Tens of thousands of Citizens Property Insurance policyholders in Florida face opt-out deadline

TALLAHASSEE — As millions of Floridians head to the polls on Tuesday, about 175,000 homeowners will face another stark choice: Stay with Citizens Property Insurance Corp., or allow a smaller private company to take over their policy.

Homeowners across the state received “takeout” offers from private insurers last month, giving them 30 days to either opt out, or be automatically shifted out of state-run insurance.

On Tuesday, those who agree to leave Citizens — or who simply don’t respond — will join one of the largest mass exoduses from the state’s largest insurer. Meanwhile, 100,000 more letters are hitting mailboxes this week offering another round of takeouts for December.

“It gives me great pleasure to announce that the latest takeout figures have the potential to make 2012 the largest take-out year for Citizens since 2008,” insurance commissioner Kevin McCarty said as he announced the program in September.

Homeowners facing Tuesday’s deadline have had a month to weigh the pros and cons of leaving Citizens.

On the pro side, policyholders will be able to leave an unpopular company that is trying to make itself less popular and shed away its customers. Citizens has embarked on a series of controversial initiatives — home reinspections, coverage cutbacks and tougher eligibility requirements — while continuing to raise its rates. The company also warns of potential “hurricane taxes” after a storm, something that private insurers don’t require.

But the grass may not be greener for some who agree to leave Citizens. The five companies participating in the takeout are all much smaller than Citizens and undercapitalized insurers have failed in the past after taking over policies. Also, there is no guarantee that premiums won’t jump after the policy renews.

“Chances are that the premiums are going to go up,” said John Page, an agent with Rick Gibbs PA Insurance Agency.

But Page added that rates are also going up at Citizens, which recently approved a 10.8 percent rate hike for next year.

Homeowners can decline the offer by sending back the opt-out letter provided by the company or contacting their insurance agent.

Those who ignore the letters that came in the mail will be automatically shifted out of Citizens on Tuesday and added into one of five companies: Florida Peninsula, American Integrity, Homeowners Choice, Southern Oak, and Southern Fidelity Property & Casualty.

While Tuesday is the official deadline to opt-out, homeowners will still be able to decline the offer for another 30 days after they are taken over by the new company.

The large takeout is part of an aggressive plan — championed by Gov. Rick Scott — to reduce risk and the possibility of financial liability for taxpayers if the state-run insurer runs out of money during a catastrophic storm.

More takeouts are on the way. On December 4, another 100,000 policies will be shifted out of Citizens, which currently insures about 1.4 million properties. Proposal letters were recently mailed to homeowners from private insurers, setting off another 30-day opt-out period. Some homeowners who opted out of the first round could be targeted in the current takeout program, a Citizens spokesperson said.

Citizens and Scott are so eager to get risk out of the state-run insurer that they are considering rewarding private insurers who take over policies with $350 million in low-interest, forgivable loans.

If that program moves forward, Citizens may shrink from 1.4 million policies to less than 900,000 policies next year.