Two Florida Journalists reveal the Truth about Citizens and Gov. Scott’s Plans

In Citizens Insurance, Florida Hurricane Insurance, Florida Law Changes by Patricia Staebler

Matt Reed: Lies about Citizens justify policyholder abuse

Insurance lobbyists working hard to discourage public’s use of company

You’ve probably heard that Citizens Property Insurance Co., with 32,000 policyholders in Brevard County, teeters on the brink of financial collapse. That an average storm season would trigger assessments on all Floridians to replenish the insurer of last resort. That making Citizens’ rules and rates less cruel to homeowners has caused them to flock to the “taxpayer-funded” company over private insurers. But none of that is true. It is a lie perpetuated lately by insurance lobbyists and incurious lawmakers to justify a pair of questionable “reform” bills moving through the state House and Senate. The bills would nearly double Citizens’ prices over the next three years and include other costly traps for Space Coast policyholders. The bills would suck millions of dollars a year out of the Space Coast economy, enough to cost hundreds of jobs. The goal of these industry-‚Ä®authored bills? Knock out Citizens as a potential competitor for less-stable private companies that want to raise their own rates while scaling back coverage. The truth about Citizens: Citizens has a $5 billion surplus — more cash on hand to pay claims than all of Florida’s private insurance companies combined. Its cash and investments total $11.3 billion, a financial report shows. Citizens is stronger and more profitable than Florida subsidiaries of the best-known private insurers. Even with 1.3 million policyholders, Citizens could endure a repeat of Hurricane Andrew or the storm seasons of 2004-2005 without triggering assessments, its records show. Almost all of Citizens customers, 95 percent, said they could not find any other coverage at any price. They did not seek Citizens. Citizens would require assessments on all private home and auto policies only after a degree of storm damage that has a 1 percent to 2 percent chance of happening in 2011 — and that Florida has not yet experienced. More than half the assessment money would come from a first round of surcharges only on Citizens policyholders. “Citizens is in its best financial position ever, with projected combined surplus, (catastrophe-fund) reimbursements and pre-event liquidity of over $14.6 billion,” says a January report by Citizens to the House Insurance and Banking Committee. To put that $14.6 billion in context: Citizens and the Florida Hurricane Catastrophe Fund paid out $4.6 billion after Hurricanes Frances, Jeanne and two others in 200

Key pages from the Citizens report are posted at

Punitive policies In truth, the Legislature must make one change only to Citizens: Cancel a rate freeze in place since 2006. Lawmakers and CFO Alex Sink last year proposed a “glide path” of annual increases of up to 10 percent until all rates become actuarially sound and Citizens further cuts the odds of assessments. Gov. Charlie Crist blocked it. Big problems now in store for Citizens policyholders: Citizens must raise rates by up to 25 percent per year per policy until 2015. Thus, a $2,000 policy could nearly double to $3,906 within three years. Homeowners must switch to any “surplus lines” company that offers them a policy at any price. Such carriers’ enjoy unregulated rates in Florida in exchange for covering people rejected by the market. In Brevard, surplus-lines outfits such as USF&G tripled their premiums in 2006 and 2007 and further padded bills with dubious fees that added $500 to $750. They were among the most abusive and unaccountable insurers. Citizens must switch to policies that put the burden on homeowners to prove that damage was caused by a peril specifically covered in their policy. Before, Citizens had to prove it wasn’t covered. “It will make it more difficult for policyholders to prove they have sustained a covered loss,” says a legislative analysis of Senate Bill 1714. Citizens no longer will pay for damaged screen enclosures, fences or detached garages or carports. Those are basics here.

Job killer All of it stands to worsen the Space Coast economy. The first 25 percent rate increase alone could raise a typical $2,000 annual premium by $500. Multiply that $500 by 32,000 local Citizens policies, and you get $16 million. That’s $16 million no longer spent on goods and services in Brevard. Assuming one decent job costs $50,000 per year in pay and benefits, the Citizens-reform bill could kill 320 local jobs. No matter. Sen. J.D. Alexander, R-Lake Wales, called Citizens itself the “biggest single financial crisis facing this state.” Alexander — who has accepted hundreds of thousands of dollars in campaign contributions from insurance companies — even passed a handwritten amendment to rename it “Taxpayer Funded Insurance Co.” he is a top lieutenant to Senate President Mike Haridopolos, R-Merritt Island. I’ll track how Brevard’s representatives and senators vote on this brutal bill. That’s a promise. Contact Reed at 321-242-3631 or


If you’re looking for the state’s “Shop and Compare Rates” website — which offered homeowners a county-by-county glance at average premiums charged by insurance companies — forget it. It has been taken down. The address now redirects visitors to the homepage for Gov. Rick Scott. — Matt Reed

While FLORIDA TODAY columnist Matt Reed reported Sunday on Citizens Property Insurance Co.’s much-improved strength and resources, another newspaper exposed Gov. Rick Scott’s plan to wreck it. Says the story by Pulitzer Prize-winner Paige St. John in the Sarasota Herald-Tribune: Gov. Rick Scott has secretly pushed to kill Citizens Property Insurance before his first term ends, a goal that alarmed even representatives of private insurance companies seeking to remove Citizens as a competitor, the Herald-Tribune has learned. In a February meeting with the industry lobbyists writing bills for the upcoming legislative session, documents show that Governor Scott’s top staff sought to force the 1.3 million property owners who now have a policy from the state-run carrier back into the private market, “phasing out Citizens completely.” The industry lobbyists protested that Florida carriers could not absorb all of Citizens’ business, records show. The gap would force many Florida property owners to turn to the unregulated surplus lines market, where rates are unchecked and policies are not backed by a state guarantee fund. A lobbyist who attended the meeting advised others by email that Scott knew about the gap, but was not bothered. “He doesn’t seem to care whether they are insured in the voluntary market or surplus lines,” the lobbyist wrote. The concept of shutting down Florida’s largest and, at the moment, best-capitalized insurance company outraged lawmakers whose constituents rely on the public company. “He’s clueless. The governor is clueless as to what is happening throughout the state, and the burden on homeowners and condominium owners and business owners,” said Sen. Mike Fasano, a New Port Richey Republican who opposes most of the insurance legislation offered by the industry this year.

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