Citrus County Chronicle Online
Editorial
December 11, 2011
Citizens Property Insurance Corp., commonly called Citizens, is a not-for-profit, tax-exempt state government corporation. Created as the insurer of last resort for Florida property owners, it is an important safety net for those property owners abandoned by private insurers.
In fulfilling its public purpose, however, the number of property owners insured by Citizens has ballooned to close to 1.5 million. This has significantly increased the total fiscal exposure of Citizens to over half a trillion dollars. As a consequence of this staggering exposure, a catastrophic hurricane or series of destructive storms would make it necessary to place emergency assessments on the premiums of all Florida property owners.
Given the fiscal risk to Floridians, Citizens’ underwriting committee, comprised of a majority of Citizens’ Board of Governors, has prepared about two-dozen initiatives that don’t require changes to state statutes to return it to being an insurer of last resort.
The first initiatives to reduce exposure filed this month include cuts in coverage with the most significant being a $1 million cap on coastal homes instead of the current $2 million cap. This initiative, which would eliminate about 7,500 high-risk policies, supports Gov. Scott’s view that it doesn’t make sense for Florida homeowners to subsidize the property insurance of those who choose to own a home in a high-risk coastal area if its not impossible for them to obtain property insurance.
In addition to the initiatives being considered by the underwriting committee to limit Citizens’ size and exposure, Citizens is now relying more heavily on a new computerized estimation tool called the “360” than the expertise of real estate appraisers to estimate replacement costs. This is resulting in skyrocketing insurance premiums for Citizens’ customers.
While the proposed coverage cuts can be reasonably argued, consumer advocates view the use of the computer model to increase replacement values as a back-door means for Citizens to raise rates without state approval. Further, industry watchdogs fear that if Citizens is successful in collecting money on larger insurance policies, it’s only a matter of time before private insurers start relying more heavily on computer models to justify de facto rate increases.
Although Gov. Scott previously signaled that he would like to see Citizens shuttered, Florida’s vulnerability to hurricanes makes an insurer of last resort necessary. However, in limiting its fiscal exposure and the attendant risk shared by all Florida property owners, Citizens should strive to remain true to its core value of fairness, which espouses that its overriding culture is to always do the right thing.
In doing the right thing for all Florida property owners, Citizens is urged to pursue balanced and reasonable initiatives to return to the market of last resort. Otherwise, absent any major legislative reform, Florida’s property insurance dilemma will remain a lose-lose proposition for both customers and non-customers of Citizens.
http://www.chronicleonline.com/content/state-insurer-seeks-return-insurer-last-resort
