The Tampa Tribune
Editorial
April 18, 2011
Citizens Property Insurance Corp., a state-run company, is the largest insurer of homes and other property in Florida at 1.3 million policies in 2010. What was supposed to be the insurer of last resort in the Sunshine State now covers $457 billion worth of Florida property.
It is a behemoth that competes for coverage with other private insurance companies by writing policies using artificially low rates. In some coastal areas, where buildings would be leveled by a once-in-a-century hurricane, homeowners may be paying 35 percent to 65 percent below rates based on the actual risk.
And if a monster storm should hit the coast, every home or business owner, every car owner – almost anyone insured – could see billions in surcharges added to their premiums. In fact, it has already happened, as we continue to pay hurricane assessments from the eight storms of 2004 and 2005 to cover the costs of Citizens’ policyholders.
For 2011, Citizens has a claims-paying capacity of $14.7 billion. Its probable maximum loss in a 1-in-100 year event is $22.2 billion.
Which raises the question of whether the state should be in the insurance business to begin with. We think not.
Lawmakers should move toward shutting Citizens’ doors. We understand the company formed because property owners couldn’t find insurance. We know private carriers have been reluctant to write new coverage in recent years.
But one thing former Gov. Charlie Crist was right about is that insurance companies don’t want to lose lucrative Florida customers, and this market is too valuable.
And at the same time, the market is perilous — perilous for carriers insuring property located on this big spit of land surrounded by water and for homeowners, who have seen property values fall even as the costs to live here rises.
So why not give Citizens policyholders a timeframe in which to find new coverage, say three years, then sunset the company?
But for now, something has to be done to grow the marketplace of insurance carriers and shrink Citizens so the state can meet its obligations in the event of a major hurricane. Bills are moving in both chambers of the Legislature that would increase the cost of coverage to Citizens customers to reflect actual risk and slow the growth of the company.
“We now have the chance to get Citizens back to the market of last resort, which is what Citizens was intended to be to begin with,” said Rep. Jim Boyd, R-Bradenton, the sponsor of HB 1243. Appearing before the House insurance and banking subcommittee, he also said, “There’s a big opportunity to get private capital back.”
Let’s hope so.
Among the proposals is to allow Citizens to increase premiums by up to 25 percent a year on single policies — a blow to the consumer but a move toward fiscal sanity.
Other proposals would tighten the eligibility requirements. A new Citizens applicant must prove the cost with any other carrier would be 25 percent higher. By 2015 coverage would be limited to those who can find no other insurance.
And the bills would, over the next five years, eliminate coverage of homes valued at more than $500,000. Importantly, Citizens would no longer provide coverage for new structures within the Coastal Construction Control Line.
The bills also address sinkhole coverage, of which Citizens is the largest writer, but that is an editorial for another day. For now, let’s focus on the big picture: The state needs to get out of the property-insurance business.
It’s true that the increases called for in the various bills will be hard on some property owners. But that does not mean the bills are anti-consumer. If something is not done, all ratepayers would be on the hook for any debt that the state insurers — Citizens and the Florida Hurricane Catastrophe Fund — incur. These assessments would make it more expensive for everyone living and doing business in Florida.
http://www2.tbo.com/content/2011/apr/17/PVWOPINO1-sunset-for-citizens/
