Citizens

The new president of Citizens Property Insurance Corp. blew an opportunity last week to tell Florida property owners why they should continue to have confidence in the state’s “insurer of last resort,” given its record of lax management and lavish spending.

Instead, Barry Gilway defensively told his board he would not throw his people under the bus. “That’s not how I do business.”

Then, he proceeded to throw under the bus the four internal investigators — since dismissed — who exposed travel expense irregularities, severance packages without limits and a bra-swinging bar dance performed by a human resources manager after a board meeting.
Gov. Rick Scott has ordered an investigation of the firings, which Gilway conceded was a “dumb decision” on his part. Then he emotionally argued that the internal investigators had uncovered “no new news, by the way. No new revelations … Every single one of those had been investigated previously. This was rehashing old news.”This after earlier newspaper reports about traveling executives who stay at luxury hotels costing as much as $600 a night, take themselves to swanky restaurants even when dining alone and use corporate credit cards to pay for personal expenses.

Perhaps it’s old news for Gilway, but it’s news to the company’s 1.4 million customers, who continue to see their rates raised, coverage slashed, discounts discontinued, homes reinspected and policies denied.

And it’s alarming to learn the state’s largest property insurer is playing footsie when a critical pillar of our economy — homebuilding and home sales — is struggling to regain its footing and needs a credible insurance provider for home buyers who have no other choice.

The latest revelations come at a time when Citizens is under pressure by Gov. Scott and theFlorida Legislature to funnel more of its policies into the private sector and reduce its exposure. To make it happen, the company has become customer-unfriendly.

Just Thursday, Gilway told a Florida Chamber of Commerce insurance summit in Orlando: “We’ve got the worst coverage in the marketplace. That’s by design. Is that stopping 8,000 policies a week coming through our front door? It’s not.”

Despite having a $6.2 billion reserve and seven years of no hurricanes, Citizens this year tried to skirt a legislative mandate that caps annual premium hikes at 10 percent. Instead, it tried to uncap rates for new customers, which could have led some homeowners to pay premiums 50 percent higher than their neighbors’. Fortunately, the dodge was reported and rejected.

This fall, Citizens also announced plans to spend $350 million to encourage relatively new insurance companies to take policies from the state-run program, what State Rep. Mike Fasano, R-New Port Richey, rightfully called “corporate welfare.”

To understand the danger in this move, know that the Sarasota Herald-Tribune won the 2011Pulitzer Prize for a series that showed Florida’s insurance regulators not only permit private insurers to carry dangerously low reserves, but encourage them to take on more policies than they can safely cover. The paper found some of these fly-by-night operators operate out of their homes. To this day, the state’s Office of the Insurance Consumer Advocate says these small, undercapitalized insurers remain in perilous financial condition, posing “as much or more of a financial risk” than Citizens.

Until Florida creates a competitive and well-capitalized insurance market, we need Citizens to play the credible, foundational role for which it was created.

Gilway was brought in six months ago to clean things up. So when he took the podium Tuesday to address the recent scandals, we expected more than an executive who got all choked up and talked about this not being a Communist country and that people are innocent until proven guilty.

We expected an executive who would speak to customers alarmed by the dalliances of the state’s biggest insurance company.

We expected Gilway to assure us things would be different. Instead, we came away with our confidence shaken. Again.

Citizens is doing its best to provide an inferior product, the president of Florida’s last-resort property insurer told an industry conference Thursday.

“The Citizens product is an inferior product by design,” Barry Gilway said at the Florida Chamber of Commerce Insurance Summit in Orlando. “It’s not stopping the flow of policies.”

Gilway said such steps as not covering pool cages and outbuildings or homes worth more than $1 million are part of a plan not to compete effectively with private insurers. State-run Citizens is Florida’s largest insurer with nearly 1.5 million customers.

In Palm Beach County, the growth of Citizens to 141,000 customers reflects decisions by name-brand insurers such as State Farm and Allstate to drop local customers, state data shows. Many homeowners did not seek out Citizens but found it was the only option available.

The Citizens president praised the work of individual company employees as exemplary, even as he acknowledged a mission of making its products unpalatable.

“We tried to make ourselves as unattractive as we possibly can,” Gilway said. That has “frustrated” customers, he said.

Plans to “depopulate” Citizens by pushing customers to private insurers could see the company shrink to about 1.2 million customers in 2013, according to budget projections the company revealed this week.

