By Anita Byer, Setnor Byer Insurance & Risk
Citizens Property Insurance Corporation, Florida’s insurer of last resort, is planning to drastically increase the number of residential property inspections in the coming years. Citizens inspected roughly one percent of all its policies in-force last year and plans to inspect 2-3% of its covered properties by the end of this year. These numbers are expected to soar under Citizens’ new holistic inspection plan. So much so that by the end of 2025, Citizens plans to inspect approximately 20% of all its residential policies in-force.
Citizens’ holistic inspection plan has a greater focus on new business inspections and establishes condominium unit inspections. It also incorporates automation so a percentage of properties with little-to-no risk can bypass underwriting review. Citizens plans to use a new, lower cost, highly scalable Virtual Inspection type as well. According to Citizens, its 4-year plan to increase its inspection volume is going to achieve the following results.
- Reduced Loss Frequency. Property inspections help guard against adverse selection, which is the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance. Citizens expects to see a 10-20% improvement in the overall impact on loss frequency for inspected policies.
- Improved Premium (Pricing) Accuracy. Property inspections can help identify undervaluation concerns and maintain sound pricing models by validating rating and pricing characteristics.
- Reduced Exposure in Private Market Assumptions. Private insurers need inspections when deciding whether to take policies out of Citizens. Citizens expects an increased assumption ration of 10-20% for inspected properties.
In addition to increasing the number of residential property inspections, Citizens amended its eligibility rules to make property ineligible for coverage when inspections reveal that it’s unsafe for occupancy or identify substantial structural deficiencies. They apply to residential policies that are written or renewed on or after October 15, 2021. Citizens already orders inspections for all new commercial property policies and plans to continue doing so through 2025.
Identifying ineligible properties will no doubt benefit Citizens, but what about the property owners? Many may lose access to the crucial insurance coverage provided by Citizens, Florida’s insurer of last resort. What happens then? If you have questions or concerns about Citizens new inspection plan, please contact our team of property insurance professionals.