SARASOTA – The papers spread across the coffee table of Jeff and Anne Wilkinson are a faded yellow, a record of hurricane worries and precautions dating back more than a decade.
In outdated typeface, the billing statements document steadily climbing prices to insure the couple’s historic 1,100-square-foot bungalow near Whitaker Bayou.
What has not changed is the Wilkinsons’ insurer. Their hurricane coverage has always been with state-run Citizens Property Insurance and its predecessor.
No other carrier wants the business.
The problem: Neither does Citizens anymore.
The state’s push to drastically shrink Florida’s largest property insurance company and force more of its policies into the private market has the Wilkinsons feeling trapped — punished for a problem they didn’t create and likely can’t escape.
Most of Citizens’ customers are in the same predicament, short of alternatives as the company increases deductibles, drops coverage and gears up for big rate increases.
State leaders contend that the changes will induce private insurers to swoop back into the market to pick up more Citizens policies.
Yet even if the strategy works and people flee the company, Citizens’ own staff estimates that roughly 800,000 of its 1.43 million customers will remain under any scenario. At that size, the company would still be Florida’s largest home insurer, by far.
Caught in the cross hairs are hard-to-insure structures like older homes, properties near the coast, wood-frame construction and homes in especially hurricane- or sinkhole-prone regions. They are part of a large bloc of homes that private insurers have long been unwilling to touch at almost any price.
With nowhere to turn, homeowners like the Wilkinsons view the prospect of steadily rising Citizens prices and decreasing coverage with apprehension.
“More and more people are just letting their insurance go, and I can see why,” said Jeff Wilkinson.
Florida’s history of state intervention in the home insurance market goes back 42 years, as major hurricanes periodically threatened to make property coverage unavailable.
The state-organized insurance programs have persisted despite consistently high rates and restrictions on who can participate.
Lawmakers first intervened in 1970 to guarantee windstorm coverage in the Florida Keys.
The Florida Windstorm Underwriting Association — a precursor to Citizens — expanded throughout the state as development accelerated and private insurers limited hurricane coverage in many areas.
The turning point came after Category 5 Hurricane Andrew devastated South Florida in 1992. Nearly a dozen private insurers failed. Others canceled policies and drastically scaled back Florida operations despite dramatic rate increases.
The FWUA expanded from 62,000 policies to 500,000 in six years, and the Legislature created another entity to write regular homeowners’ policies. The two insurers merged in 2002 to create Citizens.
State law required Citizens to be more expensive than the private market. Yet by 2003 the company had 820,255 policies and was closing in on State Farm as Florida’s largest property insurer.
Private insurers had become less and less willing to bet on Florida’s riskiest properties.
Sarasota landlord Devin Rutkowski specializes in renovating and renting historic homes in the Laurel Park neighborhood. He drives a restored 1945 Chevy truck and lives in a spruced up blue bungalow dating to 1925.
But those vintage tastes come with a cost.
Rutkowski pays $2,900 a year for windstorm coverage from Citizens on a 2,400-square-foot home insured at $361,000. All 28 of his rental properties have hurricane coverage through Citizens.
“The private companies ran out of the state so the state expanded Citizens,” he said. “Now the private companies are worried about being forced out by Citizens? It’s crazy.”
The six hurricanes that hit Florida in 2004 and 2005 magnified the property insurance problems.
More companies failed, rates skyrocketed and state leaders felt pressure to act.
Led by former Gov. Charlie Crist, lawmakers increased access to Citizens and moved to hold down rates.
Citizens’ critics — including Gov. Rick Scott and many state lawmakers — have focused on the company’s rate freeze from 2007 to 2009 and subsequent 10 percent cap on annual rate increases as sources of Florida’s problems.
The rate control effort made Citizens too attractive, crowding private companies out, critics argue.
Citizens is now larger than Florida’s next three largest home insurers combined, but much of the growth came from failures or retrenchment in the private market.
One failed insurer dumped 330,000 policies into Citizens in 2006. Meanwhile, the trend of large national firms retreating from the state accelerated.
Despite rate increases, State Farm stopped writing new business in Florida. The company shed more than a third of its policies after 2008 — 300,000 customers — with many winding up with Citizens.
Insurance agent Larry Willis said Citizens has served as a critical safety net. He believes most people who land in the company have no other option.
“There are many areas where essentially it is the only carrier or one of the only carriers offering policies, especially windstorm,” Willis said. “That’s just a given in the environment today.”
Willis serves on the Professional Insurance Agents of Florida board of directors and has spoken out against changes that he says make Citizens’ customers “second-class.”
Those changes include a reduction in personal liability coverage, which protects homeowners against accidents like a slip and fall on their property, from $300,000 to $100,000. Citizens’ policies also no longer cover auxiliary structures such as screened porches and pool cages. Even the standard coverage for personal property like home furnishings has been reduced.
Many state lawmakers and their appointees on the Citizens board blame Crist’s reforms for the absence of private insurers.
The private insurance industry has been active in the debate, encouraging lawmakers to make Citizens more expensive. The industry also worked last year to allow unregulated carriers to take policies from Citizens.
Despite six years without paying catastrophe claims as hurricanes stayed away from Florida, insurance executives insist they often cannot compete with Citizens on price.
“The private market’s lack of participation … is an effect, not a cause” of Citizens’ growth, Citizens board member John Rollins asserted at a recent meeting.
Citizens’ board may vote next month on whether to lift a 10 percent annual cap on rate increases for new policies.
The Wilkinsons’ annual windstorm premium hit $1,502 in 2011, a 400 percent increase in 10 years, even as the insured value of their home increased by just 86 percent to $149,000.
Friends have already dropped their hurricane coverage after years of steep rate increases.
The couple will consider doing the same, or moving from their 1945 bungalow with its old pine floors and lush tropical landscaping, if rates get too high.
One option they do not see as likely: a private company offering better rates.
“If somebody would offer us a more reasonable rate, we would certainly consider it. But that hasn’t happened and I don’t see it happening,” said Anne Wilkinson.
Rutkowski is similarly resigned. He will pass off part of any rate increase to his renters and absorb some of the cost.
“It’s not a comfortable feeling to be at their mercy,” he said.