Business

Citizens to Consider ‘Home Shopping Network’ to Push New Policies into Private Firms

By: Jim Turner | Posted: November 30, 2012 3:55 AM

Citizens Property Insurance can financially withstand the impact of a hurricane that is on the scale of one in every 19 years.

Hurricane Irene Damaged Homes

Aerial shot of Hurricane Irene damaged homes in East Haven, CT | Credit: environmentalheadlines.com

However, industry experts say if you look to the Northeast, where they have been hit by hurricanes Irene and Sandy in the past two years, the so-called "100-year" storms have become more common.

And this comes as Florida’s Chief Financial Officer Jeff Atwater says Citizens is in better fiscal condition than it has been in years.

“The only people that slept well in 2007 and 2008 were those who were ignorant,” Atwater said Thursday.

To continue bulking up the insurer, Citizens President and CEO Barry Gilway intends to ask his board next month to approve a plan to set up a program that will shop potential new customers to private firms before signing them up with the state-backed insurer of last resort.

The proposal will be the latest effort to make the company as “unattractive as we can.”

Gilway said the agency will drop about 1.5 million policies when 2012 is done, but the overall depopulation efforts are not working.

About 8,000 new policies a week continue to come through the door to the agency that is supposed to be shedding many of its 1.48 million customers. And most of the new policies are never shopped to a potential competitor, Gilway said.

“If you have companies interested in this market, they should have an opportunity to respond before it enters Citizens,” Gilway said Thursday at the Florida Chamber of Commerce Insurance Summit.

The “Home Shopping Network” would allow every private company interested in picking up customers to be given a chance to pick up the policy before it is accepted by Citizens.

The Citizens board is expected to also consider a $350 million loan program proposed to shift about 300,000 polices to private insurers in December.

Critics have said the private companies will “cherry pick” the least risky polices. Gilway said that’s good.

“Depop companies will cherry pick, and yes they should cherry pick because if they don’t cherry pick they’re not doing their job,” Gilway said. “They’ll get the most risk-free risks and the most rate-adequate risk. That is what they should take out. We should get the balance.”

Sinkhole Home

A sinkhole forming underneath a home.

He said people should accept that Citizens isn’t going away. But it needs to return to what it was intended: providing coverage for older homes, older mobile homes and old condominiums, and a limited number of sinkhole area homes, that private firms won’t cover.

He said the 450,000 coastal accounts now handled by Citizens, the same as a decade ago, will still be part of the inventory a decade from now.
But otherwise, Citizens should only focus on those risks that can’t be handled by other private firms, Gilway said.

Meanwhile, Citizens continues to close loopholes that have allowed fraud.

Atwater said public policy has allowed Citizens to explode beyond its initial intent more than a decade ago, but fraud in the sinkhole coverage has caused an imbalance between premiums and amounts paid out.

“In the last five years, premiums for sinkhole (coverage) in Citizens has taken in just over $200 million and we’ve paid out just shy of $1.1 billion,” Atwater said. 

“And who is paying for that? The one honest guy on the street.”

Citizens board member John Rollins said if he had the lone vote on the board he’d limit eligibility to Citizens policies.

On average, Citizens rates are expected to grow about 11 percent next year.

But that will still keep the company under the private market values in several densely populated areas of the state.

Gilway said if Citizens ended the inadequacy in Hernando County, rates would need to jump 230 percent, while customers in Monroe County would see a 73 percent increase, Pasco County would grow 60 percent and Miami-Dade would get a 20.5 percent hike.

Gilway said he would never advocate for “flipping the switch” for rate adequacy.



Reach Jim Turner at jturner@sunshinestatenews.com or at (772) 215-9889.



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