Florida's Citizens Property Insurance To Fade Away

On August 27, 2013, Palmetto Bay hosted a town hall event to discuss the future of the Citizens Property Insurance Corporation. Guest speakers were Senators Dwight Bullard and Gwen Margolis and House Representatives Michael Bileca and Jose Felix Diaz. They provided about 50 attending citizens the opportunity to hear what’s going on and voice their opinions and concerns.

[l-r] Senator Dwight Bullard, Pinecrest Mayor Cindy Lerner, Palmetto Bay Mayor Shelley Stanczyk, Baptist Health’s Marsha Tejeda and Rep. Jose Felix Diaz.

Ever since Hurricane Andrew 21 years ago, windstorm insurance in Florida has been a hot potato issue. Originally, Citizens was created as an insurer of last resort run by the State. In reality, it has become the largest insurer in Florida and the only choice for millions. For years, it’s been clear that Florida should not be in the insurance business.

With passing of a State bill this past April, our government set in motion a plan to slowly dismantle Citizens. In short, even with reserves of approximately $6B, one storm could easily bankrupt Citizens and, potentially, Florida. So, the bill begins limiting policies for dwellings worth more than $1M in 2014 and reduces that by $100,000 each year until it reaches $700,000 in 2017. This helps alleviate the risks of carrying huge policies, but it is far from a solution.

The bill also puts in place some checks-and-balances allowing homeowners to (a) leave Citizens and come back if their alternate carrier does not work out, (b) requires Citizens to report annually on its loss ratio for non-catastrophic losses, (c) adds a consumer member to Citizens’ Board and (d) creates a clearinghouse to divert new applicants.

While Citizens debate and change has gone on for years, things are just now coming to a new frothy head. For this reason, the discussion was brought to the residents for dialog.

Senator Gwen Margolis and House Representatives Michael Bileca and Jose Felix Diaz listen

During the 90-minute session a fraction of the bitter debate was explained to those in attendance. Essentially, the rest of Florida contends they no longer want to subsidize the rich South Florida coastal communities. They also point to the significantly higher level of fraudulent non-catastrophic claims coming from Miami-Dade County.

24-year Senator Gwen Margolis stated, “The State wants out of the insurance business. This bill gives us a phased approach which we believe will encourage private insurance companies to come back in.”

Dwight Bullard, one of the few dissenting votes of the bill said he did so because he feels there are not enough options from private insurers. He also wants to ensure private carriers have no choice but to offer windstorm policies along with their other insurance as a matter of course in Florida. 

Jose Felix Diaz, who said he gets fired up and becomes an insurance nerd each time he is in Tallahassee, explained that compromise had to be reached and, due to prior bills getting defeated, South Florida had the leverage they needed to get important features into the current bill.

“We tried to do a 10% cap and Citizens finds ways around it by changing coverage and new mitigation standards, explained Diaz, “We were able to put in checks and balances within Citizens'. They now must allow homeowners to exit and return to Citizens without penalty within 3 years, under certain conditions.”

Representative Michael Bileca, who lives near the Westminster school, said even while he was fighting matter in Tallahassee, he got hit with a $5000 rate hike. With no available alternate insurer, he and his wife were forced to do mitigation changes. 

My question, among the dozens of very valid ones asked that night, was about the fraud. I asked. “Who at Citizens was working on finding and preventing the fraud?” I conjectured, “Stiffer penalties and more critical observation should make a dent in the issue.” I also made it a point to say I felt as if Citizens was committing fraud on its policyholders. They are supposed to be providing consistent windstorm policies, but instead find ways to drop/reduce coverage and modify mitigation credits in ways that undermine the consumer.

What I took away from this meeting is that compromise is the only solution and the Citizens debate will certainly rage on.

An interesting side note illustrating just how dysfunctional this process continues to be, Citizens was asked to participate in the town hall meeting. Their response was that they no longer had travel budget and, according to Palmetto Bay Mayor Shelley Stanczyk, sent forms to citizens who attended so “a Citizens representative could personally follow up with them.”