Achieving Profitability and Growth with Citizens Takeout

An emerging opportunity is unfolding in Florida for insurers aiming to broaden their market footprint, as well as for newcomers aspiring to achieve rapid and lucrative business growth. Numerous entities are strategically planning customer takeouts from Citizens Property Insurance, the state-run insurer of last resort, as a means to expedite their journey towards expansion.

Several factors contribute to this situation, such as Florida’s highest average premium, historical litigation prevalence and recent reforms, rising reinsurance costs, and rising loss costs in a catastrophe-prone market. The Florida homeowners market, once bleak, now appears more promising due to legislative reforms that have reignited reinsurer interest.

Florida carriers looking to expand their book or new entrants in the market find Citizens takeouts an appealing proposition. It serves as an effective means to accelerate faster and more profitable growth in new business. Since 2013, many of the companies that have participated in Citizens depopulation have grown and prospered; nonetheless, there are several companies that assumed Citizens’ policies that are now in liquidation. The key for carriers who want to win using this growth strategy is to leverage an expert ability to predict future risk.

Citizens Takeout: Criteria for a Successful Selection

An obvious criterion for selecting potential policyholders from Citizens lies in the structural part of the risk with hurricane mitigation measures. However, it’s important to note that over the past couple of years better performing carriers have still had non-cat loss ratios of approximately 50%2. Therefore, predicting non-cat risk at a more granular and individualized level is also imperative for insurers to achieve their financial targets. This is especially important as severe non-cat weather and home repair costs have been on the increase. 

This is why the best performing carriers in the state of Florida are good at understanding both the structural risk and the person risk in light of an insured’s overall responsibility level and propensity to file costly claims. For companies participating in, or considering the Citizens depopulation program, Pinpoint offers carriers a strategic advantage in policy selection. 

Currently carriers have data sources to assess catastrophe risk but outside of credit, carriers do not have information to predict loss propensity at an “individual level”. Pinpoint provides individual behavioral predictions that provide a full picture of the profit potential of a new insured.

Pinpoint’s custom Loss Predictions are powered by trillions of behavioral predictors (excluding personal credit, zip code, natural language and social media), coupled with cutting-edge deep learning AI, providing Florida insurers with the ability to target the individual Citizens policyholders who will be the most profitable for their book.

With only a name and address, Pinpoint identifies policyholders with predicted loss ratios that range from being extremely attractive, to those that are significantly above your average loss ratio. This valuable intelligence is accessible at the earliest stage, preceding any evaluations, such as side-by-side product and pricing analysis.

Pinpoint’s Loss Predictions at the top of the funnel offer crucial insights to carriers for:

• Making informed decisions on the most profitable policyholders for your book
• Optimizing the volume of business to maximize potential returns

Figure 1: Pinpoint Frequency Scores predict the Actual Non-cat Loss Ratios for a book of business.

Reading the lift chart: In this lift chart, Pinpoint’s homeowners loss frequency predictions are sorted from lowest to highest frequency into 20 buckets of equal premium. Each of the 20 buckets shows the actual loss ratio (represented by the y-axis) for the customers in each group.

Key insights: Here we can see that Pinpoint’s ranking achieved a 7.1x top-bottom loss ratio lift. This means that the 95th-percentile bucket on the far right has a non-cat loss ratio that is 7.1x times higher than the 5th-percentile bucket on the far left. Attaining this powerful measure of profitability with just a name and address – without any rating variables and before a prospect even becomes a customer – enables Pinpoint clients to fast-track both profitability and rapid growth.

Figure 2: Pinpoint provides a detailed view of the distribution of 122,817 insureds and their predicted loss frequency.

Reading this histogram: This chart shows the distribution of insureds by number of people in each range of Pinpoint’s frequency predictions, which define the heights of each bar. 

Key insights: Here we can see that the riskiest 5% of Pinpoint’s frequency predictions had an actual non-cat loss ratio that was 2.43 times higher than average. Likewise, any prospects at this carrier’s top of funnel with predicted frequency scores of 0.107 or higher are also likely to have these extremely high loss ratios, which fall outside of this insurer’s rating plan.

Understanding New Business Risk with Pinpoint

If you are considering or participating in the Citizen takeout depopulation program, Pinpoint’s custom Loss Predictions can be a powerful tool in your arsenal to not only identify the most profitable risks for your portfolio but also to offer a comprehensive view of the opportunity’s profit potential before proceeding with further evaluations. This saves both you and your company significant time and financial resources in the short-term and long-term.