues contributed to the failure of policy renewals to be submitted to the Clearinghouse,” the report said. “We recommend that Citizens management ensure that all applicable new and renewed policies are submitted to participating insurers for review.”

Citizens’ response noted that processes must allow time for policies to be reviewed by insurers, manually cancelled, non-renewed or reinstated. Recent changes to the law prohibiting renewals when major insurers make comparable offers should also improve participation in the clearinghouse, Citizens said.

satisfaction rates. The audit found that policyholders and insurance agents are largely satisfied with Citizens’ service.

You can read more points in the full report here.

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