When state leaders created Citizens Property Insurance 10 years ago by merging two state insurance pools, they probably never imagined it would become the state’s largest home insurer with 1.4 million policies.
That’s why state-backed Citizens plans to push some policyholders out by raising rates and deductibles and offering less desirable coverage.
Citizens has already implemented some of the changes, and next week its board will hold a workshop in Miami to discuss whether to request raising new policyholders’ premiums by more than the 10 percent allowed by law. The insurer says the cap only applies to existing customers. The board plans to vote on it July 27.
Some state leaders and insurance industry representatives say the changes are crucial because automobile and property insurance policyholders are subject to paying fees to offset Citizens’ potential deficits after a major hurricane. Some consumers and their advocates question whether all the changes are needed given the insurer’s health seems to be improving.
Bill Newton, executive director of the Florida Consumer Action Network, criticized Citizens “for not serving its customers and instead serving Gov. [Rick] Scott’s narrow political agenda.” Last year, Scott ordered Citizens to develop ways to shrink.
Citizens has more policies than 30 other state-sponsored insurers combined, according to a report Monday by the Insurance Information Institute. The state insurers, mainly called Fair Access to Insurance Requirements plans, offer a last-ditch option for consumers who can’t find insurance.
Citizens’ possible losses, a record $511 billion in 2011, far outpace the potential losses in other states and it increased from from $461 billion in 2010 and $406 billion in 2009, according to the institute, an industry group..
Insurers of last resort are those of “first choice for many vulnerable, high-risk coastal properties,” according to the group.
Some good news can be gleaned from the institute’s figures. For instance, Citizens:
Collected more premiums to cover potential losses — $3.1 billion in 2011, up from $2.6 billion in 2010 and $2.2 billion in 2009.
Received the increased premiums at a faster rate — 41 percent — than the increase in its potential losses — 26 percent — from 2009 to 2011.
Had a higher ratio of premiums to possible losses in 2011 than that of Massachusett’s state-backed insurer — the next largest — and the average of the 31 state insurers the institute included.
The institute acknowledged that Citizens’ $750 million catastrophe bond, more than three times what was expected and the biggest deal of its kind, indicates renewed interest by investors in Florida’s property insurance market.
Citizens Property Insurance President Barry Gilway told the Florida Cabinet last month the insurer has $6 billion in reserves and another $13.5 billion in claims-paying funds, some of which would have to be paid back through fees from policyholders.
The Citizens workshop will be held July 16 at 9 a.m. at the JW Marriott, 1109 Brickell Ave., Miami.