The Palm Beach Post
By Charles Elmore
April 5, 2012
The outgoing chief of Citizens, Florida’s insurer of last resort, says his “heart goes out” to homeowners with affordability concerns, but he supports rate increases more than the allowed 10 percent a year.
That’s the “glide path” legislators approved years ago, and Scott Wallace said he thinks Citizens rates should rise faster to make the market more attractive for private-sector insurers. He’s working for one in his new job.
“From a personal standpoint, I’d like to see the glide path jacked up a little bit,” Wallace said in an interview with The Palm Beach Post. “I can certainly see the affordability issues cited by many people and I feel for them.”
Wallace leaves his post after six years, making him the longest-serving president and CEO of what has become by far Florida’s largest insurer, 10-year-old Citizens Property Insurance Corp. His official final day was Friday . He takes over as president of the property and casualty division of a private carrier serving the Florida market, Homeowners Choice Inc.
“Whether it’s Citizens or the voluntary market, the difficulty is rates have certainly gone up,” Wallace said. “That’s troubling. I can certainly sympathize with it. On the other hand, until we get Citizens more closely in line with the voluntary market, Citizens will continue to have problems in terms of its growth and size in the state of Florida.”
The toughest part of running Citizens has been dealing with “many, many constituencies,” he said.
“Certain legislators have different opinions than other legislators,” Wallace said. “Sometimes it’s difficult to move forward in ways I think are appropriate to move forward.”
Sen. Mike Fasano, R-New Port Richey, sent a letter to Wallace this year questioning Citizens on such issues as spending large amounts of money on lawyers to fight claims, applying rules consistently and canceling policies.
“Scott Wallace was asked to downsize what had become the largest property insurer in Florida,” Fasano told The Post. “Although I did not agree with many of the changes that were made under his leadership, particularly those that harmed the policyholder, I understood that his orders came from the governor and the board. He was always accessible to our office and that is something I will always appreciate.”
Gov. Rick Scott has called for Citizens to shrink to avoid potential assessments to its own customers and those of other companies if, say, the state is hit with a once-in-100 year storm.
Replacing Wallace as interim Citizens chief is Tom Grady, who has served as commissioner of Florida’s Office of Financial Regulation. Grady is a candidate for the permanent job as well.
Insurers and supporters in the legislature contend much higher rates at Citizens are necessary, though some consumer advocates call it a “myth” that rates are artificially low.
A Post analysis shows carriers besides Citizens have paid fewer direct losses in Florida since 2000 – 66 cents on the premium dollar – compared to 76 cents since 1985. Insurers cite increased reinsurance and other costs.
Citizens introduced many policies on Wallace’s watch that produced protests from customers, including reinspections for storm-resistant features that raised bills an average of 22 percent for 62 percent of those visited through March. More than 200,000 homes are scheduled to be reinspected this year.
As of May 1, Citizens is refusing to insure properties valued at more than 1 million. Also no longer covered this year: Most porches, decks and outbuildings.
At times, Wallace made announcements consumer advocates praised, such as accepting alternative ways of calculating replacement value besides a single software vendor. Replacement costs – the insurer’s projected cost of rebuilding a destroyed home – were running double the market value of some existing homes and had the effect of driving up bills unfairly, some homeowners argued.
Citizens, the state’s largest property insurer with more than 1.4 million customers, controls almost 30 percent of Palm Beach County’s market with more than 140,000 policies. That’s bigger than the carrier’s 23 percent share statewide.
In Palm Beach County, Citizens has 80 percent more local policies than the nearest private-sector competitor, Universal Property & Casualty.
Wallace’s new employer, Tampa-based Homeowners Choice, had a little more than 5,000 policies in Palm Beach County at the end of the third quarter of 2011. The company ranked 23rd in local market share and 29th statewide with more than 57,000 customers.
Citizens Chairman Carlos Lacasa said when Wallace announced his resignation: “Scott has led the company through a complex ramp-up of the infrastructure needed for Citizens to provide the services and possess the claims payment ability that is so essential to our state’s housing industry.”
Lacasa said, “His talents will be sorely missed.”
Wallace made $220,000 when he was hired in his current role and leaves with a base salary of $330,000, a spokeswoman said.
The most fulfilling part of his job at Citizens, Wallace said, has been “watching the organization grow and develop in terms of its people. They are constantly looking at ways to improve.”
Now he’ll play a different role.
“I’m certainly excited about the new opportunity I’m moving to,” Wallace said. “I look forward to getting back to a situation where we can earnestly work at building new markets and new opportunities.”
