Out-of-state property owners now using Citizens Property Insurance -- of which nearly 50,000 have billing addresses in New York or somewhere in France -- may be culled into private hands.
Also, agents that dump a homeowner into Citizens without researching if the customer could have been directed into a private firm could lose their commission as proposals were tossed around this week by members of the Senate Banking and Insurance Committee.
The proposals were just a few of the ideas that may be advanced to reduce the overall size of the state-backed insurance provider with the goal of putting more of the 1.3 million policies now covered by Citizens into the hands of private firms, expanding the free market while reducing the risk to Florida property owners, said Committee Chairman David Simmons, R-Altamonte Springs.
Weve all seen that artificially suppressing rates is a recipe for disaster, Simmons said.
When you cause a private company to not be able to make a profit, what do they do? They do like what weve seen, which is a flight from the state of Florida and then you're assured that you dont have anybody to compete and keep rates down.
On Friday, Sen. Jeff Brandes, R-St. Petersburg, filed Senate Bill 724, aimed at depopulating Citizens. The bill is intended to provide greater flexibility for Citizens to make deals with private insurers to share portions of hurricane risk and to set up a clearing house from which private insurers could assume less risky policies without any increase for the policyholders.
I believe that with the combination of an insurance clearinghouse to keep new policies out of Citizens and expanded options to reduce policies already in Citizens we will bring some comprehensive reform to Floridas property insurance marketplace, Brandes stated in a release.
Brandes' bill has already received the backing of the Tallahassee-based Florida Association for Insurance Reform, which called the proposal "good for business and good for the consumer."
The bill isn't expected to be the last word in depopulation efforts when the Senate Banking and Insurance Committee meets again in two weeks.
Senators on Wednesday expressed concern about the number of properties that were not the primary residences of the owners covered by Citizens, and questioned if many of those individuals could be prohibited from acquiring Citizens coverage.
The state lists 361,462 Citizens policies as not being owner-occupied properties, with 192,182 sent to addresses out of state, and more than 48,000 sent to addresses in France and New York.
"Chances are, these people can afford to buy insurance from the private market," said Simmons, who said more research is needed to advance how such a proposal could be advanced.
Locke Burt, a former senator who is chairman and president of Security First Insurance Co., told committee members that there is an existing market for many of the homes now covered by Citizens, with the myth being the premiums are more expensive than those Citizens offers.
Sen. Tom Lee, R-Brandon, said the committee needs to hear from private firms about simultaneously reducing Citizens and the Cat fund.
I know where we all want to be over time, which is to be out of both businesses, Lee said. But just to make sure that as we depopulate, push this business out into the private sector market, the reductions in the re-insurance costs that these companies are going to bear are not going to be cost-prohibitive and create some of that rate shock.
The direction of the overhaul includes:
* Setting up a clearing house to allow private firms to cherry pick policies.
* Establishing new rules for homes and commercial properties worth $300,000 or more when considered for new policies.
* Prohibiting Citizens from writing new policies seaward of the coastal construction control line, unless codes are exceeded.
* A $1 billion annual reduction in the Catastrophic Disaster Fund, starting in 2014, with the maximum amount the fund can pick up at 5 percent
* Expanding to policy renewals on existing Citizens customers the eligibility requirement that prohibits coverage when a private insurer is able to offer a competitive price that is within 15 percent of the Citizens premium.
* Setting at 25 percent the minimum hike proposal from private insurers for the Office of Insurance Regulation to hold a review, up from 15 percent.
Also, firms that come in below the OIR projections wouldnt have to go through the standard review process.
Reach Jim Turner at firstname.lastname@example.org or at (772) 215-9889.