Column: Citizens Insurance keeps growing, and maybe that’s a good thing

Jan 7, 2012

The following article was published in the South Florida Sun Sentinel on January 7, 2012:

Citizens insurance keeps growing and maybe that’s a good thing

By Michael Mayo

Call it Rick’s Paradox: The more that Gov. Scott and other state leaders talk about shrinking or eliminating Citizens Property Insurance, the bigger the state-run insurer gets.

Two years ago, Citizens had a little over 1 million policies. When Scott took office last January, Citizens had 1.23 million policies. As of Dec. 31, the number was up to 1,472,391 policies.

And Citizens projects it will have 1.65 million policies by year’s end, according to its 2012 budget, more than the four biggest private insurers combined.

In a budget commentary released last month, Citizens executives said they anticipate more growth because of “limitations on availability and affordability of coverage” in the private insurance market, “particularly in Southeast Florida and the Tampa area.”

Translation: Despite a business-friendly Legislature, looser rate guidelines and the sixth straight hurricane season with no major storms hitting the state, private insurers are still shedding Florida policies instead of flocking here. State Farm has gone from 580,000 policies last January to 514,000 in September, according to state figures.

Meanwhile, to make Citizens less attractive to consumers, there will soon be an effort to raise rates, cap coverage amounts, increase deductibles and exclusions and require more stringent guidelines and costly inspections for older homes.

One of the most dramatic proposals pitched at a Citizens presentation to the state’s Financial Services Commission last month: “Require that Citizens’ rates be non-competitive.”

Geez, if the rates I’m already paying are competitive (about $4,000 a year for a small home, not including federal flood insurance) I’d hate to see what non-competitive is.

The problem for many homeowners, especially in South Florida, is that there are no options besides Citizens. I’m among the 352,000 homeowners in Broward and Palm Beach counties stuck with Citizens because nobody else will write a policy for my 52-year-old home east of Interstate 95.

Those who can find private companies willing to write policies will also face steeper premiums with narrower coverage.

So expect another confusing, expensive and painful year for homeowners.

It’s hard to see how a “more attractive” (read: more profitable) climate for the insurance industry with “actuarially sound” (read: astronomical) rates is going to help South Florida’s fragile economy. I’ve spoken to plenty of folks who say that if insurance rates climb higher, they’ll have to leave. And what business or worker would want to move here?

For all the efforts to demonize Citizens by free-market ideologues, it serves a much-needed purpose. And its size might not be such a bad thing. The company is profitable and healthy, with an estimated $5.6 billion surplus in reserve.

That’s more than the combined reserves of all the other private property insurers in the state.

Even though a big storm would wipe out the surplus and leave the state on the hook, I trust Citizens more than the untested upstarts and fair-weather giants in the private market. That’s not saying much, but it speaks volumes about how broken Florida’s insurance system has become.

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