Governor clarifies position on Citizens insurance

Apr 25, 2011

The following article was published in the Sarasota Herald Tribune on April 25, 2011:

Governor Clariifies Position on Citizens Insurance

By Paige St. John

Governor Rick Scott distanced himself Monday from a secret plan his top aides pushed in February to shut down Citizens Property Insurance, the state-run insurer that covers more than 1 million Florida households that cannot get insurance on the private market.

Despite emails showing that Scott’s staff sought to eliminate Citizens within four years, Scott said in a press statement he only intended to reduce the company’s size, restoring it as the state’s “insurer of last resort.”

The Herald-Tribune reported Sunday that emails between insurance lobbyists, including one recounting a meeting with the governor’s staff, describe a plan to quickly shrink Citizens by limiting the value of the homes it could insure. The cap would have started at $1 million, to be been reduced by $250,000 per year, emails stated.

The emails also show that insurance industry lobbyists — who generally support reducing Citizens’ market share — balked at the plan, saying the private market could never take on Citizen’s 1.3 million policies so quickly.

That scaled-back plan is advancing through the state Legislature.

The Senate today is set to hold its last public hearing on a bill largely written by insurance industry lobbyists that would require sharp rate hikes — up to 25 percent a year — and reductions in policy coverage at Citizens. A measure preventing homeowners from collecting legal fees if they win a lawsuit against Citizens also is on the table.

Sen. Mike Fasano, reacting to the Herald-Tribune report, asked for the bill, SB 1714, to be delayed.

“There needs to be a hearing and questioning of the lobbyist and Scott’s staff,” Fasano, R-New Port Richey, wrote in an email to Senate President Mike Haridopolos.

But the request was largely ignored. Senate Budget Chairman JD Alexander, R-Lake Wales, said he intends to take up the Citizens bill today.

Citizens’ critics have pushed for legislation this year that would dramatically change Florida’s insurance market by tilting the playing field toward higher premiums for the private carriers that provide most of Florida’s property insurance.

Part of the strategy has been to reduce competition from Citizens, which was expanded in recent years to allow more homeowners to purchase coverage from it even if policies were available in the private market.

According to recent financial documents, the state’s 57 private carriers now have only a combined $2.2 billion surplus as a buffer against future storms, less than half the surplus accumulated by Citizens.

Much of the money to pay claims in a major storm would have to come from reinsurance, which the private carriers buy largely from unregulated, offshore companies. Another Senate bill would make it easier for insurers to pass reinsurance expenses to homeowners, giving carriers less incentive to control those costs.

Proponents of the Senate legislation have argued that Citizens’ rates need to be raised and its coverage restricted to improve the private carriers’ poor health.

The Legislature, however, is not considering any provisions to govern how the private insurers shift premiums to their own for-profit ventures for management costs, claims handling, inspections and other services.

In a phone interview with a Miami radio station, Haridopolos declared that he, too, believes Citizens needs to be phased out.

“I don’t like Citizens,” Haridopolos said Monday morning. “It grew way out of control.”

However, he said the state carrier, which now insures 1.3 million Florida homes, condominiums and businesses, can’t be shut overnight.

“I think it’s a little too rash to do it in the first year, because that would be a radical property insurance increase, especially for the people down in Miami-Dade County,” the Brevard County Republican said.

Scott’s press spokesman, Brian Burgess, characterized the emails from the insurance industry lobbyists recounted in the Herald-Tribune article as “hearsay from a third party.”

“Those accounts do not accurately reflect the governor’s position,” Burgess said.

Scott’s staff issued its own written statement vowing the governor’s support to keep Citizens, although in a smaller form.

“With the position we’re in now, Florida taxpayers would be on the hook for a major storm or hurricane,” the statement said, referring to Citizens’ ability to trigger a public bailout if it doesn’t have enough money to pay claims. “That’s not acceptable.

“The Legislature is still considering ways to fix this issue, but the governor has always been clear; he wants a vibrant, competitive private insurance market.”

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