Citizens Shreds Policies – No Longer Florida’s Largest Insurer
State-Run Citizens Insurance is no longer the largest insurer in Florida based on the number of policies issued. The company has downsized to under 500,000 policies in January, its smallest amount since being created in 2002. Originally formed to be the “insurer of last resort” due rising premiums and the difficulty of many citizens to even obtain basic coverage, Citizens began to grow significantly following the hurricane season of 2004 when Florida was slammed by 3 hurricanes in a row. Numerous insurance companies pulled out of Florida or went bankrupt or out of business. Florida homeowners have had limited options since.
Since 2011, Citizens has been under pressure to downsize. Nearly 138,000 policies have been approved for transfer in March and April alone. And, the Office of Insurance Regulation recently announced that another 85,000 policies have been approved for transfer as of May 1. The transfers are not generally going to national “blue-chip” firms. Rather, a large number are going to small Florida-based companies. The 85,000 policies to be transferred in May are going to 3 companies: Anchor Property and Casualty Insurance Company, Heritage Property & Casualty Insurance Company and Southern Oak Insurance Co.
While many hope that the move away from Citizens and into the market place will encourage competition and drive premiums down, there is concern about the financial strength of the newer and smaller companies and fear that another season like 2004 or a Hurricane Andrew or Katrina will prove to be an insurance disaster to Floridians. Florida Insurance Commissioner Kevin McCarthy acknowledges these concerns but is confidant that all companies doing business in Florida have the capabilities to live up to their obligations.
Another growing problem in this market is the method in which Citizens has transferred policies. Homeowners have complained that policies are often transferred without notice, forcing consumers into policies or renewals with significantly higher premiums and not ability to return to Citizens or to shop to find a better price. State Senator Antione Flores introduced SB 1630 to the Florida Senate in the most recent legislative session which would have made it easier for homeowners to switch coverage back to Citizens if their rates go back up. The bill would have also limited the number of times that a consumer could be asked to leave Citizens. The bill nearly made it through the Senate before the legislature adjourned in March. However, Governor Scott vetoed similar legislation last year. As homeowners’ complaints grow, perhaps the legislature will take a more urgent stance on this legislation next year.
I think that most consumers will be happy to get out of Citizens and into private insurance again. Citizens has always felt like being banished to my friends and clients. No one has ever been certain that the coverage provided by Citizens would measure up to that provided by the national brand that they previously had, despite the fact that the insuring documents are identical. What people are really saying is that they trust the private sector more than the State of Florida to honor their contracts. Of course, the state can’t hide behind bankruptcy protection. The policies that are being issued are the same as those being written by Allstate, State Farm, Nationwide or any of the other companies that we all see advertising on TV. They are being written by smaller companies who are passing state mandated stress tests and regulated by the state. If the state mandated reserves that insurance companies must maintain are adequate and are fully funded, we’ll be covered. Hopefully, we won’t have to answer that question for some time.