The Florida Office of Insurance Regulation announced Thursday the approval of up to 65,990 more policies to be removed from Citizens by five Florida domestic insurance companies starting on Jan. 8.

That’s in addition to 310,000 policies approved for removal in November and December.

Florida Peninsula Insurance Co. of Boca Raton said it will take up to 15,000 more customers in January after pledging to take up to 45,000 in November. Others looking to add customers in January include Southern Oak Insurance Co. (10,000), Heritage Property & Casualty Co. (20,000) and United Property & Casualty Co. (20,990).

Still, Gilway said it’s too much to expect Citizens will disappear any time soon. Mobile homes, certain homes near the coast and others will likely remain in the last-resort insurer for many years to come.

Gilway said a continuing problem is “rate inadequacy” in some areas, mentioning Monroe County, parts of the Tampa Bay area and others. The company’s rate hikes are capped at 10 percent a year by law.

In other action at the conference, personal injury protection car insurance rates are going down on average only about one-fourth of the way toward a 10 percent reduction targeted under a new law, state officials said.

Among the first 44 rate filings approved, the average decrease was 2.5 percent, said Sandra Starnes, an official with the state’s Office of Insurance Regulation. Approvals ranged from a 25 percent PIP reduction to a 41.5 percent increase, but only about one third of the Oct. 1 filings have been approved.

A law passed in the spring severely cut back PIP benefits, eliminating massage and acupuncture and limiting non-emergency care to $2,500 in the name of combatting fraud. In return, insurers were supposed to reduce rates on the state-mandated coverage by 10 percent Oct. 1 and 25 percent by 2014 or say why not.

State Chief Financial Officer Jeff Atwater said he was “comfortable” that if the law survives court challenges PIP savings will be eventually be 25 percent or more.

An actuarial firm reported to state officials that PIP savings under the law should range from 14 percent to 25 percent.

Some legislators, consumer groups and lawyers have blasted the law that Gov. Rick Scott made one his top legislative priorities. They portray it as a favor to the insurance industry that won’t really help drivers. One lawmaker said the biggest lie of 2012 was that PIP rates were going to come down.

Industry groups said the expectation of immediate savings under the bill has created some problems.

“Since the end of the session we’re playing a really tough expectations game,” said Michael Carlson, executive director of the Personal Insurance Federation of Florida, which represents big car insurers. He said it will take time to see the full effects.

Some insurers say legal costs and other expenses mean they cannot bring bills down. One group has challenged the law’s constitutionality, and other suits are expected by early next year.

PIP represents about 20 percent of the bill for many drivers. In some company filings, modest PIP savings are offset by increases in other parts of the bill.

The annual Leadership Florida survey released this week found that 46 percent of Floridians say property insurance “puts a greater stress on my personal finances” than property taxes, compared with 24 percent who say the opposite is true and 22 percent who were not sure or not affected by the issue.

That is a much greater spread than 2008, when 36 percent of Floridians said property insurance costs were more of a concern and 31 percent cited property taxes.

The number of Floridians citing insurance as a greater burden than taxes has increased in every Leadership Florida survey since 2008, leading University of South Florida political science professor Susan MacManus to conclude that “the issue is bubbling up and it’s not going away.”

“The common perception is that the government and insurance companies are in bed with each other to the detriment of the public,” MacManus said. “People think there’s no real interest in the pressure this is putting on the public’s pocketbook.”

While property taxes dipped along with property values in the recession, property insurance costs have continued to rise. Many insurers requested double-digit rate increases this year.

One Allstate affiliate asked regulators to boost rates by 33 percent while Florida’s largest property insurance company, state-run Citizens Property Insurance, received approval this month for a 10.8 percent average statewide rate increase.

Florida homeowners often pay more for property insurance now than they pay in annual property taxes, yet Florida lawmakers and Gov. Rick Scott have continued to push for property tax breaks while simultaneously working to increase Citizens’ rates, which also affect those set by the private market.

Scott and other top state leaders argue Citizens’ rates are too low and the company unfairly undercuts private insurers. They want to push more customers into the private market.

But MacManus said most homeowners are more concerned about rates.

“People don’t really care where they get insurance from,” she said.

Leadership Florida is a nonpartisan organization that seeks to build more civic engagement statewide by cultivating potential leaders from a variety of backgrounds.