Solving Citizens Problems ‘Tops’ on Fla. Legislators To-Do List

February 28, 2005

Solving numerous problems with Citizens Property Insurance Co., Florida’s insurer of last-resort, tops the to-do lists of many legislators, lobbyists and industry groups going into the March sessions of the Florida Legislature.

Top proposals were recently highlighted in the Fort Lauderdale Sun-Sentinel include:

A “quota share” proposal under which Citizens would cover most wind risk for windstorm customers. But private insurers would assume part of that risk and would handle front office and other tasks, such as dealing with claims and customer service.

Private insurers would receive less money for taking policies out of Citizens — an incentive created to reduce its size — and would be required to hold the policies longer to get the money. More than 158,000 policies were taken out of Citizens’ homeowners’ and windstorm accounts in 2004.

Citizens’ rate-making rules would be changed. Instead of automatically charging the highest rates in an area, it would look more at past and future losses in that region. The hope: Rates might fall in places like South Florida, where Citizens charges $3,065 on a $150,000 home policy in Broward County and $2,916 in Palm Beach County. But some in the industry say rates would then rise, not fall.

“Citizens … is probably the foremost issue that this committee will address this year,” Rep. Dennis Ross, R-Lakeland, chairman of the House insurance committee told the Sun-Sentinel. “… And we have to act quickly, because we’re getting ready to head into another hurricane season.”

After months of waiting for claims to be settled, more than 7,200 Citizens customers complained to the state. They griped about being put on hold for too long and waiting days, even weeks, for claims adjusters to survey damaged homes.

Many of Citizens problems, according to the Sun-Sentinel, stem from being pulled two ways. At one time, it was designed to essentially disappear — come 2012 the company is supposed to cut in half its exposure to losses by shedding clients. Meanwhile, despite its rates being the highest, Citizens is growing, on the verge of becoming the state’s largest property insurer.

The company reported 814,081 policies through the end of January, down about 65,000 from its high last year, thanks to a slew of policies taken out by private companies in November, December and January. But officials expect those numbers to rise again.

“This is an entity that isn’t going away,” Pete Dunbar, general counsel to state Chief Financial Officer Tom Gallagher said. He also is chairman of a task force examining Citizens’ operations and service.

Legislators formed Citizens in 2002 by merging two government entities: The Florida Windstorm Underwriting Association and the Florida Residential Property and Casualty Joint Underwriting Association, known as the JUA. The windstorm association arose in the 1970s to write policies in the high-risk Florida Keys. The JUA was formed in 1992 to cover homeowners abandoned when some insurers fled the state or went bankrupt after Hurricane Andrew.

But streamlining two insurers into one didn’t solve a deeper problem. Citizens mission “is almost conflicted on its face,” Dunbar said. The company must cover homeowners who can’t get insurance elsewhere, but at the same time is told it must get smaller.

“You ended up creating a business model that ran with very few people in hopes that there would soon be a need to have no people at all,” he said.

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