Florida insurance commissioner: Most options to shrink Citizens Property Insurance politically unpopular
Jan 17, 2013
The following article was published in the Orlando Sentinel on January 17, 2013:
Insurance commissioner: Most options to shrink Citizens polically unpopular
By Michael Peltier
Asked to come up with ways to reduce the number of homeowners covered by the state-supported insurer of last resort, Florida Insurance Commissioner Kevin McCarty has compiled a list of options — many of them politically unpalatable — for shifting a large portion of the financial risk from Citizens Property Insurance Corp.back to the private market.
Pressed last month by members of the state Senate’s Banking and Insurance Committee for answers, McCarty acknowledged this week that some of his suggestions to shrink Citizens — which has ballooned to become Florida’s largest property insurer — would likely face intense political scrutiny.
Among the diciest proposals: return Citizens to its role as a coastal high-hazard account, which would reduce its portfolio of nearly 1.3 million policyholders to fewer than 500,000 of the riskiest properties in the state. Presumably, that would force many policyholders back to the private market, where they would pay higher premiums.
Other proposals that would face tough sledding include eliminating or greatly relaxing the 10 percent cap on annual premium increases for Citizens policyholders, and separating Citizens’ coastal business from its inland policies.
“Let’s make no mistake that what we are talking about is higher prices in most parts,” McCarty said Wednesday.
Nelson earlier this week said he would consider raising the cap on Citizens’ annual premium increases to 13 percent, up from the 10 percent cap that has restricted rate growth the past several years. McCarty said a higher glide path would help reduce Citizens ranks, because more homeowners would stay with private insurance companies, but he cautioned that too steep a curve could hurt the state’s economy.
Barry Gilway, Citizens’ chief executive, said an attainable goal would be to reduce the number of Citizens policyholders by half, to fewer than 675,000 policies.
Some of those policies would cover higher-risk coastal properties that Citizens has insured for years, but most would be policies covering inland properties, which now account for most of the 7,000 policies a week streaming into the state-supported insurer.
“Immediate implementation could have a distorting effect on policyholders and the market,” McCarty said. “The first thing is, we don’t want to do more harm.”
Insurance officials also cautioned the lawmakers not to make any more cutbacks in Citizens’ coverage, a message Simmons said dovetailed with one of his own
“In the event of a major catastrophe, you are going to find a large group of homeowners who are not going to be able to rebuild,” Simmons said. “The idea of trying to ‘cheap out’ and to reduce coverage [provided by Citizens] is a bad, bad, bad idea.”
Sen. Tom Lee, R-Brandon, said efforts to reduce Citizens ranks must take into account that many of Citizens’ customers live in areas of the state where no competition exists.
“There are places where people have no place to go but Citizens,” Lee said. “I just want to make sure that, as we go forward, we are sensitive to that.”
Committee members took no action on Wednesday, but will begin writing proposed legislation in the weeks ahead.
View the original article here: http://www.orlandosentinel.com/business/os-nsf-citizens-insurance-reform-20130117,0,982058.story