CEO Barry Gilway Says Post-Session Citizens Property Insurance in Best Financial Shape Ever
May 19, 2013 | By Colodny Fass
The following article was published in the Sun Sentinel on May 19, 2013:
By Maria Mallory White
Hurricane season doesn’t officially start until next month, but Citizens Property Insurance Corp. already has weathered a series of political and public-relations storms.
Still shy of his first anniversary at the helm of Citizens Property Insurance Corp. as president and CEO, Barry Gilway approaches his second storm season leading a company that, following the legislative session, is substantially different than the one he joined last June, he said this week in a lengthy interview with the Sun Sentinel.
Few would doubt Citizens needed fixing. Bloated with policies and outsized risk associated with too many underfunded policies whose rates are deemed “actuarially unsound,” lawmakers struggled with how to raise prices without hurting consumers or hobbling the state’s fragile housing market recovery. .
When lawmakers left Tallahassee two weeks ago, many of the most aggressive proposals to shrink Citizens and return it to its original status of insurer of last resort were not a part of Senate Bill 1770, which was approved by both chambers and sent to the governor.
Still, with the new mandates of the bill, which take effect July 1, Gilway said ultimately the Florida consumers are the big winner — both those with Citizens policies and nonpolicyholders. Here are Gilway’s edited comments to the Sun Sentinel’s questions:
Q. With the passage of Senate Bill 1770 (and the presumed signature of the governor), how is Citizens different?
A. I think the legislative session did two things: First, the appointment of the Office of Inspector General. I think we can integrate that [position] very well into the Citizens corporate structure. Ithink that’s a positive thing because I believe they will have free reign to look at anything [that deserves attention] in the Citizens structure. Second, there will be a ninth board member, appointed by the governor, that really we be focused on the consumer. I believe that will increase the transparency of the organization. I applaud anything that will increase the overall transparency and anything that will increase in the minds of the public that we are a well-run, well-structured organization.
Q. How did consumers benefit with the passage of Senate Bill 1770?
A. At the end of the day, you have to look at the legislative session and look at what was included in the legislation, and then you have to look at what was not passed.
I think consumers benefit because of what was not passed. In the Senate bill, actuarially sound rates would have applied to new business. There’s no question that would have reduced the number of policies within Citizens. The attempt, I think, of the legislators was correct, [but] it would have had an economic impact. Consumers benefited from the fact that the compromise bill between the Senate and the House did not include the separation of new business and renewal rates.
I think the benefit for consumers was the glide path [or annual 10 percent rate cap] was reapproved and reconfirmed. At the end of the day, the session was not negative for consumers.
Q. One of the provisions of the bill that lawmakers, insurance industry players and consumer advocates seemed to like was the creation of a clearinghouse aimed at offering Citizens customers more favorable rates from private insurers. What’s the status of getting the clearinghouse up and running?
A. Gilway: Already we are seeing the benefit of the clearinghouse. Companies are already coming forward. There are roughly 250,000 [market-priced] policies in our estimation that shouldn’t be in Citizens…They’re with us for one reason alone and that is basically because they are not shopped in the marketplace. The Office of Insurance Regulation is being approached, and Citizens is being approached much more aggressively by companies. They are basically saying, ‘We want to take out policies …’ before the clearinghouse goes into effect in January 2014. They know they stand a better opportunity [before then] to take out rate-adequate policies from Citizens.
We’ve already done a request for information for the technology firms that have the capability today to do this. Within the next two weeks or so, we will be putting out a request for negotiation with firms. We’re meeting with the top insurance companies of the state, all the agents groups and again with some consumer groups to make sure the final system we put in place meets all the need of the final constituents.
Q. Wind-only policies got a lot of attention during the legislative session for being priced too low to cover their risk. Sen. David Simmons has said these so-called “actuarially unsound” policies will top his agenda next year. How does all this impact consumers with those policies?