Shrink Rap

Ah, Citizens Property Insurance Corp. It’s supposed to be the insurer of last resort but, of course, it has ballooned to become the first and only choice for many property owners in Florida.

Now there is a serious push to shrink Citizens. This is borne out of fear that if a major hurricane were to hit, the insurer would be forced to surcharge nearly every insurance bill in the state to cover its losses.

Gov. Rick Scott has set a deadline this week for ideas on how to depopulate Citizens.

Citizens’ own leaders have been taking steps that indicate they understand the insurer needs to shrink.

Carlos Lacasa, chairman of the Citizens board, wants lawmakers to allow Citizens to raise its rates more than 10 percent a year. Also, state law now says that homeowners are eligible for Citizens if the only alternative is a policy from a private company with rates that are 15 percent higher. Citizens supports raising that eligibility threshold to 25 percent.

In one step that should help the shrink Citizens movement a bit, Citizens is raising its rates on high-value condominium buildings by 19 percent, something it can do without getting state approval of the rates.

In the spirit of reforming Citizens, Insurance Journal asked its online readers what they think should be done to fix Citizens. Readers submitted more than 60 comments, many with positive and practical suggestions. Here is just a sampling:

• Bundle Florida, North Carolina, South Carolina, Louisiana, Mississippi, Alabama and Texas in to one windstorm insurance fund/carrier.
• Make Citizens a wind-only facility only across the whole state.
• Don’t forget about building code.
• Raise the sales tax to pay for the wind policy beyond the premium.
• Change depopulation rules to eliminate any opt out capability.
• Publish all claims (policyholder and amounts) paid by Citizens with a reward for any leads that result in a fraud conviction.
• Pay agents a servicing fee of $50 per policy in lieu of commission.
• Eliminate Citizens contracts from agencies that have no private market capacity.
• Blow it up and start over.

Florida just survived another hurricane season without a major disaster. Many of these ideas — including those backed by Citizens itself — would face an uphill battle in Tallahassee where lawmakers are hesitant to incur voters’ wrath over higher rates. But it does seem that the conversation has shifted and that more people are willing to face the reality that Florida may not be so lucky next hurricane season.

For all the suggestions from IJ readers, check out the story online.

Topics Florida