Property insurance
There's nothing wrong with Citizens Property Insurance wanting to cut 678,000 customers from its rolls to improve its financial position.
When another big hurricane hits the state, everyone in Florida with an insurance policy will be on the hook for billions of dollars if the state's publicly held insurance company can't meet its obligations to its 1.4 million customers.
But the way Citizens is going about meeting that goal should cause every one of its policyholders to worry. Some of the policy changes are too drastic, and many Citizens customers could find themselves paying more for less coverage. The problem is not the goal itself, but rather the way the company is going about it.
Florida has not managed to establish a viable, affordable windstorm-insurance system in the private sector since Hurricane Andrew hit the state in 1992.
Enter Citizens. Designed to be the insurer of last resort, it has become instead the largest property-insurance company in the state, and it has never been able to create reserves or reinsurance funding strong enough to cover another Andrew, or a series of back-to-back storms.
Citizens has a duty to try to avoid the havoc that would result if that were to happen. Making its rolls smaller gets it there.
As reported in The Miami Herald, however, the aggressive "depopulation" plan is flawed in several ways.
Most Citizens policies cover both windstorm and homeowners insurance. A major problem is the decision to limit personal liability coverage from $300,000 to $100,000 in new Citizens homeowners' policies because this amount is completely insufficient.
A second problem involves re-inspection for mitigation credits. There was widespread fraud in the original inspection process, but honest homeowners find it next to impossible to contest the results of a re-inspection that results in steeply higher premiums, even if they're ultimately proven right.
Nor is it fair to charge customers for the initial mitigation inspections - not to mention the cost of improvements - and then change the rules in order to raise premiums. If re-inspection uncovers flaws in the first review, a higher premium may be required. If not, the rate should stay the same. Homeowners struggling through tough economic times should not have to bear this burden.
For 20 years, private companies have been fleeing high-risk areas where they believe it makes no sense to underwrite homes. Citizens is unlikely to lure big, financially sound companies back into Florida just by tossing their own customers out of the state pool and hoping they can find coverage somewhere else.
- The Miami Herald