Bill Would Cut Citizens Property Insurance Reach

March 13, 2011

The state-run insurer of last resort would not cover newly constructed homes in the state’s most hurricane-prone areas under a provision to be introduced next week and backed by a oddly diverse coalition of interests who who usually don’t agree.

Sen. Alan Hays, R-Umatilla, said Friday that will propose to prevent Citizens Property Insurance Corp. from offering new policies in coastal and high risk areas of the state.

The provision, which Hays plans to offer as an amendment to another insurance measure he’s sponsoring, would also prohibit the state-backed insurer after June 1, 2012 from providing coverage to owners who remodel existing homes if the fix up increases the value of their home by 50 percent or more.

The provisions would not drop coverage for the 400,000 Citizens policyholders who currently are in the company’s high risk pool for wind or multi-peril coverage.

The underlying bill, SB 1714, makes changes that would reduce the number of coastal residents insured by the state-run pool. Citizens has seen its ranks swell in the past several years as private companies like Allstate, Nationwide and others bail out or dramatically reduce their books of business across the state. Now, with 1.2 million policyholders, Citizens is the largest property insurer in state.

Joining Hays in supporting the proposal are environmentalists, who support slower growth along the coasts.

Hays and other conservatives are pushing the idea because of their opposition to the state taking such a large role in the insurance business, and the peril in which it puts the taxpayers in the event of a large loss for Citizens.

“My goal is to depopulate Citizens, to make it as small as we can make it as rapidly as we can,” Hays said.

Citizens currently has $400 billion in exposure in coastal regions but has only $4.5 billion in reserves. In the event of a catastrophic storm, Citizens would pay its claims by assessing all property and automobile insurance policyholders, a scenario critics say is patently unfair.

“The Citizens Property Insurance Corp. is a threat to Florida’s fiscal well-being, it’s a threat to residents’ safety and it is a threat to the environment,” said Eli Lehrer of the Heartland Institute, a fiscally conservative organization that wants the state out of the insurance business.

On Friday, Hays was joined at a news conference by representatives of the Florida Wildlife Federation, 1,000 Friends of Florida, the Sea Turtle Conservancy. They stood side by side with representatives of fiscally conservative organizations like Heartland, the James Madison Institute, Americans for Prosperity and the Tallahassee Tea Party that support the measure.

“Some of these areas are some of our state’s most valuable coastal habitats,” said Manley Fuller of Florida Wildlife Federation “We think this bill is a place … where conservation and good economic sense come together.”

Hays plans to add the provision to SB 1714, filed earlier this week, that allows Citizens to increase residential policyholders’ rates by 25 percent on any single policy, excluding coverage changes and surcharges, and restricts who could purchase insurance from the state-backed insurer.

The proposal makes a number of changes to Citizens, including a phase out of Citizens coverage for the most expensive homes, with the state-run insurer by 2016 only covering homes worth less than $500,000. It also would prohibit Citizens policyholders from using public adjusters to file claims.

Officials at Citizens didn’t return a call for comment Friday.

Jack McDermott, spokesman at the Office of Insurance Regulation, said the office supports the underlying bill, but couldn’t comment yet on the proposed amendment.

Pictured: Sen. Alan Hays talks to reporters about his Citizens Property Insurance Corp. proposal in Tallahassee. Photo for NorthEscambia.comm, click to enlarge.

By Michael Peltier
The News Service of Florida

Comments

6 Responses to “Bill Would Cut Citizens Property Insurance Reach”

  1. David Huie Green on March 15th, 2011 10:48 am

    REGARDING:
    “to prevent Citizens Property Insurance Corp. from offering new policies in coastal and high risk areas of the state”

    This makes sense. As it stands someone says, “I want to build a condominium on this beach right here but I can’t sell it to make my millions of dollars unless I can get insurance on it.”

    Normal insurance companies say, “But you want to put a huge target for hurricanes right in front of hurricanes, built on shifting sand where storm surges can easily destroy it.”

    The builder says, “I don’t care if it’s destroyed as long as I can sell it first and the buyers don’t care if it’s destroyed as long as they get the money to buy a replacement.”

    Insurance company then says, “We’d have to charge enough for insurance to replace the condo every few years. We’re no longer interested, too many hurricanes lately.”

    Builder says, “Problems getting insurance are hurting the economy (meaning MY pocketbook) so the State’s going to have to bail me out or the only thing on these beaches will be people visiting.”

    Politician responds, “Sure thing. We‘ll just spread out the cost so it‘s paid by those who can‘t afford the condo in the first place and make it cheap enough for you and your buyers. Oh and unrelated but don’t forget I’m running for re election and need contributions.” wink, wink

    David thinking “sink or swim”
    is better than “sink others
    so the rich can swim”

  2. Just saying... on March 14th, 2011 9:07 am

    I don’t know what the answer is to the insurance issue but it certainly needs to be reexamined. We bought our home in 1991 and fortunately by the grace of God have never had a claim-not even after Hurricane Ivan. The kicker is that Nationwide tripled plus our premium making it well beyond affordable. We then insured with Universal at an outrageous rate, again never having a claim, and out of the blue they cancel us because our house is built “off-grade.” Citizens is the only group we could get to cover us and believe me it isn’t cheap. I’m sure we aren’t the only ones in the state of Florida who have dealt with this type situation. It doesn’t matter that we live a long way from the coast as long as Florida is attached to our address. I just think there should be a just way or at least well regulated way to adjust the cost of premiums. Just sayin…

  3. Arthro on March 13th, 2011 3:15 pm

    Concerned parent…while I sympathize with and understand the challenges you and others face, insurance companies (including govt-run Citizens) shouldn’t base their premiums on how much you can afford to pay – that would mean that they would have to charge someone else a higher premium to subsidize yours. In effect, that is exactly what we are doing today – you just dont know it.

    Right now, all of the people in Escambia and North and Central Florida are subsidizing the premiums of the folks in Dade, Broward, Palm Beach, Pinellas, and Hillsborough counties, where most Citizens policies are sold. Do you think that helps people up here? No way.

    Upset…tornados and even earthquakes are dwarfed by the threat of hurricanes. Govt overregulation and prcie controls have driven away most of the financially stable, large insurers, and replaced them with Citizens and a bunch of fly-by-night start-up companies. Both of those will have big challenges paying your claims.

  4. Name (required) on March 13th, 2011 3:02 pm

    We never should have gotten into the insurance business… anything that cuts down the number of policies written by citizens is a good thing.

    If you pay insurance in FL, YOU are paying to underwrite citizens… this is great for developers, but a tax we don’t need!

  5. Concerned parent on March 13th, 2011 10:06 am

    I don’t have any either. I can’t afford it. It’s all I can do to keep the utilities on and food on the table. Why can’t they offer one that is based on income?

  6. upset on March 13th, 2011 8:15 am

    WOW, once again, by living in Florida you get the short straw!!!! I just don’t understand this with ALL insurance companies. What do they do with places in the mid-west that are prone to tornados and out west in California with earthquakes. Once again making it harder and harder to have insurance by way of general coverage AND too expensive!!!!!!!!!!!! We unfortunately don’t have homeowners insurance since Ivan when AGI dropped us, NOW we certainly won’t be able to get it. No companies in the area will either taken new policies, or if you have over a certain amount of acreage or have large animals you are just screwed!!!!!!!!!!!! Welcome again to AMERICA!

Written by William Reynolds · Filed Under News