Citizens Property Insurance customers now have a lot more options for calculating what it would cost to rebuild their homes in the event of a hurricane.
After public outcry and media scrutiny, Citizens backed off late Friday from sole use of a controversial software program to calculate home replacement costs, a process that some critics called a back-door way to raise homeowners' rates.
Instead, the state-run company, by far the biggest property insurer in Florida, said it will now accept a range of alternatives, including outside appraisals, for estimating the cost of rebuilding homes damaged in a hurricane.
"We believe that providing these options gives our policyholders and agents more confidence in the valuation process while providing policyholders with adequate protection for their homes," Scott Wallace, Citizens' president, CEO and executive director, said in a statement.
In a story on Sunday, the Tampa Bay Times documented cases where homeowners were battling Citizens over estimates that valued their properties not only far above market value, but also far higher than what independent appraisers said it would cost to rebuild. Higher valuations can translate into higher rates.
One such homeowner, Ruth Lauro of New Port Richey, lives in a two-bedroom house worth little more than the $33,500 she and her husband paid for it in 1979. Yet, Citizens' software model estimated it would cost $124,000 to replace the home.
Homeowners, appraisers and others accused Citizens of using higher replacement costs to circumvent rate caps. As insurer of last resort, Citizens' policy count has swelled to nearly 1.5 million as it assumes high-risk policies that large private insurers refuse to cover. At the same time, it has been under political pressure to raise its rates as aggressively as possible to shield Floridians from a massive bailout after a major hurricane.
Sen. Mike Fasano, R-New Port Richey, one of Citizens' chief critics, said the insurer's reversal shows consumers can come out ahead in the long run.
"It's great to hear that if you do pursue and do battle against what you think is wrong, the people do come out winning once in a while," Fasano said when told of Citizens' decision.
Problems date back to late 2010, when Citizens began using a software program called 360Value to calculate replacement costs. Late last year, Citizens tightened its program further, telling agents to rely solely on 360Value and not accept alternative appraisals given by homeowners.
But as complaints continued to rise, the agency decided to review the program, authorizing contractors this month to reinspect a sampling of homes in Tampa Bay and south Florida which had used the 360 evaluation.
Under its revised plan, the methods that Citizens will now accept to calculate replacement costs include:
• An insurance reconstruction cost valuation prepared by a licensed appraiser that is specifically formulated to establish the insurance reconstruction cost rather than market value;
• Estimates prepared by licensed general contractors, architects or engineers that include a contract price for reconstruction cost and an itemized list of the home's features.
•A property inspection report dated within the past 12 months that was ordered by another insurer and includes a reconstruction cost estimate.
It was not immediately clear how homeowners who believe an earlier estimate was wrong can retroactively use an alternate appraisal or if policyholders will be reimbursed for premiums based on the earlier, higher replacement estimates.
Jeff Harrington can be reached at email@example.com or (727) 893-8242.