This is not the first time Citizens has paid out substantial financial awards to executives embroiled in scandal.
In the past eight years, Citizens has paid more than $750,000 in severance packages to employees, including five-figure checks to executives who resigned after misconduct allegations.
The company’s former vice president of underwriting walked away with an $80,000 severance package after he was implicated in a sex scandal with an underling. He resigned and Citizens helped him collect unemployment benefits.
Citizens’ former chief administration officer, who resigned abruptly last year after allegations of falsified documents and unlicensed practice as a lawyer, continued to receive salary and benefits for five months after leaving the company.
The internal investigators who flagged the large severance packages and the altered documents were fired shortly after filing their report. Citizens says the firings were part of a restructuring, but Scott’s chief inspector general is investigating whether they were retaliatory.
Citizens’ General Counsel Dan Sumner, who was implicated multiple times in the investigation, received a $25,000 raise just days after the investigators were fired. His salary shot up 12 percent to $215,000.
A January report by the Office of Insurance Regulation found that Citizens had spent $604 million on contracts with private vendors, often in no-bid deals and without pushing for a more competitive price.
Citizens “does not appear to place any emphasis on price negotiation, instead relying on best and final offer,” the report stated. State regulators found that contracts with private vendors ate up 20 cents out of every $1 paid to Citizens by policyholders. In most cases, Citizens gave the contracts without soliciting bids, and often chose vendors that were much more expensive than other options.
Citizens initially disagreed with the findings and said it follows a “rigorous set of procurement procedures” to get the best prices and services on its contracts. But on Friday, the company announced new, stricter policies for its vendor contracts.
The company’s chief insurance officer, who handles contracts as head of the Purchasing Department, received a $31,000 raise last year. His pay increased 14 percent to $255,000.
A separate audit report found that Citizens inadvertently paid another insurance company $2.5 million in a botched “depopulation” agreement. The money has since been recouped.
Executives responsible for the company’s depopulation efforts — a Citizens strategy to move policyholders to private insurance companies — also received five-figure raises after the $2.5 million mistake was unveiled.
Many of the executives rewarded with raises were behind new initiatives to raise insurance costs for homeowners and scale back their coverage.
Those initiatives have hit homeowners hard in places like South Florida and the Tampa Bay area, which have the state’s highest insurance rates. In Miami-Dade County, the standard Citizens policyholder pays an average of $3,300, eating up 5 percent of the typical family’s income. That’s more than twice the statewide average.
A bill being drafted by the Legislature — and supported at least in part by Citizens — would push those costs even higher, in an attempt to force homeowners into the private market.