Property insurance for a coastal community
The story is a familiar one. After paying premiums for 20 years without making a single claim, I was unceremoniously dumped by my property insurance carrier in 2006. Lots of phone calls later, it was apparent that the only carrier willing to cover my home was Citizens.
Citizens Property Insurance Corporation (Citizens) was formed by the Florida Legislature in 2002, precisely to address these situations. The private insurance market had begun to dry up, and thousands of homeowners were unable to purchase property insurance to protect their homes. Since mortgages require a property insurance backstop, the lack of private carriers threatened to destroy the real estate market as well.
Now the legislature has decided that Citizens must be “depopulated” in order to entice the private market back into our state. Led by Rep. Jim Boyd, the legislature has directed Citizens to provide less coverage and charge consumers more money in an effort to make the private market appear more competitive. But will these efforts really get at the real problem of insurance for our people?
The Sarasota Herald Tribune published a series of articles in 2010 that led to reporter Page St. John winning the Pulitzer Prize for journalism. In these articles, St. John exposed the reinsurance market that was treating Florida consumers like an ATM machine. The first paragraph of the series was telling: “Never before have Floridians paid so much to protect themselves against hurricanes. And never have they received so little benefit.”
As documented by St. John, two-thirds of property insurance payments were leaving the state to unregulated offshore companies. She estimated that by June 2011, the tab would reach $19 billion. This money was not being held for the benefit of Florida consumers, to pay off claims in the event that disaster struck. This money was going to pay off shareholders and corporate executives. Additionally, overhead for Florida-based insurance companies was more than double the national average.
Not content with looting our state over the past five years, now the private market has its eyes on the reserves that Citizens has built up. As reported in the July 27 edition of the Tampa Bay Times: “Citizens Property Insurance Corp. has built up a massive cash surplus of about $6.1 billion. And private insurance companies want to get their hands on it.” Essentially, the private market is proposing that they will take over thousands of policies from Citizens if they are paid millions of dollars and allowed to raise their premiums. This is a terrible deal for Floridians.
Instead of standing up for consumers, Gov. Rick Scott and Rep. Boyd are punishing Florida citizens. Boyd was one of 23 legislators who recently signed a letter urging the Citizens Board to significantly raise rates for new customers. Meanwhile existing customers are subject to repeated “inspections” that have resulted in rate increases for three out of four policyholders. Furthermore, Boyd was the sponsor of a bill that would have allowed unregulated “surplus line” carriers to take over policies without the consent of the property owner.
While the private market claims they can’t compete with Citizens, they also reported a 40 percent increase in profits for the first quarter of 2012. What is becoming increasingly clear is that the private market has no interest in providing insurance in the traditional sense of the word. Instead it seems content to kill the golden goose after wringing out every last bit of profit for the benefit of its shareholders.
There are a few common sense solutions that would benefit consumers, the industry and the state of Florida. First there must be transparency when it comes to the reinsurance market. There should be no more accounting tricks when it comes to state regulators reviewing property insurance rate increase requests. The state should insist that private companies have adequate reserves to pay a substantial percentage of claims and not rely solely on unregulated reinsurance companies.
Finally, we should face the possibility that Citizens will be with us always, and therefore we should focus on improving and strengthening its business model. What we can’t do is allow private insurance companies to continue to dictate policy for the state, or allow Citizens customers to be treated like second-class citizens.
Adam Tebrugge is a Democratic candidate for the Florida House of Representatives in District 71, which includes Longboat Key. Tebrugge lives in Sarasota and practices law in Bradenton.