Senate Seeks To Diminish Citizens

Florida’s more than 1 million Citizens Property Insurance policy holders could see their windstorm insurance rates go up by a much as 50 percent over the next two years.

And after 2016, the only people who could purchase windstorm coverage from Citizens would be owners of homes worth less than $500,000 who can’t find a policy from a private insurer, no matter how expensive the private insurer’s policy is.

Those conditions are part bill of a Senate bill aimed at shrinking the number of homes covered by Citizens, the state-run insurer that now covers more homes than any other single insurance company in Florida. The bill (SB 1714) was passed 6-4 Tuesday by the Senate Banking and Insurance Committee.

Republican lawmakers say restrictions on Citizens are necessary because they fear a once-in-a-century storm like Hurricane Andrew would leave taxpayers on the hook for billions because Citizens does not have enough money to cover its losses, estimated at about $22.2 billion, in a catastrophic storm.

Some are also just ideologically opposed to a state-run insurer.

“It’s dead wrong…for us to perpetuate the life of Citizens,” the bill’s sponsor, Sen. Alan Hays, R-Umatilla, said. “Socialism failed in Moscow. It’s going to fail in Orlando and Miami as well. And we need to stop it as fast as we can.”

But Sen. Mike Fasano, the only Republican who voted against the measure, said most coastal residents are unable to get insurance elsewhere and couldn’t afford the premiums even if they could.

“I’ve got people back home who cannot afford not to have Citizens,” Fasano, R-New Port Richey, said. “The industry abandoned has them. What do I tell those people?”

Private insurance is available for Citizens customers but they don’t want to pay the premiums, on average about 40 percent higher than Citizens, said Florida Association of Insurance Agents lobbyist Kyle Ulrich.

“It’s because Citizens’ prices are so inadequate,” Ulrich said.

Four years ago, at the behest of then-Gov. Charlie Crist, lawmakers froze premium increases for Citizens customers until January 2010 and capped annual increases at 10 percent thereafter.

Citizens’ lobbyist, Christine Ashburn, told the committee that also means the insurer would not be able to pay about half of its claims in a catastrophic storm like Andrew. Citizens would have to raise rates by at least 48 percent statewide to be actuarially sound, Ashburn testified.

“I think the state is fraudulently offering insurance,” said Senate budget chief J.D. Alexander, R-Lake Wales, who serves on the committee. “If it were an insurance company, we’d be locking somebody up for writing an insurance contract for something he can’t pay.”

And it’s unfair that Citizens can levy assessments on nearly all other insurance customers – including automobile and boat owners – to cover its losses after storms, something other insurers can’t do, Hays said. That means that 85 percent of the state’s residents who aren’t Citizens customers are underwriting the cost of Citizens’ unrealistically low premiums, he said.

Hay’s bill would:

• Assess Citizens policy holders at 1 1/2 times the rate of private insurance customers to help pay off Citizens’ claims after a storm.
• Allow Citizens to increase an individual’s windstorm premium by up to 25 percent a year, although the statewide average could not be more than 20 percent.
• Prohibit Citizens from lowering premiums.
• Prohibit Citizens from covering any new coastal construction permitted after June 1, 2011.
• Phase in limits on more expensive homes. The law already prohibits Citizens from insuring homes worth more than $1 million, effective this January. The bill would prohibit coverage of homes worth $750,000 or more beginning in 2014 and those worth $500,000 or more in 2016.
• Require homeowners covered by Citizens to purchase their windstorm insurance from a private company if it’s available – no matter how much more expensive it is than Citizens – beginning in 2015.

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