Citizens’ Depopulation Strategy

In Citizens Insurance, Commercial Market, Florida Hurricane Insurance, Florida Law Changes, Insurance Appraisal by Patricia Staebler

Under Governor Scott’s tutelage Citizens Insurance starts an aggressive depopulation strategy.

The new limitations, rate increases, exclusions and rules, which were issued by Citizens since January 2012 were just the beginning. Citizens is starting an aggressive depopulation strategy to remove more than 650,000 policyholders. This sounds more like a war strategy than a move initiated by an insurance carrier; however, the fact is that Citizens has now all the necessary instruments in place to limit new policies and kick out existing policies through extreme rate hikes.

The overall goal is to motivate private insurers to come back to Florida by shrinking Citizens as much as possible and as quickly as possible. Citizens was able to build a nice $6 billion cushion during the last six years without a major storm. However, insurance insiders fear that a large hurricane would wipe out those funds, which in turn would lead once again to assessments on all policyholders in the state.

The most important change is that insurance applicants have to proof they cannot get coverage with another carrier:

Agent Technical Bulletin #010-12: New Proof of Eligibility Requirements for Personal Lines Applications announced submission requirements for proof-of-eligibility documents, which will be effective May 1, 2012:

An applicant does not meet eligibility requirements under the no-offer-of-coverage or 15-percent rules if an agent is aware of any private-market offer of coverage that is less than 15 percent more than coverage with Citizens. Either a document, which shows that there is no-offer-of-coverage or a document, which shows a comparison quote must be submitted for Underwriting review. The Agent Technical Bulletin referenced above provides instructions on how to qualify under the 15-percent rule.

Additional Acceptable No-Offer-of-Coverage Documentation:
Acceptable documentation may include:

• A letter of declination from a private-market carrier
• A screen-print of a declined quote from a private-market carrier
• A screen-print showing that the company does not write policies for the property location
• A screen-print showing that the company does not write coverage for the specific policy form, coverage limits or property age

Documentation must include:

• The company name
• The property’s zip code, at a minimum
• The declination reason (e.g., loss history, territory closed, etc.)

Other limitations include the following, (see also Summary Changes 2012):

• Builders’ risk insurance for new homes will no longer be offered by Citizens
• Coverage for carports, screened enclosures and fences will end for renewals
• The personal liability coverage limit will decline from $300,000 to $100,000
• Uncapping rates for new policies, causing new policyholders to pay as much as 50 percent more than existing customers for similar coverage
• Requiring new electrical and plumbing inspections for older homes
• Requiring new inspections and likely higher premiums in sinkhole-prone counties
• Increasing deductibles for “all other perils” coverage

All these changes come after the legislative session ended, which means that most of the new rules are “Made By Citizens” circumventing the legislator.

From a professional standpoint of view:
Who really wants to be insured by Citizens? It is a never ending hassle to know all the rules they enact, insurance appraisals for Citizens have to be prepared as if they have go to a higher court, insurance agents are more and more miserable when dealing with Citizens, it is utterly frustrating to deal with Citizens on a daily basis.

So there is no reason to be sorry for seeing a shrinking Citizens Insurance. Fact is however we do not know if the private companies will come back to Florida and if they come the question still remains how good they are. More and more surplus insurers are coming to Florida, but will they be the right replacement for Citizens?

Recently I called my automobile insurance agent and wanted to know if I could get a bid from Progressive for my house as I have my car and my motorcycle insured with Progressive. And you all know the brunette girl in the Progressive commercials, do you? These commercials advertise in Florida that you will receive a discount, when combining auto, motorcycle, boat, house, etc. Guess who recently got rejected by the Florida Office of Insurance Regulation for an insurance license in Florida? You are guessing right: Progressive.

So something is wrong up there in Tallahassee. Seems the right hand does not know what the left is doing. Shrinking Citizens and at the same token deny an insurance license to a high quality insurance carrier like Progressive?

Governor Scott: this is a call to action. Do something!

As always, thanks for sharing my thoughts and reading my blog. Let me know if you have any questions regarding Citizens or any other insurance and appraisal related question.
Call or email me, the first consultation is free, so don’t hesitate, I keep my promises!

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