Some Citizens policyholders get more choice

Mar 12, 2008

Miami Herald–Mar. 12, 2008

Insurance regulators issued an order Wednesday allowing homeowners currently insured by the state-run pool to have the first choice of accepting an offer of coverage from a private carrier.

Regulators also approved the first companies to take policies from Citizens Property Insurance covering condo and homeowners associations.

In explaining Wednesday’s order, the Office of Insurance Regulation said that currently, many policyholders don’t know private companies are interested in taking their policies from Citizens because the move is blocked by their agents.

A law passed shortly after Citizens was formed in 2002 allowed homeowners to stay with Citizens if their agents agreed to continue servicing their policies. Though it was the agent who made the decision, the choice could be beneficial if homeowners believed they would receive less coverage from a takeout company.

The Office of Insurance Regulation said if an agent is unwilling or unable to transfer a Citizens policy to a takeout company, homeowners never know an offer for coverage with a private company might have come their way.

”Without requiring policyholders to be informed that they could be moved into the private market at or below their current premium, the takeout process fails to provide real consumer choice and is contrary to state objectives to reduce the exposure of Citizens,” said Insurance Commissioner Kevin McCarty.

The new order is likely to have the greatest impact on agents who can write policies for only one company, such as State Farm and Florida Farm Bureau. These agents can write windstorm coverage through Citizens if their own companies don’t want to offer hurricane coverage.

Allstate agencies generally can’t write policies for other carriers. But in Florida, the company has contracted with several other companies that agreed to offer coverage to homeowners dropped by Allstate. Nationwide switched to an independent agent system in January.

Citizens has 1.25 million policies on its books, with more than half located in South Florida and close to the coast.

OIR said it has approved 10 companies to take roughly 400,000 homeowners policies out of Citizens.

The massive insurance bill passed in January allowed homeowners to refuse a takeout offer if the premium on a new policy would be higher than what Citizens is currently charging them. Also, the law doesn’t allow takeout companies to charge higher premiums than Citizens.